COLOR SPOT NURSERIES INC, 10-Q, 1998-02-09

COLOR SPOT NURSERIES INC
10-Q, 1998-02-09
MISCELLANEOUS NONDURABLE GOODS

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 25, 1997
------------------

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 000-23483
-----------

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

COLOR SPOT NURSERIES, INC.
(Exact Name of Registrant as Specified in Its Charter)

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

DELAWARE 68-0363266
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

3478 BUSKIRK AVENUE, PLEASANT HILL, CA 94523
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (510) 934-4443
--------------------

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- -----

As of January 30, 1998, the Registrant had outstanding 6,937,068 shares of
Common Stock, par value $.001 per share.

<PAGE>

COLOR SPOT NURSERIES, INC.

INDEX

PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets as of December 25, 1997 and
June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . 1

Consolidated Statements of Operations for the Three and Six
Months Ended December 25, 1997 and December 26, 1996. . . . . 2

Consolidated Statement of Changes in Stockholders' Equity
as of December 25, 1997 . . . . . . . . . . . . . . . . . . . 3

Consolidated Statements of Cash Flows for the Three and
Six Months Ended December 25, 1997 and December 26, 1996. . . 4

Condensed Notes to Consolidated Financial Statements as of
December 25, 1997 . . . . . . . . . . . . . . . . . . . . . . 5

Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations. . . . . . .10

PART II - OTHER INFORMATION

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .14

Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . .14

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . .14

Item 4. Submission of Matters to a Vote of Security Holders . . . . .14

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . .15

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . .15

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
</TABLE>

<PAGE>
COLOR SPOT NURSERIES, INC.

FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS FORM 10-Q
(AND ANY DOCUMENTS INCORPORATED HEREIN BY REFERENCE) CONTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 (THE
"1933 ACT") AND SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934 (THE
"1934 ACT"). THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT
FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE
TYPICALLY IDENTIFIED BY THEIR INCLUSION OF PHRASES SUCH AS "THE COMPANY PLANS,"
"MANAGEMENT BELIEVES" AND OTHER PHRASES OF SIMILAR MEANING. SUCH FACTORS
INCLUDE, AMONG OTHERS, THE COMPANY'S SUBSTANTIAL LEVERAGE AND DEBT SERVICE; THE
COMPANY'S DEPENDENCE ON ACQUISITIONS FOR FUTURE GROWTH; THE EFFECT OF GROWTH ON
COMPANY RESOURCES; THE COMPANY'S SHORT OPERATING HISTORY UNDER CURRENT
MANAGEMENT; THE COMPANY'S CUSTOMER CONCENTRATION AND ITS DEPENDENCE ON HOME
DEPOT; SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS AND CERTAIN CHARGES;
RESTRICTIONS IMPOSED BY, AND ENCUMBRANCE ON ASSETS TO SECURE, THE COMPANY'S NEW
LOAN AGREEMENT; CERTAIN EFFECTS OF A CHANGE OF CONTROL OF THE COMPANY; FUTURE
CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FINANCING; WEATHER AND GENERAL
AGRICULTURAL RISKS; DEPENDENCE ON LEASED FACILITIES; SENSITIVITY TO PRICE
INCREASES OF CERTAIN RAW MATERIALS; COMPETITION; GOVERNMENT REGULATIONS AND THE
MINIMUM WAGE; CONTROL BY SIGNIFICANT STOCKHOLDERS AND MANAGEMENT; AND OTHER
FACTORS REFERENCED IN THIS FORM 10-Q. AS A RESULT OF THE FOREGOING AND OTHER
FACTORS, NO ASSURANCE CAN BE GIVEN AS TO FUTURE RESULTS, LEVELS OF ACTIVITY
AND/OR ACHIEVEMENTS, AND NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES
RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THESE STATEMENTS.

<PAGE>

ITEM 1.

COLOR SPOT NURSERIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

December 25, June 30,
1997 1997
------------ --------
(unaudited)
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash $ 352 $ 2,762
Accounts receivable, net of allowances
of $1,721 and $1,661, respectively 25,254 25,524
Inventories 54,135 28,854
Prepaid expenses and other 1,105 893
------------ --------
Total current assets 80,846 58,033

TREE INVENTORIES 2,364 541
PROPERTY, PLANT AND EQUIPMENT, net 50,461 31,774
INTANGIBLE ASSETS, net 57,644 31,383
DEFERRED INCOME TAXES 19,014 10,120
NOTES RECEIVABLE AND OTHER ASSETS 1,651 1,566
------------ --------
Total assets $211,980 $133,417
------------ --------
------------ --------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 18,840 $ 9,815
Accrued liabilities 19,510 12,395
Dividends payable to stockholders 882 906
Deferred income taxes 17,596 14,056
Current maturities of long-term debt 1,273 6,700
------------ --------
Total current liabilities 58,101 43,872

LONG-TERM DEBT 113,287 83,408
------------ --------
Total liabilities 171,388 127,280
------------ --------

SERIES A PREFERRED STOCK, $0.01 par value, 100,000
shares authorized, 40,000 shares issued and
outstanding at December 25, 1997 29,610 -
REDEEMABLE COMMON STOCK, $0.001 par value, 1,163,550
and 1,199,744 shares issued and outstanding,
respectively 2,106 2,062
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 4,900,000
shares authorized, no shares issued and
outstanding - -
Common stock, $0.001 par value, 50,000,000
shares authorized, 5,773,518 and 5,021,118
issued and outstanding, respectively 12 162
Additional paid-in capital 50,966 45,033
Treasury stock, 6,200,228 and 6,164,034 shares,
respectively (45,488) (45,228)
Warrants, 825,000 exercisable at $0.01 per
share 8,250 -
Retained earnings (accumulated deficit) (4,864) 4,108
------------ --------
Total stockholders' equity 8,876 4,075
------------ --------
Total liabilities and stockholders' equity $211,980 $133,417
------------ --------
------------ --------

</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

1
<PAGE>

COLOR SPOT NURSERIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 38,708 $ 13,165 $ 64,190 $ 26,602
COST OF SALES 25,502 8,245 43,647 17,103
------------ ------------ ------------ ------------
Gross profit 13,206 4,920 20,543 9,499

SALES, MARKETING AND
DELIVERY EXPENSES 11,095 5,088 19,499 9,851
GENERAL AND ADMINISTRATIVE
EXPENSES 2,594 721 5,292 1,925
AMORTIZATION OF INTANGIBLE
ASSETS 629 170 974 251
TERMINATION OF MANAGEMENT
FEE AND OTHER 2,400 - 2,400 -
------------ ------------ ------------ ------------
Loss from operations (3,512) (1,059) (7,622) (2,528)

INTEREST EXPENSE 3,305 344 5,805 477
OTHER EXPENSE (INCOME), net (69) 23 33 2
------------ ------------ ------------ ------------
Loss before income tax benefit
and extraordinary loss (6,748) (1,426) (13,460) (3,007)

INCOME TAX BENEFIT 3,709 686 6,730 1,447
------------ ------------ ------------ ------------
Loss before extraordinary loss (3,039) (740) (6,730) (1,560)

EXTRAORDINARY LOSS, net of tax benefit 2,162 - 2,162 -
------------ ------------ ------------ ------------
Net loss $ (5,201) $ (740) $ (8,892) $ (1,560)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Basic and diluted loss per share:
Loss before extraordinary loss $ (0.44) $ (0.11) $ (0.97) $ (0.22)
Extraordinary loss (0.31) - (0.31) -
------------ ------------ ------------ ------------
Total $ (0.75) $ (0.11) $ (1.28) $ (0.22)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Shares used in per share calculation 6,937,068 6,967,668 6,932,805 6,970,162
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE>

COLOR SPOT NURSERIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT COMMON SHARES)

<TABLE>
<CAPTION>
Additional Total
Common Common Paid-In Treasury Retained Stockholders'
Shares Stock Capital Stock Warrants Earnings Equity
--------- ------- ---------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 5,021,118 $ 162 $ 45,033 $(45,228) $ - $ 4,108 $ 4,075

Issuance of common stock:
Existing shareholders and management 713,196 7 5,114 - - - 5,121
Acquisition of businesses 39,204 1 625 - - - 626
Issuance of warrants - - - - 8,250 - 8,250
Purchase of redeemable common stock - - 36 (260) - - (224)
Accretion of redeemable common stock - - - - - (80) (80)
Par value adjustment - (158) 158 - - - -
Net loss - - - - - (8,892) (8,892)
--------- ------- ---------- -------- -------- -------- -------------
Balance, December 25, 1997 (unaudited) 5,773,518 $ 12 $ 50,966 $(45,488) $ 8,250 $(4,864) $ 8,876
--------- ------- ---------- -------- -------- -------- -------------
--------- ------- ---------- -------- -------- -------- -------------
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE>

COLOR SPOT NURSERIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)

(IN THOUSANDS)

Six Months Ended
December 25, December 26,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,892) $ (1,560)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation an amortization 2,952 564
Deferred income taxes (8,892) (1,447)
Write-off of deferred financing costs 4,324 -
Changes in operating assets and liabilities,
net of effect of acquired businesses:
Decrease in accounts receivable 2,357 6,277
Increase in inventories (17,597) (6,031)
Increase in prepaid expenses and other
current assets (206) (229)
Increase in accounts payable 6,017 4,016
Increase (decrease) in accrued liabilities 5,960 (1,717)
------------ ------------
Net cash used in operating activities (13,977) (127)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in business acquisitions, less
cash acquired (40,539) (5,556)
Purchases of fixed assets (7,309) (3,245)
------------ ------------
Net cash used in investing activities (47,848) (8,801)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 5,121 100
Purchase of treasury stock (260) -
Financing and organizational costs (743) (75)
Issuance of preferred stock and warrants 40,000 -
Proceeds from borrowings 136,803 2,598
Debt and stock issuance costs (7,848) -
Net borrowings under revolving line of credit (9,386) 6,429
Repayments of long-term debt (104,272) (563)
------------ ------------
Net cash provided by financing activities 59,415 8,489

NET DECREASE IN CASH (2,410) (439)

CASH AT BEGINNING OF PERIOD 2,762 701
------------ ------------
CASH AT END OF PERIOD $ 352 $ 262
------------ ------------
------------ ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 5,207 $ 493
------------ ------------
------------ ------------
Income taxes $ 3 $ 2
------------ ------------
------------ ------------

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Stock issued for acquisitions $ 625 $ -
------------ ------------
------------ ------------

</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

4
<PAGE>

COLOR SPOT NURSERIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1997

NOTE 1 - BASIS OF PRESENTATION

The information contained in the following notes to the consolidated
financial statements of Color Spot Nurseries, Inc. (the "Company") is
condensed from that which would appear in the annual consolidated financial
statements. Accordingly, these financial statements should be read in
conjunction with the Company's annual financial statements for its fiscal
year ended June 30, 1997 contained in its registration statement on Form S-1
filed with the Securities and Exchange Commission dated December 22, 1997.

The consolidated financial statements as of December 25, 1997, and the
three and six months ended December 25, 1997 and December 26, 1996 are
unaudited. However, in the opinion of management, these financial statements
reflect all adjustments (of a normal and recurring nature) which are
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounting measurements at interim dates inherently involve greater reliance
on estimates than at year-end. The Company's operations are highly seasonal
and the results of operations for the interim periods are not necessarily
indicative of the results to be expected for the entire year. Certain
reclassifications have been made to the results of operations for the three
months ended September 25, 1997 included in the results of operations for the
six months ended December 25, 1997 to be in conformity with the three months
ended December 25, 1997.

NOTE 2 - INVENTORIES

Inventories at December 25, 1997 and June 30, 1997, consisted of the
following (in thousands):

DECEMBER 25, JUNE 30,
1997 1997
------------ --------
(UNAUDITED)
<S> <C> <C>
Current:
Plants, shrubs and ground cover $ 46,644 $ 24,385
Raw materials and supplies 7,441 3,374
Christmas trees 50 1,095
------------ --------
Total current inventories 54,135 28,854
Noncurrent:
Christmas trees 2,364 541
------------ --------
Total inventories $ 56,499 $ 29,395
------------ --------
------------ --------
</TABLE>

5
<PAGE>

COLOR SPOT NURSERIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1997

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 25, 1997 and June 30, 1997
consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 25, JUNE 30,
1997 1997
------------ --------
(UNAUDITED)
<S> <C> <C>
Land $ 9,272 $ 8,621
Greenhouses and buildings 16,243 9,029
Furniture and fixtures 3,696 2,108
Machinery and equipment 16,733 10,929
Leasehold improvements 4,173 2,587
Other 4,827 1,302
------------ --------
54,944 34,576
Less: Accumulated depreciation (4,483) (2,802)
------------ --------
Total property, plant and equipment $ 50,461 $ 31,774
------------ --------
------------ --------

</TABLE>

NOTE 4 - INTANGIBLE ASSETS

Intangible assets at December 25, 1997 and June 30, 1997 consisted of
the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 25, JUNE 30,
1997 1997
------------ --------
(UNAUDITED)
<S> <C> <C>
Goodwill $ 47,517 $ 23,971
Organization costs 3,645 1,670
Financing costs 5,708 4,352
Noncompete agreements 1,694 1,731
Other 911 856
------------ --------
59,475 32,580
Less: Accumulated amortization (1,831) (1,197)
------------ --------
Total intangible assets $ 57,644 $ 31,383
------------ --------
------------ --------
</TABLE>

NOTE 5 - ACQUISITIONS

Between October 1, 1996 and June 30, 1997, the Company effected seven
business acquisitions. Between July 31, 1997 and September 3, 1997, the
Company effected six business acquisitions. The Company accounted for all of
these acquisitions using the purchase method of accounting. The allocation
of the purchase price to the underlying net assets acquired is based upon
preliminary estimates of the fair value of the net assets, which may be
revised at a later date. It is anticipated that any purchase price
allocation adjustments will be made within one year from the date of
acquisition. Management does not believe that the final allocations of the
purchase prices will have a material effect of the Company's financial
position or results of operations. Results of operations of the acquired
entities subsequent to the purchase date are included in the consolidated
financial statements.

6
<PAGE>

COLOR SPOT NURSERIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1997

Pro forma operating results of the Company, assuming all the above
acquisitions occurred on July 1, 1996 are presented below (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 38,708 $ 35,531 $ 66,053 $ 60,823
Loss before
extraordinary loss (3,039) (1,012) (7,319) (4,178)
Loss per share before
extraordinary loss:
Basic (0.44) (0.11) (1.05) (0.46)
Diluted (0.44) (0.11) (1.05) (0.46)
Shares used in per
share calculation:
Basic 6,937,068 9,031,244 6,940,119 9,033,738
Diluted 6,937,068 9,031,244 6,940,119 9,033,738
</TABLE>

NOTE 6 - SALES OF SECURITIES, REFINANCING AND EXTRAORDINARY LOSS

On December 24, 1997, the Company sold $100 million of its 10 1/2%
Senior Subordinated Notes (the "Notes") and 40,000 units each consisting of
one share of 13% Series A Cumulative Preferred Stock (the "Series A Preferred
Stock") and 20.625 warrants each representing the right to purchase one share
of the Company's common stock for $0.01 each (the "Warrants"). The Series A
Preferred Stock and Warrants were sold for an aggregate cost of $40.0
million. The sale of the Notes, Series A Preferred Stock and Warrants are
hereto referred to as the "Offerings". The Company raised $133.5 million,
net of fees and expenses, from the Offerings which it used to repay existing
indebtedness. Interest on the Notes is payable semiannually on June 15 and
December 15 of each year, commencing on June 15, 1998. The Notes are
redeemable, in whole or in part, at the option of the Company, at any time on
or after December 15, 2002 at specified redemption prices. Dividends on the
Series A Preferred Stock accrue at a rate of 13% of the liquidation
preference of $1,000 per share and are payable quarterly on March 15, June
15, September 15 and December 15 commencing on March 15, 1998. At the
Company's option, dividends may be paid by the issuance of additional shares
of Series A Preferred Stock having an aggregate liquidation preference equal
to the amount of such dividends. The Series A Preferred Stock is redeemable,
in whole or in part, at the option of the Company, at any time on or after
December 15, 2002 at specified redemption prices. The Series A Preferred
Stock ranks senior to all other outstanding classes or series of capital
stock with respect to dividends and liquidation rights.

Simultaneous with the completion of the Offerings, the Company entered
into a new loan agreement with Credit Agricole Indosuez and a syndicate of
banks (the "New Loan Agreement"). The New Loan Agreement provides the
Company with a seven year acquisition term loan facility of $75.0 million, a
five year revolving credit facility of $40.0 million and a five year
supplemental line of $35.0 million which may be used either for acquisitions
or working capital. Interest on amounts borrowed under the New Loan
Agreement bear interest, at the Company's option, at floating rates based on
the prime rate or the London interbank offer rate ("LIBOR"), plus a margin
which ranges from 0% to 1.25% for prime rate loans and 1% to 2.75% for LIBOR
loans depending on certain financial performance targets. The New Loan
Agreement

7
<PAGE>

COLOR SPOT NURSERIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1997

contains various covenants, including covenants prohibiting or limiting the
incurrence of additional indebtedness, the granting of liens, sales of
assets, as well as certain financial covenants. Borrowings under the New
Loan Agreement are secured by substantially all of the Company's assets.
Borrowings under the revolving credit facility and the portion of the
supplemental line used for working capital are subject to certain borrowing
base limitations generally based on a percentage of eligible inventory and
eligible accounts receivable. On December 25, 1997, the Company had borrowed
$2.7 million under the new revolving credit loan and had not yet borrowed
under the new acquisition loan or supplemental line. At December 25, 1997,
the Company had $38.3 million of credit availability under the revolving and
supplemental lines. Additionally, the revolving line and the portion of the
supplemental line used for working capital must be reduced annually below
$15.0 million for a 30-day period between the months of July through
September.

In connection with these transactions, the Company incurred a $4.3
million non-cash pre-tax charge related to the write-off of deferred
financing fees. This charge is reported net of income tax benefit of $2.2
million in extraordinary loss on the Company's consolidated statements of
operations. Also, in December 1997, the Company incurred a $2.0 million
pre-tax charge related to the termination of an annual management fee and a
$0.4 million pre-tax charge related to the payment of bonuses to certain
members of management. These charges are reported in termination of
management fee and other on the Company's consolidated statements of
operations.

Also, at the time of the Offerings, the Company increased the aggregate
authorized number of shares of preferred stock from 1,000,000 to 5,000,000,
changed the par value of its common stock from $0.01 to $0.001 per share and
effected a 0.69-for-one reverse stock split of its common stock. The
reverse stock split has been reflected retroactively in these financial
statements.

NOTE 7 - DEBT

Debt at December 25, 1997 and June 30, 1997 consisted of the following
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 25, JUNE 30,
1997 1997
------------ --------
(UNAUDITED)
<S> <C> <C>
Revolving line of credit $ 2,719 $ 12,105
Senior subordinated notes 100,000 -
Term and acquisition loans - 66,977
Convertible note 7,384 7,384
Non-compete agreements 1,250 1,395
Other 3,207 2,247
------------ --------
114,560 90,108
Less: Current maturities (1,273) (6,700)
------------ --------
Long-term portion $ 113,287 $ 83,408
------------ --------
------------ --------
</TABLE>

8
<PAGE>

COLOR SPOT NURSERIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1997

NOTE 8 - LOSS PER SHARE

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, EARNINGS PER SHARE ("SFAS 128"). SFAS 128 replaces
primary earnings per share with basic earnings per share. Basic earnings per
share excludes the effect of any dilutive common equivalent shares. Fully
diluted earnings per share, now called diluted earnings per share, is still
required. Diluted earnings per share is computed by dividing net income by
the weighted average number of all common and dilutive common equivalent
shares outstanding during the period. The effect of common equivalent
shares upon earnings per share was antidilutive for all periods presented and
are therefore excluded from the calculations.

9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

The Company is the largest wholesale nursery in the United States, based
on revenue and greenhouse square footage. The Company sells a wide
assortment of high quality bedding plants, shrubs, potted flowering plants,
ground cover and Christmas trees as well as provides extensive merchandising
services primarily to leading home centers and mass merchants.

As a result of both acquisitions and internal expansion, the Company's
operations have grown rapidly during the first six months of its current
fiscal year as compared to the comparable period of the prior year. Since
June 30, 1996, the Company has completed 13 acquisitions, making it the
leading consolidator in the wholesale nursery industry. Three of these
acquisitions occurred during the three months ended December 26, 1996, four
occurred during the third and fourth quarters of fiscal 1997 and six occurred
during the first quarter of fiscal 1998. These acquisitions resulted in the
Company's expansion into several states, including Texas, Washington, Oregon
and Michigan and into new product lines such as shrubs and Christmas trees.
The Company plans to continue to enter new geographic markets through
acquisitions, expand its presence in existing markets and add new product
lines.

The Company's business is highly seasonal and as a result, the Company
has historically reported losses for the first six months of its fiscal year
and profits for the second six months of its fiscal year. The Company is
reporting higher operating losses during the three and six months ended
December 25, 1997 as compared to the same periods in fiscal 1997 primarily
due to the growth of the Company's operations combined with the inherent
seasonality of its business. The Company has recently sought to reduce the
effects of seasonality with sales that are counter-seasonal to its historic
products with the acquisition of Christmas tree operations. The Company plans
to continue to expand its Christmas tree operations to further reduce the
effects of seasonality on its operating results.

In December 1997, the Company raised $133.5 million, net of fees and
expenses through the sale of additional senior subordinated debt, preferred
stock and warrants which it used to repay existing debt. In December 1997,
the Company also entered into a new loan agreement providing the Company with
$150.0 million in available credit. In connection with these transactions,
the Company incurred a $4.3 million non-cash pre-tax extraordinary charge
related to the write-off of deferred financing fees. Also, in December 1997,
the Company incurred a $2.0 million pre-tax charge related to the termination
of an annual management fee and a $0.4 million pre-tax charge related to the
payment of bonuses to certain members of management.

THREE MONTHS ENDED DECEMBER 25, 1997 AS COMPARED TO THE THREE MONTHS ENDED
DECEMBER 26, 1996

NET SALES. Net sales increased $25.5 million, or 194.0%, to $38.7
million for the three months ended December 25, 1997 from $13.2 million
during the three months ended December 26, 1996. This increase is the result
of the acquisition of thirteen businesses plus growth of the Company's
previously existing business.

GROSS PROFIT. Gross profit increased $8.3 million, or 168.4%, to $13.2
million for the three months ended December 25, 1997 from $4.9 million during
the three months ended December 26, 1996. Gross profit as a percentage of
net sales decreased to 34.1% for the three months ended December 25, 1997
from 37.4% for the three months ended December 26, 1996. The reduction in
gross profit percentage was primarily the result of higher production costs
and higher shrinkage and return rates due to below planned sales plus higher
production labor costs as a result of the statutory increase in the minimum
wage.

10
<PAGE>

OPERATING EXPENSES. Operating expenses includes sales, marketing and
delivery expenses, general and administrative expenses, amortization of
intangible assets and termination of management fee and other. Sales,
marketing and delivery expenses increased $6.0 million, or 118.1%, to $11.1
million for the three months ended December 25, 1997 from $5.1 million in the
three months ended December 26, 1996. As a percentage of net sales, sales,
marketing and delivery expenses decreased to 28.7% for the three months ended
December 25, 1997 from 38.6% for the three months ended December 26, 1996.
This decrease as a percentage of net sales was the result of the addition of
the Company's Southwest division which generally experiences lower delivery
expenses as a percentage of net sales because the mix of products sold by the
Southwest division generally has a higher per unit sales price. General and
administrative expenses increased $1.9 million, to $2.6 million for the three
months ended December 25, 1997 from $0.7 million in the three months ended
December 26, 1996. As a percentage of net sales, general and administrative
expenses increased to 6.7% for the three months ended December 25, 1997 from
5.5% for the three months ended December 26, 1996. This increase as a
percentage of net sales is primarily the result of additional general and
administrative resources needed to support the Company's current and
anticipated future growth. Amortization of intangible assets increased $0.5
million to $0.6 million for the three months ended December 25, 1997 due to
the acquisition of four companies during the third and fourth quarters of
fiscal 1997 and the acquisition of six companies during the first quarter of
fiscal 1998. During the three months ended December 25, 1997, the Company
incurred a $2.0 million charge related to the termination of an annual
management fee and a $0.4 million charge related to the payment of bonuses to
certain members of management.

INTEREST EXPENSE. Interest expense increased $3.0 million to $3.3
million for the three months ended December 25, 1997 from $0.3 million in
three months ended December 26, 1996 as a result of significantly higher
levels of borrowings required to fund acquisitions and the Company's growing
working capital requirements.

TAXES. While the Company's financial statements include tax expense,
the Company has historically not paid income taxes. Agricultural companies
are permitted to calculate taxable income on a cash basis. As a result of the
Company's growth, this treatment has enabled the Company to generate
significant net operating losses since its inception and accumulate a large
net operating loss carryforward. In addition, the Company's effective tax
rate has been significantly higher than the U.S. statutory rate of 34%. The
difference between the Company's effective tax rate and the U.S. statutory
rate was due to state tax provisions and other California tax limitations on
the use of net operating loss carryforwards. The Company's effective tax
rate increased to 55.0% for the three months ended December 25, 1997 from
48.1% for the three months ended December 26, 1996. This increase was
primarily the result of the effect of permanent items due to reductions in
projected book income for the fiscal year ended June 30, 1998.

SIX MONTHS ENDED DECEMBER 25, 1997 AS COMPARED TO THE SIX MONTHS ENDED
DECEMBER 26, 1996 AND THE PRO FORMA SIX MONTHS ENDED DECEMBER 25, 1997

The financial information for the pro forma six months ended December
25, 1997 gives effect to the six acquisitions completed by the Company since
June 30, 1997 as if those acquisitions had been completed on July 1, 1997.

NET SALES. Net sales increased $37.6 million, or 141.3%, to $64.2
million for the six months ended December 25, 1997 from $26.6 million during
the six months ended December 26, 1996. This increase is the result of the
acquisition of thirteen businesses plus growth of the Company's previously
existing business. Net sales for the proforma six months ended December 25,
1997 totaled $66.1 million, representing an increase of $1.9 million ,or
2.9%, over the six months ended December 25, 1997.

11
<PAGE>

GROSS PROFIT. Gross profit increased $11.0 million, or 116.3%, to $20.5
million for the six months ended December 25, 1997 from $9.5 million in the
six months ended December 26, 1996. Gross profit as a percentage of net
sales decreased to 32.0% for the six months ended December 25, 1997 from
35.7% for the six months ended December 26, 1996. The reduction in gross
profit percentage was primarily the result of higher production costs and
higher shrinkage and return rates due to below planned sales plus higher
production labor costs as a result of the statutory increase in the minimum
wage. Gross profit for the proforma six months ended December 25, 1997
totaled $20.9 million, representing and increase of $0.3 million, or 1.6%,
over the six months ended December 25, 1997. Gross profit as a percentage of
net sales decreased to 31.6% for the proforma six months ended December 25,
1997.

OPERATING EXPENSES. Operating expenses includes sales, marketing and
delivery expenses, general and administrative expenses and amortization of
intangible assets. Sales, marketing and delivery expenses increased $9.6
million, or 97.9%, to $19.5 million for the six months ended December 25,
1997 from $9.9 million in the six months ended December 26, 1996. As a
percentage of net sales, sales, marketing and delivery expenses decreased to
30.4% for the six months ended December 25, 1997 from 37.0% for the six
months ended December 26, 1996. This decrease as a percentage of net sales
was the result of the addition of the Company's Southwest division which
generally experiences lower delivery expenses as a percentage of net sales
because the mix of products sold by the Southwest division generally has a
higher per unit sales price. Sales, marketing and delivery expenses for the
proforma six months ended December 25, 1997 totaled $20.0 million, an
increase of $0.5 million, or 2.5%, over the six months ended December 25,
1997. As a percentage of net sales, sales, marketing and delivery expenses
decreased to 30.3% for the proforma six months ended December 25, 1997.
General and administrative expenses increased $3.4 million, or 174.9%, to
$5.3 million for the six months ended December 25, 1997 from $1.9 million in
the six months ended December 26, 1996. As a percentage of net sales,
general and administrative expenses increased to 8.2% for the six months
ended December 25, 1997 from 7.2% for the six months ended December 26, 1996.
This increase as a percentage of net sales is primarily the result of
additional general and administrative resources needed to support the
Company's current and anticipated future growth. General and administrative
expenses for the proforma six months ended December 25, 1997 totaled $5.8
million, an increase of $0.5 million, or 9.5%, over the six months ended
December 25, 1997. As a percentage of net sales, general and administrative
expenses increased to 8.8% for the proforma six months ended December 25,
1997. Amortization of intangible assets increased $0.7 million to $1.0
million for the six months ended December 25, 1997 from $0.3 million in six
months ended December 26, 1996 due to the acquisition of seven companies
during fiscal 1997 and the acquisition of six companies during the first
quarter of fiscal 1998. Amortization of intangible assets for the proforma
six months ended December 25, 1997 increased to $1.1 million. During the six
months ended December 25, 1997, the Company incurred a $2.0 million charge
related to the termination of an annual management fee and a $0.4 million
charge related to the payment of bonuses to certain members of management.

INTEREST EXPENSE. Interest expense increased $5.3 million to $5.8
million for the six months ended December 25, 1997 from $0.5 million in six
months ended December 26, 1996 as a result of significantly higher levels of
borrowings required to fund acquisitions and the Company's growing working
capital requirements. Interest expense for the proforma six months ended
December 25, 1997 was $6.2 million.

TAXES. The Company's effective tax rate increased to 50.0% for the six
months ended December 25, 1997 and the proforma six months ended December 25,
1997 from 48.1% for the six months ended December 26, 1996. This increase
was primarily the result of the effect of permanent items due to reductions
in projected book income for the fiscal year ended June 30, 1998.

12
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash needs are primarily to fund seasonal working capital
requirements, capital expenditures and acquisitions.

On December 24, 1997, the Company sold $100.0 million of Notes and $40.0
million of Series A Preferred Stock and Warrants (See Note 6 to Condensed
Notes to Consolidated Financial Statements). The Company raised $133.5
million , net of fees and expenses, from the Offerings which it used to repay
existing indebtedness. Interest on the Notes is due semiannually on June 15
and December 15 commencing June 15, 1998. Dividends on the 13% Series A
Preferred Stock are payable on March 15, June 15, September 15 and December
15 commencing March 15, 1998 and are payable, at the option of the Company,
in additional shares of Series A Preferred Stock.

In connection with the Offerings, the Company entered into a New Loan
Agreement, which provides an acquisition term loan facility of $75.0 million,
a revolving credit facility of $40.0 million, and a supplemental line of
$35.0 million which may be used either for acquisitions or working capital.
Borrowings under the New Loan Agreement are secured by substantially all of
the Company's assets. On December 25, 1997, the Company had borrowed $2.7
million under the new revolving credit loan and had not yet borrowed under
the new acquisition loan or supplemental line. Borrowings under the revolving
credit facility and the portion of the supplemental line used for working
capital are subject to certain borrowing base limitations generally based on
a percentage of eligible inventory and eligible accounts receivable. At
December 25, 1997, the Company had $38.3 million of credit availability under
the revolving and supplemental lines. Additionally, the revolving line and
the portion of the supplemental line used for working capital must be reduced
below $15.0 million for a 30-day period between the months of July through
September.

Prior to the Offerings, the Company's primary sources of capital were a
revolving line of credit, various term and acquisition loans and the issuance
of Company stock. During the six months ended December 25, 1997 and December
26, 1996, net cash used in operating activities was $14.0 million and $0.1
million, respectively primarily as a result of operating losses and increases
in inventory in advance of the spring selling season. Net cash used in
investing activities during the six months ended December 25, 1997 and
December 26, 1996 was $47.8 million and $8.8 million, respectively. These
amounts related primarily to cash used to acquire six businesses during the
six months ended December 25, 1997 and three businesses during the six months
ended December 26, 1996. The Company spent $7.3 million and $3.2 million on
capital expenditures during the six months ended December 25, 1997 and
December 26, 1996, respectively. The Company anticipates that it will spend
a total of $11.4 million during the year ended June 30, 1998, of which
approximately $8.0 million is expected to be used for expansion capital
expenditures. Expansion capital expenditures represent expenditures for
capital which increases the Company's productive capabilities and typically
includes grading of new land, purchasing and building new greenhouses and
related improvements, such as the installation of ventilation and irrigation
systems.

The Company believes that the net proceeds from the Offerings, together
with cash generated from operations and available borrowings under the New
Loan Agreement, will be sufficient to finance working capital, capital
expenditures and planned acquisitions for at least the next 12 months.

13
<PAGE>

PART II. - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is from time to time involved in litigation arising in the
ordinary course of its business. None of the pending litigation, in the
opinion of the Company, is likely to have a material adverse effect on the
Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Pursuant to a Registration Statement on Form S-1 (Registration No.
333-37335) that was declared effective December 22, 1997, the Company offered
for sale (the "Units Offering") 40,000 units (the "Units"), each Unit
consisting of 1 share of 13% Series A Cumulative Preferred Stock (the "Series
A Preferred Stock") and 20.625 warrants (the "Warrants"), each representing
the right to purchase one share of common stock, par value $0.001 per share
(the "Common Stock") of the Company, by means of a prospectus dated December
22, 1997. The Units were offered to the public at a price of $1,000 per Unit
and were sold for an aggregate offering price of $40 million. Pursuant to
the same Registration Statement and concurrently with the Units Offering, the
Company offered to the public (the "Notes Offering" and, together with the
Units Offering, the "Offerings") $100 million aggregate principal amount of
10 1/2% Senior Subordinated Notes due 2007 (the "Notes"), which were sold for
an aggregate offering price of $100 million. The aggregate underwriting
discount was $1.6 million for the Units Offering and $3.0 million for the
Notes Offering. Other expenses in connection with the Offerings were
reasonably estimated to be $1.9 million.

The net proceeds of the Offerings were reasonably estimated to be
applied as follows:

<TABLE>

<S> <C>
Repayment of Debt . . . . . . $133.5 million

Fees and Expenses . . . . . . $6.5 million

</TABLE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Before the consummation of the Offerings, the sole stockholder of the
Company, CSN, Inc., approved the following actions by unanimous written
consent without a meeting pursuant to Section 228(a) of the Delaware General
Corporation Law on December 1, 1997: (1) approval of an agreement and plan of
merger to merge the Company with CSN, Inc., with the Company being the
surviving corporation; (2) approval of the amended and restated certificate
of incorporation; and (3) approval of the amended and restated bylaws. The
amended and restated certificate of incorporation and the amended and
restated bylaws were filed with the Commission as Exhibits 3.1 and 3.2,
respectively of the Registration Statement and are hereby incorporated by
reference.

14
<PAGE>

ITEM 5. OTHER INFORMATION

See Part II, Item 2 for a description of the Company's offering to the
public of Notes, Series A Preferred Stock and Warrants.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBIT DESCRIPTION OF DOCUMENT
<C> <S>
1.1 Note Underwriting Agreement between the Registrant and
the Underwriters.
1.2 Unit Underwriting Agreement between the Registrant and
the Underwriters.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Amended and Restated Bylaws of the Registrant.*
3.3 Certificate of Designation of the Series A Preferred
Stock.
4.1 Form of Preferred Stock certificate.*
4.2 Indenture (including form of Note).
4.3 Warrant Agreement (including form of Warrant).
10.1 Second Amended and Restated Credit Agreement dated as of
December 24, 1997.
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule.
___________________________________________________________________

* Filed with the Company's Registration Statement, No.
333-37335, filed with the Securities and Exchange
Commission ("SEC") and incorporated herein by reference.
</TABLE>

(b) REPORTS ON FORM 8-K.

None.

15
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

COLOR SPOT NURSERIES, INC.

Dated: February 9, 1998
By: /s/ Michael F. Vukelich
----------------------------------------
Chairman of the Board and Chief Executive
Officer

By: /s/ Paul Yeager
-----------------------------------------
Executive Vice President and Chief Financial
Officer

16
<PAGE>

EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT DESCRIPTION OF DOCUMENT
<C> <S>
1.1 Note Underwriting Agreement between the Registrant and
the Underwriters.
1.2 Unit Underwriting Agreement between the Registrant and
the Underwriters.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Amended and Restated Bylaws of the Registrant.*
3.3 Certificate of Designation of the Series A Preferred
Stock.
4.1 Form of Preferred Stock certificate.*
4.2 Indenture (including form of Note).
4.3 Warrant Agreement (including form of Warrant).
10.1 Second Amended and Restated Credit Agreement dated as of
December 24, 1997.
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule.
___________________________________________________________________

* Filed with the Company's Registration Statement, No.
333-37335, filed with the Securities and Exchange
Commission ("SEC") and incorporated herein by reference.

</TABLE>
17

<PAGE>

COLOR SPOT NURSERIES, INC.

$100,000,000
10 1/2% SENIOR SUBORDINATED NOTES DUE 2007

UNDERWRITING AGREEMENT

December 22, 1997

BT Alex. Brown Incorporated
130 Liberty Street
New York, New York 10006

Donaldson, Lufkin & Jenrette Securities Corporation
600 California Street, Suite 1900
San Francisco, California 94108

Ladies and Gentlemen:

Color Spot Nurseries, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement with each of you (collectively, the
"Underwriters"), as set forth below.

1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Underwriters
$100,000,000 aggregate principal amount of its 10 1/2% Senior Subordinated Notes
due 2007 (the "Securities"). The Securities are to be issued under an indenture
(the "Indenture") by and between the Company and U.S. Trust Company of
California, N.A., as trustee (the "Trustee").

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-37335)
with respect to the Securities has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the

<PAGE>

Registration Statement has been filed as of the date of this Agreement.
"Prospectus" means (a) the form of prospectus first filed with the Commission
pursuant to Rule 424(b) with respect to the Securities or (b) the last
preliminary prospectus included in the Registration Statement filed prior to
the time it becomes effective or filed pursuant to Rule 424(a) under the Act
that is delivered by the Company to the Underwriters for delivery to
purchasers of the Securities, together with the term sheet or abbreviated
term sheet filed with the Commission pursuant to Rule 424(b)(7) under the
Act. Each preliminary prospectus included in the Registration Statement prior
to the time it becomes effective is herein referred to as a "Preliminary
Prospectus."

(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity other than the subsidiaries listed in Exhibit 21 to Item 16(a) of
the Registration Statement. Each of the subsidiaries of the Company as listed
in Exhibit 21 to Item 16(a) of the Registration Statement (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its incorporation with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The Company and each of
the Subsidiaries are duly qualified to transact business in the jurisdictions
set forth opposite their names in Schedule I hereto and, to the best of the
Company's knowledge, in all other jurisdictions in which the conduct of their
business requires such qualification. The outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company or another Subsidiary
free and clear of all liens, encumbrances and equities and claims, except as
described in the Registration Statement; and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligations into shares of capital stock or ownership interests in
the Subsidiaries are outstanding. On or prior to the Closing Date, CSN, Inc., a
Delaware corporation, shall be merged with and into the Company and all of the
business operations of the Company are conducted through the Company and its
subsidiaries.

(c) The information set forth under "Capitalization" in the
Prospectus is true and correct. The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive or similar
rights; and except as disclosed in the Prospectus or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus, all of the outstanding
shares of capital stock of the Company and each of the Subsidiaries are free and
clear of all liens, encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and the securities or "Blue
Sky" laws of certain jurisdictions) or voting. Except for the capital stock of
the Subsidiaries, the Company does not own, directly or indirectly, any shares
of stock or any other equity or long-term debt securities or have any equity
interest in any firm, partnership, joint venture or other entity. No holders of
securities of the Company are entitled to have such securities registered under
the Registration Statement.

<PAGE>

(d) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Securities nor instituted proceedings for that purpose. The Registration
Statement contains, and the Prospectus and any amendments or supplements
thereto will contain, all statements which are required to be stated therein
by, and will conform to, the requirements of the Act and the Rules and
Regulations. The Registration Statement and any amendment thereto do not
contain, and will not contain, any untrue statement of a material fact and do
not omit, and will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus and any amendments and supplements thereto do not contain, and
will not contain, any untrue statement of material fact; and do not omit, and
will not omit, to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in
or omitted from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with, written
information furnished to the Company by the Underwriters, specifically for
use in the preparation thereof, or to the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939, as amended
and the rules and regulations of the Commission thereunder (the "Trust
Indenture Act"), of the Trustee filed as an exhibit to the Registration
Statement.

(e) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, as well as the financial statements, together with
related notes and schedules, of Oda Nursery, Inc., Lone Star Growers Co.,
Summersun Greenhouse Co., Wolfe Greenhouses, LLC, Signature Trees, Peters'
Wholesale Greenhouses, Inc., Sunnyside Plants, Inc. and Cracon Inc.
(collectively the "Acquired Entities") present fairly the financial position and
the results of operations and cash flows of the Company and the consolidated
Subsidiaries and the Acquired Entities, at the indicated dates and for the
indicated periods. Such financial statements and related schedules have been
prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as otherwise noted
therein, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary financial and statistical data
included in the Registration Statement presents fairly the information shown
therein and such data has been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company. The pro
forma financial statements and other pro forma financial information included in
the Registration Statement and the Prospectus present fairly the information
shown therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, have been properly
compiled on the pro forma bases described herein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein. No other financial statements or schedules
of the Company or any other entity are required to be included in the
Registration Statement pursuant to any requirement of the Act or any Rules or
Regulations, including Rule 3-05 of Regulation S-X.

(f) Arthur Andersen LLP, Moss Adams LLP and Jaynes,
Reitmeier, Boyd & Therrell, P.C., who have certified certain of the financial
statements filed with the

<PAGE>

Commission as part of the Registration Statement, are independent public
accountants as required by the Act and the Rules and Regulations.

(g) There is no action, suit, claim or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of the Subsidiaries might result in
any material adverse change in the business, properties, assets, operations or
financial condition of the Company and of the Subsidiaries taken as a whole or
might prevent the consummation of the transactions contemplated hereby, except
as set forth in the Registration Statement.

(h) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the
Subsidiaries occupy their leased properties under valid and binding leases
conforming in all material respects to the description thereof set forth in the
Registration Statement.

(i) The Company and the Subsidiaries have filed all Federal,
State, local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments received
by them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the financial statements of the
Company.

(j) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the business, properties,
assets, operations or financial condition of the Company and the Subsidiaries
taken as a whole, whether or not occurring in the ordinary course of business,
and there has not been any material transaction entered into or any material
transaction that is probable of being entered into by the Company or the
Subsidiaries, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, as it may be
amended or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.

(k) Neither the Company nor any of the Subsidiaries is or
with the giving of notice or lapse of time or both will be, in violation of or
in default under its charter or bylaws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound or any statute, judgment, decree, order,
rule or regulation applicable to the Company or any Subsidiary and which default
is of material significance in respect of the condition, financial or otherwise,
of the Company and the Subsidiaries taken as a whole or the business,
properties, assets, operations or financial condition of the Company and the
Subsidiaries taken as a whole. Except with respect to that certain Amended and
Restated Credit Agreement, dated as of February 20, 1997, as amended, the

<PAGE>

execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party, or of
the charter or by-laws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any regulatory
body or administrative agency or other governmental body having jurisdiction
which conflict, breach or default could reasonably be expected to have a
material adverse effect on the Company.

(l) The Company and each of the Subsidiaries hold all
material licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses; and neither the Company nor
any of the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks or
copyrights owned by or licensed to the Company or any Subsidiary.

(m) Neither the Company nor any Subsidiary is an "investment
company" or an affiliated person of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
of the Commission thereunder.

(n) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

(o) The Company and each of the Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.

(p) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material

<PAGE>

respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.

(q) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA (Fla. Stat. ch.
517.075). The Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in Cuba
after the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes in
any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.

(r) The Securities have been duly authorized by the Company
and, when the Securities are executed by the Company and authenticated by the
Trustee in accordance with the provisions of the Indenture and delivered to and
paid for by the Underwriters in accordance with the terms of this Agreement, the
Securities will be entitled to the benefits of the Indenture and will constitute
valid and legally binding obligations of the Company enforceable in accordance
with their terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the court
before which proceeding therefor may be brought. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under the Indenture; the Indenture has been duly authorized by the Company and
qualified under the Trust Indenture Act and, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the Trustee),
will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought.

(s) The Company has all requisite corporate power and
authority to enter into this Agreement, to issue and deliver the Securities and
to consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Company. No consent, approval,
authorization or order of any court or governmental agency or body is required
for the performance of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby, except such as have been
obtained and such as may be required under state securities or "Blue Sky" laws
in connection with the purchase and distribution of the Securities by the
Underwriters.

(t) Except as provided in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no consensual encumbrances or restrictions on the ability of any Subsidiary
(i) to pay dividends or make any other distributions on

<PAGE>

such Subsidiary's capital stock or to pay any indebtedness owed to the
Company or any other Subsidiary, (ii) to make any loans or advances to, or
investments in, the Company or any other Subsidiary, or (iii) to transfer any
of its property or assets to the Company or any other Subsidiary.

(u) Neither the Company nor any agent acting on its behalf
has taken or will take any action that might cause this Agreement or the sale of
the Securities to violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System, in each case as in effect, or as the same may
hereafter be in effect, on the Closing Date.

(v) The Securities, the Indenture, and this Agreement will
conform in all material respects to the descriptions thereof in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).

3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Underwriters, and each Underwriter agrees severally, but
not jointly, to purchase from the Company, at 10 1/2% of their principal amount,
$100,000,000 aggregate principal amount of the Securities. Certificates in
definitive form for the Securities that the Underwriters have agreed to purchase
hereunder, and in such denomination or denominations and registered in such name
or names as the Underwriters request upon notice to the Company at least 48
hours prior to the Closing Date, shall be delivered by or on behalf of the
Company to the Underwriters, against payment by or on behalf of the Underwriters
of the purchase price therefor by wire transfer payable in immediately available
funds to the account of the Company. Such delivery of and payment for the
Securities shall be made at the San Francisco offices of Latham & Watkins, at
10:00 A.M., Eastern Standard Time, on December 24, 1997, or at such other place,
time or date as the Underwriters and the Company may agree upon or as the
Underwriters may determine pursuant to Section 7(a) hereof, such time and date
of delivery against payment being herein referred to as the "Closing Date." The
Company will make such certificate or certificates for the Securities available
for checking and packaging by the Underwriters at the offices in New York, New
York of BT Alex. Brown at least 24 hours prior to the Closing Date.

4. OFFERING BY THE UNDERWRITERS. After the Registration Statement
becomes effective, the Underwriters propose to offer for sale to the public the
Securities at the price and upon the terms set forth in the Prospectus.

5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriters that:

<PAGE>

requirements imposed upon it by the Act, the Rules and Regulations and the
Trust Indenture Act to the extent necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions
hereof and of the Prospectus, as then amended or supplemented, and (ii) the
Company will not file with the Commission the Prospectus or any amendment or
supplement to such Prospectus or any amendment to the Registration Statement
of which the Underwriters shall not previously have been advised and
furnished a copy for a reasonable period of time prior to the proposed filing
and as to which filing the Underwriters shall not have given their consents.
The Company will prepare and file with the Commission, in accordance with the
Act, the Rules and Regulations and the Trust Indenture Act, promptly upon the
reasonable request by the Underwriters or counsel for the Underwriters, any
amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the Underwriters, and will use its best
efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission promptly. The Company will advise the
Underwriters, promptly after it receives notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto has been
filed and will provide evidence satisfactory to the Underwriters of each such
filing or effectiveness.

(b) The Company will advise the Underwriters promptly (A)
when the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.

(c) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary Prospectus as
the Underwriters may reasonably request. The Company will deliver to, or upon
the order of, the Underwriters during the period when delivery of a Prospectus
is required under the Act, as many copies of the Prospectus in final form, or as
thereafter amended or supplemented, as the Underwriters may reasonably request.
The Company will deliver to the Underwriters at or before the Closing Date, one
copy of the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Underwriters such number of
copies of the Registration Statement (including such number of copies of the
exhibits filed therewith that may reasonably be requested), and of all
amendments thereto, as the Underwriters may reasonably request.

<PAGE>

it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.

(e) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.

(f) The Company will, for a period ending on the date no
Securities are outstanding, deliver to the Underwriters copies of annual reports
and copies of all other documents, reports and information furnished by the
Company to the Trustee or its stockholders or filed with any securities exchange
pursuant to the requirements of such exchange or with the Commission pursuant to
the Act or the Exchange Act. During such time, the Company will deliver to the
Underwriters similar reports with respect to significant subsidiaries, as that
term is defined in the Rules and Regulations, which are not consolidated in the
Company's financial statements.

(g) The Company shall apply the net proceeds of its sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.

(h) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Securities in such a
manner as would require the Company or any of the Subsidiaries to register as an
"investment company" under the 1940 Act and the rules and regulations
thereunder.

(i) The Company will cooperate with the Underwriters in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Underwriters may
designate and will continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Securities; PROVIDED, HOWEVER,
that in connection therewith the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction.

(j) Prior to the Closing Date, the Company will furnish to
the Underwriters, as soon as they have been prepared, a copy of any unaudited
interim consolidated financial statements of the Company for any period
subsequent to the period covered by its most recent financial statements
appearing in the Registration Statement and Prospectus.

(k) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.

<PAGE>

6. EXPENSES. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions, including any costs of printing the
registration statement originally filed with respect to the Securities and any
amendment thereto, any Preliminary Prospectus and the Prospectus and any
amendment or supplement thereto, and any "Blue Sky" memoranda, (ii) all
arrangements relating to the delivery to the Underwriters of copies of the
foregoing documents, (iii) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company,
(iv) preparation (including printing), issuance and delivery to the Underwriters
of the Securities, including trustee's fees, (v) the qualification of the
Securities under state securities and "Blue Sky" laws, including filing fees and
fees and disbursements of counsel for the Underwriters relating thereto,
(vi) the filing fees of the Commission and the National Association of
Securities Dealers, Inc. relating to the Securities (including the fees,
disbursements and charges of counsel to the Underwriters in connection
therewith), (vii) expenses of the Company in connection with any meetings with
prospective investors in the Securities, (viii) fees and expenses of the
Trustee, including fees and expenses of counsel and (ix) any fees charged by
investment rating agencies for the rating of the Securities. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 7 hereof is not satisfied,
because this Agreement is terminated pursuant to Section 10 hereof or because of
any failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder other than by reason of a default by the Underwriters, the Company
will reimburse the Underwriters upon demand (accompanied by documentation) for
all out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by the Underwriters in connection with the proposed purchase
and sale of the Securities.

7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation of
the Underwriters to purchase and pay for the Securities shall, in their sole
discretion, be subject to the following conditions:

(a) If the registration statement originally filed with
respect to the Securities or any amendment thereto filed prior to the Closing
Date has not been declared effective as of the time of execution hereof, the
Registration Statement or such amendment shall have been declared effective not
later than 10:00 a.m., New York City time, on the date on which the amendment to
the registration statement originally filed with respect to the Securities or to
the Registration Statement, as the case may be, containing information regarding
the initial public offering price of the Securities has been filed with the
Commission, or such later time and date as shall have been consented to by the
Underwriters; if required, the Prospectus and any amendment or supplement
thereto shall have been filed in accordance with Rule 424(b) under the Act; no
stop order suspending the effectiveness of the Registration Statement or any
amendment thereto or the qualification of the Indenture under the Trust
Indenture Act shall have been issued and no proceedings for those purposes shall
have been instituted or, to the knowledge of the Company or the Underwriters,
threatened or are contemplated by the Commission; and the Company shall

<PAGE>

have complied with or satisfactorily responded to any request of the
Commission for additional information.

(b) The Underwriters shall have received an opinion in form
and substance satisfactory to the Underwriters, dated the Closing Date, of
Brownstein, Hyatt, Farber & Strickland, P.C., counsel for the Company,
substantially in the form of Exhibit A hereto.

(c) The Underwriters shall have received an opinion, dated
the Closing Date, of Latham & Watkins, counsel for the Underwriters, with
respect to certain legal matters relating to this Agreement, and such other
related matters as the Underwriters may require. In rendering such opinion,
Latham & Watkins shall have received and may rely upon such certificates and
other documents and information as they may reasonably request to pass upon such
matters. In addition, in rendering their opinion, Latham & Watkins may state
that their opinion is limited to matters of New York and Delaware General
Corporation Law and federal law.

(d) The Underwriters shall have received from Arthur
Andersen LLP, Moss Adams LLP and Jaynes, Reitmeier, Boyd & Therell, P.C., a
letter or letters dated, respectively, the date hereof and the Closing Date,
each in form and substance satisfactory to the Underwriters.

(e) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date; the Company shall have
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date; and
subsequent to the date of the most recent financial statements in the
Prospectus, there shall have been no material adverse change in the business,
properties, assets, operations or financial condition of the Company and the
Subsidiaries, taken as a whole, except as set forth in, or contemplated by, the
Registration Statement and the Prospectus.

(f) The sale of the Securities by the Company hereunder shall
not be enjoined (temporarily or permanently) on the Closing Date.

(g) Subsequent to the effective date of the Registration
Statement, there shall not have occurred any material adverse change, or any
event that would have a material adverse effect on the business, properties,
assets, operations or financial condition of the Company and the Subsidiaries,
taken as a whole.

(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except in
each case as described in or as contemplated by the Prospectus, none of the
Company or any of the Subsidiaries shall have incurred any liabilities or
obligations, direct or contingent (other than in the ordinary course of
business) that are material to the Company and the Subsidiaries, taken as a
whole, or entered into any transactions not in the ordinary course of business
that are material to the business, properties, assets, operations or financial
condition of the Company and the Subsidiaries, taken as a whole, and, other than
as contemplated by the Prospectus, there shall not have been any change

<PAGE>

in the capital stock or long-term indebtedness of the Company or the
Subsidiaries that is material to the business, properties, assets, operations
or financial condition of the Company and the Subsidiaries, taken as a whole.

(i) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
conduct of the business and operations of the Company or any of the Subsidiaries
has not been interfered with by strike, fire, flood, hurricane, accident or
other calamity (whether or not insured) or by any court or governmental action,
order or decree, and, except as otherwise stated therein, the properties of the
Company or any of the Subsidiaries have not sustained any loss or damage
(whether or not insured) as a result of any such occurrence, except any such
interference, loss or damage which would not have a material adverse effect on
the business, properties, assets, operations or financial condition of the
Company and the Subsidiaries, taken as a whole.

(j) The Underwriters shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by its Chief Executive Officer
or President, and the Chief Financial Officer of the Company, on behalf of the
Company, to the effect that:

(i) The representations and warranties of the Company
in this Agreement are true and correct in all material respects as of the
date hereof and as if made on and as of the Closing Date, and the Company
has performed all covenants and agreements and satisfied hereunder all
conditions on its part to be performed or satisfied hereunder at or prior
to the Closing Date;

(ii) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto or the qualification of the
Indenture under the Trust Indenture Act has been issued, and no proceedings
for those purposes have been instituted or, to the knowledge of the
Company, threatened or are contemplated by the Commission;

(iii) Subsequent to the effective date of the
Registration Statement, there has not occurred any event or events that,
individually or in the aggregate, would have a material adverse effect on
the business, properties, assets, operations or financial condition of the
Company and the Subsidiaries, taken as a whole;

(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except in each case as described in or as contemplated by the Prospectus,
none of the Company or any of the Subsidiaries has incurred any liabilities
or obligations, direct or contingent (other than in the ordinary course of
business) that are material to the Company and the Subsidiaries, taken as a
whole, or entered into any transactions not in the ordinary course of
business that are material to the business, properties, assets, operations
or financial condition of the Company and the Subsidiaries, taken as a
whole, and, other than as contemplated by the Prospectus, there shall not
have been any change in the capital stock or long-term indebtedness of the
Company or the Subsidiaries that is material to the business,

<PAGE>

properties, assets, operations or financial condition of the Company and
the Subsidiaries, taken as a whole;

(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
conduct of the business and operations of the Company or any of the
Subsidiaries has not been interfered with by strike, fire, flood,
hurricane, accident or other calamity (whether or not insured) or by any
court or governmental action, order or decree, and, except as otherwise
stated therein, the properties of the Company or any of the Subsidiaries
have not sustained any loss or damage (whether or not insured) as a result
of such occurrence, except any such interference, loss or damage which
would not have a material adverse effect on the business, properties,
assets, operations or financial condition of the Company and the
Subsidiaries, taken as a whole; and

(vi) The sale of the Securities by the Company
hereunder has not been enjoined (temporarily or permanently).

On or before the Closing Date, the Underwriters and counsel for the
Underwriters shall have received such further documents, opinions, certificates
and schedules or instruments relating to the business, corporate, legal and
financial affairs of the Company as they shall have heretofore reasonably
requested from the Company.

All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Underwriters and counsel for the Underwriters. The Company shall furnish to the
Underwriters such conformed copies of such opinions, certificates, letters,
schedules, documents and instruments in such quantities as the Underwriters
shall reasonably request.

8. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company agrees to indemnify and hold harmless the
Underwriters, and each person, if any, who controls the Underwriters within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriters or such controlling person may become subject under the Act, the
Exchange Act or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:

(i) any untrue statement or alleged untrue statement
of any material fact contained in (A) the registration statement originally
filed with respect to the Securities or any amendment thereto or any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Securities under the securities or
"Blue Sky" laws thereof or filed with the

<PAGE>

Commission or any securities association or securities exchange (each
an "Application"); or

(ii) the omission or alleged omission to state, in such
registration statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or any
Application, a material fact required to be stated therein or necessary to
make the statements therein not misleading,

and will reimburse, as incurred, the Underwriters and each such controlling
person for any legal or other expenses incurred by the Underwriters or such
controlling person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, the Company will not be liable
in any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Company by the Underwriters
specifically for use therein; and PROVIDED, FURTHER, that the Company will not
be liable to the Underwriters or any person controlling the Underwriters with
respect to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or liability
purchased Securities from the Underwriters in reliance upon the Preliminary
Prospectus but was not sent or given a copy of the Prospectus (as amended or
supplemented) at or prior to the written confirmation of the sale of such
Securities to such person in any case where such delivery of the Prospectus (as
so amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(c) of this Agreement. This
indemnity agreement will be in addition to any liability that the Company may
otherwise have to the indemnified parties. The Company shall not be liable
under this Section 8 for any settlement of any claim or action effected without
its consent, which shall not be unreasonably withheld.

(b) The Underwriters will indemnify and hold harmless each of
the Company, its directors, its officers who signed the Registration Statement
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act against any losses, claims,
damages or liabilities to which the Company or any such director, officer or
controlling person may become subject under the Act, the Exchange Act, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application, or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Underwriters

<PAGE>

specifically for use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability that the Underwriters may otherwise have
to the indemnified parties. The Underwriters shall not be liable under this
Section 8 for any settlement of any claim or action effected without its
consent, which shall not be unreasonably withheld.

(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 8, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it and/or other indemnified parties that
are different from or additional to those available to the indemnifying party,
or (iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action, then, in each
such case, the indemnifying party shall not have the right to direct the defense
of such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Underwriters in the case of paragraph (a) of this Section 8 or
the Company in the case of paragraph (b) of this Section 8, representing the
indemnified parties under such paragraph (a) or

<PAGE>

paragraph (b), as the case may be, who are parties to such action or actions)
or (ii) the indemnifying party has authorized in writing the employment of
counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party, unless such indemnified party waived in
writing its rights under this Section 8, in which case the indemnified party
may effect such a settlement without such consent.

(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 8 is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand,
or the Underwriters on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), the
Underwriters shall not be obligated to make contributions hereunder that in the
aggregate exceed the total underwriting discounts and commissions received by
the Underwriters under this Agreement, less the aggregate amount of any damages
that the Underwriters have otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls the Underwriters within the meaning of Section 15 of the Act or Section
20 of the Exchange Act shall have the same rights to contribution as the
Underwriters, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company.

<PAGE>

9. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Underwriters or any
controlling person referred to in Section 8 hereof and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in Sections 6 and 8 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.

10. TERMINATION.

(a) This Agreement may be terminated in the sole discretion
of the Underwriters by notice to the Company given prior to the Closing Date in
the event that the Company shall have failed, refused or been unable to perform
all obligations and satisfy all conditions on its part to be performed or
satisfied hereunder at or prior thereto or, if at or prior to the Closing Date:

(i) the Company shall have sustained any loss or
interference with respect to its businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance,
or from any labor dispute or any legal or governmental proceeding, which
loss or interference, in the sole judgment of the Underwriters, has had or
has a material adverse effect the business, properties, assets, operations
or financial condition of the Company and the Subsidiaries, taken as a
whole, or there shall have been, in the sole judgment of the Underwriters,
any material adverse change, or any development involving a prospective
material adverse change (including without limitation a change in
management or control of the Company), in the business, properties, assets,
operations or financial condition of the Company and the Subsidiaries,
taken as a whole, except in each case as described in or contemplated by
the Prospectus (exclusive of any amendment or supplement thereto);

(ii) trading in securities generally on the New York
Stock Exchange, American Stock Exchange or the Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been
established on any such exchange or trading in securities of the Company
shall have been suspended;

(iii) a banking moratorium shall have been declared by
New York or United States authorities; or

(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign power,
or (B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial markets
of the United States which, in the sole judgment of the Underwriters, makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities as contemplated by the Registration Statement,
as amended as of the date hereof.

<PAGE>

(b) Termination of this Agreement pursuant to this Section 10
shall be without liability of any party to any other party except as provided in
Section 9 hereof.

11. INFORMATION SUPPLIED BY THE UNDERWRITERS. The statements set
forth in the last paragraph on the cover page of the Prospectus, the
stabilization legend on the page following the cover page of the Prospectus and
the first, second, third, fourth, fifth and sixth paragraphs under the heading
"Underwriting" in the Prospectus (to the extent such statements relate to the
Underwriters) constitute the only information furnished by the Underwriters to
the Company for the purposes of Sections 2(b) and 8 hereof. The Underwriters
confirm that such statements (to the extent such statements relate to the
Underwriters) are correct.

12. NOTICES. All communications hereunder shall be in writing and,
if sent to the Underwriters, shall be mailed or delivered or telecopied and
confirmed in writing to (i) BT Alex. Brown Incorporated, 130 Liberty Street, New
York, New York 10006, Attention: Corporate Finance Department; and
(ii) Donaldson, Lufkin & Jenrette Securities Corporation, 600 California Street,
Suite 1900, San Francisco, California 94108; if sent to the Company, shall be
mailed or delivered or telecopied and confirmed in writing to the Company at
3478 Buskirk Avenue, Pleasant Hill, California 94523, Attention: Michael
Vukelich; with a copy to Brownstein Hyatt Farber & Strickland, P.C., 410
Seventeenth Street, 22nd Floor, Denver, Colorado 80202, Attention: Steven S.
Siegel, Esq.

13. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriters, the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company contained in Section 8 of this Agreement shall also be for the benefit
of any person or persons who control the Underwriters within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities
of the Underwriters contained in Section 8 of this Agreement shall also be for
the benefit of the directors of the Company, its officers who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Securities from the Underwriters will be deemed a successor because
of such purchase.

14. APPLICABLE LAW. The validity and interpretation of this
agreement, and the terms and conditions set forth herein shall be governed by
and construed in accordance with the laws of the state of New York, without
giving effect to any provisions relating to conflicts of law.

15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

<PAGE>

If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Underwriters.

Very truly yours,

COLOR SPOT NURSERIES, INC.

By: /s/ Michael F. Vukelich
--------------------------------
Name: Michael F. Vukelich
Title: Chief Executive Officer

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

BT ALEX. BROWN INCORPORATED

By: /s/ Kate W. Cook
------------------------------
Name: Kate Cook
Title: Managing Director

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By: /s/ Thomas M. Benninger
------------------------------
Name: Thomas M. Benninger
Title: Managing Director

<PAGE>

Exhibit A

Opinion of Brownstein, Hyatt, Farber & Strickland, P.C.

(a) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; to the
knowledge of such counsel, based solely upon a review of the corporate records
of the Company, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 21 to Item 16(a) of the Registration Statement (the "Subsidiaries");
each of the Subsidiaries has been duly organized and is validly existing as a
corporation or limited partnership in good standing under the laws of the
jurisdiction of its incorporation, with corporate or partnership power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement (provided that such counsel need not express any
opinion as to the organization of Oda Nursery, Inc.); the Company and each of
the Subsidiaries are duly qualified to transact business in the jurisdictions
set forth on Schedule I hereto; the outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued and are fully
paid and nonassessable and, based solely upon the review of the corporate or
partnership records of each such Subsidiary, are owned by the Company or a
Subsidiary; to the knowledge of such counsel, based solely upon the review of
the corporate or partnership records of each such Subsidiary, the outstanding
shares of capital stock of each of the Subsidiaries are owned free and clear of
all liens, encumbrances and equities and claims (other than those in favor of
Credit Agricole Indosuez, as agent for the Company's senior lenders), and no
options, warrants or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligations into any shares of capital
stock or of ownership interests in the Subsidiaries are outstanding.

(b) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly authorized; the
outstanding shares of the Company's Common Stock (i) issued in connection with
that certain Recapitalization dated as of December 31, 1996 (the
"Recapitalization") and (ii) issued since the date of the Recapitalization have
been duly authorized and validly issued and are fully paid and nonassessable.
Based solely upon the review of the Company's and the Subsidiaries' minute
books, to such counsel's knowledge, except as otherwise stated in the
Prospectus, all of the outstanding shares of capital stock of the Subsidiaries
are owned, directly or indirectly, by the Company, free and clear of all
perfected security interests and, to the knowledge of such counsel, free and
clear of all other restrictions on transferability (other than those imposed by
the Act and the securities or "Blue Sky" laws of certain jurisdictions) or
voting.

(c) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, based solely on the review of the corporate
minute book of the Company, there are no outstanding securities of the Company
convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the

A-1

<PAGE>

Company to issue any shares of its capital stock or any securities
convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of
the Company or any other person has the right, contractual or otherwise,
which has not been satisfied or effectively waived, to cause the Company to
sell or otherwise issue to them, or to permit them to underwrite the sale of,
any shares of Common Stock or the right to have any shares of Common Stock or
other securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to require
registration under the Act of any shares of Common Stock or other securities
of the Company.

(d) The Registration Statement has become effective under the
Act and, to the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act;
and any required filing of the Prospectus pursuant to Rule 424(b) under the Act
has been made in accordance with Rules 424(b) and 430A under the Act.

(e) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein, including the notes thereto and supporting
schedules and other financial and statistical data included therein or omitted
therefrom, or with respect to the Form T-1).

(f) The statements under the captions
"Management--Compensation Committee Interlocks and Insider Participation,"
"Management--Limitation on Directors' Liability and Indemnification,"
"Description of Capital Stock," "Description of Notes" and "Certain Definitions"
in the Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all material respects
the information called for with respect to such documents and matters.

(g) The information required to be set forth in the
Registration Statement in answer to Items 14 and 15 of Form S-1 to such
counsel's knowledge is accurately and adequately set forth therein in all
material respects.

(h) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.

(i) The execution and delivery of the Underwriting Agreement
and the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the charter or bylaws of the Company, or any
agreement filed as an exhibit to the Registration Statement which the Company or
any of the Subsidiaries may be bound or of any federal or New York statute, rule
or regulation or Delaware General Corporation Law known to such counsel to be
applicable to the Company (other than federal or state securities laws, which
are specifically addressed

A-2

<PAGE>

elsewhere herein) which conflict, breach or default could reasonably be
expected to have a material adverse effect on the Company.

(j) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.

(k) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body by the Company is necessary in connection with the execution
and delivery of the Underwriting Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the NASD or
as required by state securities and Blue Sky laws as to which such counsel need
express no opinion) except such as have been obtained or made, specifying the
same.

(l) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by the Underwriting Agreement,
and application of the net proceeds therefrom as described in the Prospectus,
required to register as an "investment company" or an affiliated person of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the 1940 Act and the rules and regulations thereunder.

(m) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture has been duly and validly authorized, executed and delivered by
the Company and (assuming due authorization, execution and delivery by the
Trustee) is the legally valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.

(n) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Notes. The
Notes, when executed and authenticated in accordance with the terms of the
Indenture and delivered to and paid for by the Underwriters in accordance with
the terms of the Underwriting Agreement, will be legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.

(o) The Indenture has been duly qualified under the Trust
Indenture Act.

(p) Neither the issuance, sale and delivery of the Notes, nor
the application of the proceeds thereof by the Company as set forth in the
Prospectus, will violate Regulations G, T, U or X promulgated by the Board of
Governors of the Federal Reserve System.

(q) CSN, Inc., a Delaware corporation, has been merged with
and into the Company, with the Company surviving such merger, under the General
Corporation Law of the State of Delaware.

A-3

<PAGE>

(but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date, contained
an untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need
express no opinion as to financial statements and related schedules therein,
including the notes thereto and supporting schedules and other financial and
statistical data included therein or omitted therefrom, or with respect to
the Form T-1). With respect to such statement, such counsel may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.

A-4

<PAGE>

COLOR SPOT NURSERIES, INC.

$40,000,000
40,000 UNITS CONSISTING OF
13% SERIES A CUMULATIVE PREFERRED STOCK AND
WARRANTS TO PURCHASE COMMON STOCK

UNDERWRITING AGREEMENT
----------------------

December 22, 1997

BT Alex. Brown Incorporated
130 Liberty Street
New York, New York 10006

Ladies and Gentlemen:

Color Spot Nurseries, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement with you (the "Underwriter"), as set forth below.

1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Underwriter 40,000
units (the "Units"), consisting in the aggregate of 40,000 shares of its 13%
Series A Cumulative Preferred Stock (the "Series A Preferred Stock") and 825,000
warrants (the "Warrants") to purchase an aggregate of 825,000 shares of common
stock, par value $.001 per share (the "Common Stock"), of the Company. The
terms of the Series A Preferred Stock shall be set forth in the Certificate of
Designation, Preferences and Relative, Participating Optional and Other Special
Rights of Preferred Stock and Qualifications, Limitations and Restrictions of
Series A Preferred Stock (the "Certificate of Designation") of the Company. The
Warrants are to be issued pursuant to a Warrant Agreement (the "Warrant
Agreement") to be dated as of December 22, 1997 between the Company and American
Stock Transfer and Trust Company, as warrant agent (the "Warrant Agent").
Shares of the Common Stock issuable upon exercise of the Warrants are
collectively referred to herein as the "Warrant Shares." The Units, Series A
Preferred Stock and the Warrants are collectively referred to herein as the
"Securities."

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with the Underwriter that:

<PAGE>

Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) with respect to the Securities
or (b) the last preliminary prospectus included in the Registration Statement
filed prior to the time it becomes effective or filed pursuant to Rule 424(a)
under the Act that is delivered by the Company to the Underwriter for delivery
to purchasers of the Securities, together with the term sheet or abbreviated
term sheet filed with the Commission pursuant to Rule 424(b)(7) under the Act.
Each preliminary prospectus included in the Registration Statement prior to the
time it becomes effective is herein referred to as a "Preliminary Prospectus."

(c) The information set forth under "Capitalization" in the
Prospectus is true and correct. The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive or similar
rights; and except as disclosed in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus, all of the
outstanding shares of capital stock of the Company and each of the
Subsidiaries are free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by the
Act and the securities or "Blue Sky" laws of certain jurisdictions) or
voting. Except for the capital stock of the Subsidiaries, the Company does
not own, directly or indirectly, any shares of

<PAGE>

stock or any other equity or long-term debt securities or have any equity
interest in any firm, partnership, joint venture or other entity. No holders of
securities of the Company are entitled to have such securities registered under
the Registration Statement.

(d) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Securities nor instituted proceedings for that purpose. The Registration
Statement contains, and the Prospectus and any amendments or supplements thereto
will contain, all statements which are required to be stated therein by, and
will conform to, the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by
the Underwriter specifically for use in the preparation thereof.

<PAGE>

(f) Arthur Andersen LLP, Moss Adams LLP and Jaynes,
Reitmeier, Boyd & Therrell, P.C., who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement,
are independent public accountants as required by the Act and the Rules and
Regulations.

<PAGE>

of the Company and the Subsidiaries taken as a whole. Except with respect to
that certain Amended and Restated Credit Agreement, dated as of February 20,
1997, as amended, the execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company
or any Subsidiary is a party, or of the charter or by-laws of the Company or
any order, rule or regulation applicable to the Company or any Subsidiary of
any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction which conflict, breach or default could
reasonably be expected to have a material adverse effect on the Company.

<PAGE>

thereunder (the "Code"); and each "pension plan" for which the Company would
have any liability that is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of such
qualification.

(r) The Certificate of Designation has been duly adopted by
the Company's Board of Directors in compliance with the Company's Certificate of
Incorporation and By-Laws.

(s) The Series A Preferred Stock has been duly and validly
authorized by the Company for issuance and sale to the Underwriter pursuant to
this Agreement and the Series A Preferred Stock, when issued and delivered to
and paid for by the Underwriter in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and not subject to any
preemptive or similar rights.

(t) The Warrant Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Warrant Agent),
will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought.

(u) The Warrants have been duly and validly authorized by the
Company, and when issued and delivered in accordance with the terms of the
Warrant Agreement and delivered to and paid for by the Underwriter in accordance
with the terms hereof will have been duly and validly issued and the issuance of
such Warrants will not be subject to any preemptive or similar rights.

(v) The Warrant Shares initially issuable upon exercise of
the Warrants have been duly and validly authorized and reserved for issuance
upon exercise of the Warrants and, when issued and delivered upon exercise of
the Warrants against payment of the Exercise Price (as defined in the Warrant
Agreement), the Warrant Shares will have been duly and validly

<PAGE>

issued and will be fully paid and non-assessable, and the issuance of such
Warrant Shares will not be subject to any preemptive or similar rights.

(w) The Company has all requisite corporate power and
authority to enter into this Agreement, to issue and deliver the Securities and
Warrant Shares and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company. No
consent, approval, authorization or order of any court or governmental agency or
body is required for the performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except such
as have been obtained and such as may be required under state securities or
"Blue Sky" laws in connection with the purchase and distribution of the
Securities by the Underwriter.

(x) Except as provided in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no consensual encumbrances or restrictions on the ability of any Subsidiary
(i) to pay dividends or make any other distributions on such Subsidiary's
capital stock or to pay any indebtedness owed to the Company or any other
Subsidiary, (ii) to make any loans or advances to, or investments in, the
Company or any other Subsidiary, or (iii) to transfer any of its property or
assets to the Company or any other Subsidiary.

(y) The Securities, the Warrant Agreement and this Agreement
will conform in all material respects to the descriptions thereof in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).

3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Underwriter, and the Underwriter agrees to purchase from
the Company $40,000,000 aggregate amount of the Securities for $38,400,000.
Certificates in definitive form for the Securities that the Underwriter has
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Underwriter requests upon notice to the
Company at least 48 hours prior to the Closing Date, shall be delivered by or on
behalf of the Company to the Underwriter, against payment by or on behalf of the
Underwriter of the purchase price therefor by wire transfer payable in
immediately available funds to the account of the Company. Such delivery of and
payment for the Securities shall be made at the San Francisco offices of Latham
& Watkins, at 10:00 A.M., Eastern Standard Time, on December 24, 1997, or at
such other place, time or date as the Underwriter and the Company may agree upon
or as the Underwriter may determine pursuant to Section 7(a) hereof, such time
and date of delivery against payment being herein referred to as the "Closing
Date." The Company will make such certificate or certificates for the
Securities available for checking and packaging by the Underwriter at the
offices in New York, New York of BT Alex. Brown at least 24 hours prior to the
Closing Date.

4. OFFERING BY THE UNDERWRITER. After the Registration Statement
becomes effective, the Underwriter proposes to offer for sale to the public the
Securities at the price and upon the terms set forth in the Prospectus.

<PAGE>

4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:

(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto, to become effective promptly. If
required, the Company will file the Prospectus and any amendment or supplement
thereto with the Commission in the manner and within the time period required by
Rule 424(b) under the Act. During any time when a prospectus relating to the
Securities is required to be delivered under the Act, (i) the Company will
comply with all requirements imposed upon it by the Act and the Rules and
Regulations to the extent necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) the Company will not file
with the Commission the Prospectus or any amendment or supplement to such
Prospectus or any amendment to the Registration Statement of which the
Underwriter shall not previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed filing and as to which filing
the Underwriter shall not have given its consent. The Company will prepare and
file with the Commission, in accordance with the Act and the Rules and
Regulations, promptly upon the reasonable request by the Underwriter or counsel
for the Underwriter, any amendments to the Registration Statement or amendments
or supplements to the Prospectus that may be necessary or advisable in
connection with the distribution of the Securities by the Underwriter, and will
use its best efforts to cause any such amendment to the Registration Statement
to be declared effective by the Commission promptly. The Company will advise
the Underwriter, promptly after it receives notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto has been
filed and will provide evidence satisfactory to the Underwriter of each such
filing or effectiveness.

(b) The Company will advise the Underwriter promptly (A) when
the Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.

(c) The Company will deliver to, or upon the order of, the
Underwriter, from time to time, as many copies of any Preliminary Prospectus as
the Underwriter may reasonably request. The Company will deliver to, or upon
the order of, the Underwriter during the period when delivery of a Prospectus is
required under the Act, as many copies of the Prospectus in final form, or as
thereafter amended or supplemented, as the Underwriter may reasonably request.
The Company will deliver to the Underwriter at or before the Closing Date, one
copy of the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Underwriter such number of
copies of the Registration

<PAGE>

Statement (including such number of copies of the exhibits filed therewith
that may reasonably be requested), and of all amendments thereto, as the
Underwriter may reasonably request.

(d) If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriter, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.

(f) The Company will, for a period ending on the date no
Securities are outstanding, deliver to the Underwriter copies of annual reports
and copies of all other documents, reports and information furnished by the
Company to its stockholders or filed with any securities exchange pursuant to
the requirements of such exchange or with the Commission pursuant to the Act or
the Exchange Act. During such time, the Company will deliver to the Underwriter
similar reports with respect to significant subsidiaries, as that term is
defined in the Rules and Regulations, which are not consolidated in the
Company's financial statements.

(g) The Company shall apply the net proceeds of its sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.

(i) The Company will cooperate with the Underwriter in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Underwriter may
designate and will continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Securities; PROVIDED, HOWEVER,
that in connection therewith the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction.

<PAGE>

(j) Prior to the Closing Date, the Company will furnish to the
Underwriter, as soon as they have been prepared, a copy of any unaudited interim
consolidated financial statements of the Company for any period subsequent to
the period covered by its most recent financial statements appearing in the
Registration Statement and Prospectus.

6. EXPENSES. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including all costs and expenses
incident to (i) the printing, word processing, filing or other production of
documents with respect to the transactions, including any costs of printing the
registration statement originally filed with respect to the Securities and any
amendment thereto, any Preliminary Prospectus and the Prospectus and any
amendment or supplement thereto, any "Blue Sky" memoranda and the Certificate of
Designation, (ii) all arrangements relating to the delivery to the Underwriter
of copies of the foregoing documents, (iii) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Company, (iv) preparation (including printing), issuance and delivery to the
Underwriter of the Securities, (v) the qualification of the Securities under
state securities and "Blue Sky" laws, including filing fees and fees and
disbursements of counsel for the Underwriter relating thereto, (vi) the filing
fees of the Commission and the National Association of Securities Dealers, Inc.
relating to the Securities (including the fees, disbursements and charges of
counsel to the Underwriter in connection therewith), (vii) expenses of the
Company in connection with any meetings with prospective investors in the
Securities (viii) fees and expenses of the transfer agent for the Series A
Preferred Stock and of the Warrant Agent; and (ix) any fees charged by
investment rating agencies for the rating of the Securities. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriter set forth in Section 7 hereof is not satisfied,
because this Agreement is terminated pursuant to Section 10 hereof or because of
any failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder other than by reason of a default by the Underwriter, the Company will
reimburse the Underwriter upon demand (accompanied by documentation) for all
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by the Underwriter in connection with the proposed purchase
and sale of the Securities.

7. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of
the Underwriter to purchase and pay for the Securities shall, in its sole
discretion, be subject to the following conditions:

<PAGE>

the Registration Statement, as the case may be, containing information regarding
the initial public offering price of the Securities has been filed with the
Commission, or such later time and date as shall have been consented to by the
Underwriter; if required, the Prospectus and any amendment or supplement thereto
shall have been filed in accordance with Rule 424(b) under the Act; no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto and no proceedings for those purposes shall have been
instituted or, to the knowledge of the Company or the Underwriter, threatened or
are contemplated by the Commission; and the Company shall have complied with or
satisfactorily responded to any request of the Commission for additional
information.

(b) The Underwriter shall have received an opinion in form
and substance satisfactory to the Underwriter, dated the Closing Date, of
Brownstein, Hyatt, Farber & Strickland, P.C., counsel for the Company,
substantially in the form of Exhibit A hereto.

(c) The Underwriter shall have received an opinion, dated the
Closing Date, of Latham & Watkins, counsel for the Underwriter, with respect to
certain legal matters relating to this Agreement, and such other related matters
as the Underwriter may require. In rendering such opinion, Latham & Watkins
shall have received and may rely upon such certificates and other documents and
information as they may reasonably request to pass upon such matters. In
addition, in rendering their opinion, Latham & Watkins may state that their
opinion is limited to matters of New York and Delaware General Corporation Law
and federal law.

(d) The Underwriter shall have received from Arthur
Andersen LLP, Moss Adams LLP and Jaynes, Reitmeier, Boyd & Therell, P.C., a
letter or letters dated, respectively, the date hereof and the Closing Date,
each in form and substance satisfactory to the Underwriter.

(f) The sale of the Securities by the Company hereunder shall
not be enjoined (temporarily or permanently) on the Closing Date.

<PAGE>

(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except
in each case as described in or as contemplated by the Prospectus, none of
the Company or any of the Subsidiaries shall have incurred any liabilities or
obligations, direct or contingent (other than in the ordinary course of
business) that are material to the Company and the Subsidiaries, taken as a
whole, or entered into any transactions not in the ordinary course of
business that are material to the business, properties, assets, operations or
financial condition of the Company and the Subsidiaries, taken as a whole,
and, other than as contemplated by the Prospectus, there shall not have been
any change in the capital stock or long-term indebtedness of the Company or
the Subsidiaries that is material to the business, properties, assets,
operations or financial condition of the Company and the Subsidiaries, taken
as a whole.

(j) The Underwriter shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by its Chief Executive Officer
or President, and the Chief Financial Officer of the Company, on behalf of the
Company, to the effect that:

(ii) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto and no proceedings for such
purpose has been instituted or, to the knowledge of the Company, threatened
or are contemplated by the Commission;

<PAGE>

course of business) that are material to the Company and the
Subsidiaries, taken as a whole, or entered into any transactions not in
the ordinary course of business that are material to the business,
properties, assets, operations or financial condition of the Company and
the Subsidiaries, taken as a whole, and, other than as contemplated by
the Prospectus, there shall not have been any change in the capital
stock or long-term indebtedness of the Company or the Subsidiaries that
is material to the business, properties, assets, operations or financial
condition of the Company and the Subsidiaries, taken as a whole;

(vi) The sale of the Securities by the Company
hereunder has not been enjoined (temporarily or permanently).

(k) The Underwriter shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by its Chief Financial Officer
of the Company, certifying a schedule which describes in detail the Company's
outstanding shares of Common Stock on a fully diluted basis.

On or before the Closing Date, the Underwriter and counsel for the
Underwriter shall have received such further documents, opinions, certificates
and schedules or instruments relating to the business, corporate, legal and
financial affairs of the Company as they shall have heretofore reasonably
requested from the Company.

All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Underwriter and counsel for the Underwriter. The Company shall furnish to the
Underwriter such conformed copies of such opinions, certificates, letters,
schedules, documents and instruments in such quantities as the Underwriter shall
reasonably request.

8. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under

13
<PAGE>

the Act, the Exchange Act or otherwise, insofar as any such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon:

and will reimburse, as incurred, the Underwriter and each such controlling
person for any legal or other expenses incurred by the Underwriter or such
controlling person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, the Company will not be liable
in any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Company by the Underwriter
specifically for use therein; and PROVIDED, FURTHER, that the Company will not
be liable to the Underwriter or any person controlling the Underwriter with
respect to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or liability
purchased Securities from the Underwriter in reliance upon the Preliminary
Prospectus but was not sent or given a copy of the Prospectus (as amended or
supplemented) at or prior to the written confirmation of the sale of such
Securities to such person in any case where such delivery of the Prospectus (as
so amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(c) of this Agreement. This
indemnity agreement will be in addition to any liability that the Company may
otherwise have to the indemnified parties. The Company shall not be liable
under this Section 8 for any settlement of any claim or action effected without
its consent, which shall not be unreasonably withheld.

(b) The Underwriter will indemnify and hold harmless each of
the Company, its directors, its officers who signed the Registration Statement
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act against any losses, claims,
damages or liabilities to which the Company or any such director, officer or
controlling person may become subject under the Act, the Exchange Act, or

14
<PAGE>

otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application, or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will
be in addition to any liability that the Underwriter may otherwise have to the
indemnified parties. The Underwriter shall not be liable under this Section 8
for any settlement of any claim or action effected without its consent, which
shall not be unreasonably withheld.

15
<PAGE>

defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in
the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Underwriter in the case of paragraph (a) of
this Section 8 or the Company in the case of paragraph (b) of this Section 8,
representing the indemnified parties under such paragraph (a) or paragraph
(b), as the case may be, who are parties to such action or actions) or (ii)
the indemnifying party has authorized in writing the employment of counsel for
the indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any settlement of such
action effected by such indemnified party without the consent of the
indemnifying party, unless such indemnified party waived in writing its rights
under this Section 8, in which case the indemnified party may effect such a
settlement without such consent.

(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 8 is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Underwriter. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand,
or the Underwriter on the other, the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Company and the Underwriter agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Underwriter shall
not be obligated to make contributions hereunder that in the aggregate exceed
the total underwriting discounts and commissions received by the Underwriter
under this Agreement, less the aggregate

16
<PAGE>

amount of any damages that the Underwriter has otherwise been required to pay
by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any,
who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
the Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company.

9. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Underwriter set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the Company,
any of its officers or directors, the Underwriter or any controlling person
referred to in Section 8 hereof and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.

10. TERMINATION.

(a) This Agreement may be terminated in the sole discretion
of the Underwriter by notice to the Company given prior to the Closing Date in
the event that the Company shall have failed, refused or been unable to perform
all obligations and satisfy all conditions on its part to be performed or
satisfied hereunder at or prior thereto or, if at or prior to the Closing Date:

(i) the Company shall have sustained any loss or
interference with respect to its businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance,
or from any labor dispute or any legal or governmental proceeding, which
loss or interference, in the sole judgment of the Underwriter, has had or
has a material adverse effect the business, properties, assets, operations
or financial condition of the Company and the Subsidiaries, taken as a
whole, or there shall have been, in the sole judgment of the Underwriter,
any material adverse change, or any development involving a prospective
material adverse change (including without limitation a change in
management or control of the Company), in the business, properties, assets,
operations or financial condition of the Company and the Subsidiaries,
taken as a whole, except in each case as described in or contemplated by
the Prospectus (exclusive of any amendment or supplement thereto);

17
<PAGE>

(iii) a banking moratorium shall have been declared by
New York or United States authorities; or

(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign power,
or (B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial markets
of the United States which, in the sole judgment of the Underwriter, makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities as contemplated by the Registration Statement,
as amended as of the date hereof.

(b) Termination of this Agreement pursuant to this Section 10
shall be without liability of any party to any other party except as provided in
Section 9 hereof.

11. INFORMATION SUPPLIED BY THE UNDERWRITER. The statements set
forth in the last paragraph on the cover page of the Prospectus, the
stabilization legend on the page following the cover page of the Prospectus and
the first, second, third, fourth, fifth (other than the first sentence) and
sixth paragraphs under the heading "Underwriting" in the Prospectus (to the
extent such statements relate to the Underwriter) constitute the only
information furnished by the Underwriter to the Company for the purposes of
Sections 2(b) and 8 hereof. The Underwriter confirm that such statements (to
the extent such statements relate to the Underwriter) are correct.

12. NOTICES. All communications hereunder shall be in writing and,
if sent to the Underwriter, shall be mailed or delivered or telecopied and
confirmed in writing to BT Alex. Brown Incorporated, 130 Liberty Street, New
York, New York 10006, Attention: Corporate Finance Department; if sent to the
Company, shall be mailed or delivered or telecopied and confirmed in writing to
the Company at 3478 Buskirk Avenue, Pleasant Hill, California 94523, Attention:
Michael Vukelich; with a copy to Brownstein Hyatt Farber & Strickland, P.C., 410
Seventeenth Street, 22nd Floor, Denver, Colorado 80202, Attention: Steven S.
Siegel, Esq.

13. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company contained in Section 8 of this Agreement shall also be for the benefit
of any person or persons who control the Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities
of the Underwriter contained in Section 8 of this Agreement shall also be for
the benefit of the directors of the Company, its officers who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Securities from the Underwriter will be deemed a successor because
of such purchase.

18
<PAGE>

15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

19
<PAGE>

Very truly yours,

COLOR SPOT NURSERIES, INC.

By: /s/ Michael F. Vukelich
-----------------------------
Name: Michael F. Vukelich
Title: Chief Executive Officer

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

BT ALEX. BROWN INCORPORATED

By: /s/ Kate W. Cook
----------------------------
Name: Kate Cook
Title: Managing Director

20
<PAGE>

Exhibit A

Opinion of Brownstein, Hyatt, Farber & Strickland, P.C.

(a) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; to the
knowledge of such counsel, based solely upon a review of the corporate records
of the Company, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 21 to Item 16(a) of the Registration Statement (the "Subsidiaries");
each of the Subsidiaries has been duly organized and is validly existing as a
corporation or limited partnership in good standing under the laws of the
jurisdiction of its incorporation, with corporate or partnership power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement (provided that such counsel need not express any
opinion as to the organization of Oda Nursery, Inc.); the Company and each of
the Subsidiaries are duly qualified to transact business in the jurisdictions
set forth on Schedule I hereto; the outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued and are fully
paid and nonassessable and, based solely upon the review of the corporate or
partnership records of each such Subsidiary, are owned by the Company or a
Subsidiary; to the knowledge of such counsel, based solely upon the review of
the corporate or partnership records of each such Subsidiary, the outstanding
shares of capital stock of each of the Subsidiaries are owned free and clear of
all liens, encumbrances and equities and claims (other than those in favor of
Credit Agricole Indosuez, as agent for the Company's senior lenders and those
arising under applicable securities laws), and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of ownership
interests in the Subsidiaries are outstanding.

A-1
<PAGE>

there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or
any securities convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of such stock; and except as described in
the Prospectus, to the knowledge of such counsel, no holder of any securities
of the Company or any other person has the right, contractual or otherwise,
which has not been satisfied or effectively waived, to cause the Company to
sell or otherwise issue to them, or to permit them to underwrite the sale of,
any shares of Common Stock or the right to have any shares of Common Stock or
other securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to require
registration under the Act of any shares of Common Stock or other securities
of the Company.

(f) The statements under the captions
"Management--Compensation Committee Interlocks and Insider Participation,"
"Management--Limitation on Directors' Liability and Indemnification,"
"Description of Capital Stock," "Description of Units," "Description of Series A
Preferred Stock," "Description of Warrants" and "Certain Definitions" in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all material respects
the information called for with respect to such documents and matters.

(h) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.

A-2
<PAGE>

the Company (other than federal or state securities laws, which are
specifically addressed elsewhere herein) which conflict, breach or default
could reasonably be expected to have a material adverse effect on the Company.

(j) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.

(m) The Certificate of Designation has been duly adopted by
the Company's Board of Directors in compliance with the Company's Certificate of
Incorporation and By-Laws.

(n) The Series A Preferred Stock has been duly authorized by
the Company for issuance and sale to the Underwriter pursuant to the
Underwriting Agreement and are validly issued, fully paid and non-assessable
and, to the knowledge of such counsel, not subject to any preemptive or similar
rights.

(o) The Warrant Agreement has been duly and validly
authorized, executed and delivered by the Company and (assuming due
authorization, execution and delivery by the Warrant Agent) is the legally valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.

(p) The Warrants have been duly and validly authorized,
issued and delivered in accordance with the terms of the Warrant Agreement, and,
to the knowledge of such counsel, the issuance of such Warrants is not subject
to any preemptive or similar rights.

(q) The Warrant Shares initially issuable upon exercise of
the Warrants have been duly and validly authorized and reserved for issuance
upon exercise of the Warrants and, when issued and delivered upon exercise of
the Warrants against payment of the Exercise

A-3
<PAGE>

Price as provided in the Warrant Agreement, the Warrant Shares will have been
duly and validly issued and will be fully paid and non-assessable, and, to
such counsel's knowledge, the issuance of such Warrant Shares will not be
subject to any preemptive or similar rights.

(r) CSN, Inc., a Delaware corporation, has been merged with
and into the Company, with the Company surviving such merger, under the General
Corporation Law of the State of Delaware.

In addition to the matters set forth above, such counsel shall also
furnish a separate written opinion to the effect that nothing has come to the
attention of such counsel which leads them to believe that (i) the Registration
Statement, at the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A under the
Act) and as of the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no opinion as to
financial statements and related schedules therein, including the notes thereto
and supporting schedules and other financial and statistical data included
therein or omitted therefrom). With respect to such statement, such counsel may
state that their belief is based upon the procedures set forth therein, but is
without independent check and verification.

A-4

<PAGE>

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COLOR SPOT NURSERIES, INC.

Color Spot Nurseries, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:

1. The name of the Corporation is Color Spot Nurseries, Inc. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware on August 17, 1995.

2. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of this Corporation as more
particularly set forth on EXHIBIT A.

3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is restated as more particularly set forth on EXHIBIT A.

4. This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders in accordance with the applicable
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware.

5. This Amended and Restated Certificate of Incorporation shall be
effective on the 24th day of December, 1997.

IN WITNESS WHEREOF, COLOR SPOT NURSERIES, INC. has caused this Certificate
to be signed by MICHAEL F. VUKELICH, its Chief Executive Officer, this 22nd day
of December, 1997.

COLOR SPOT NURSERIES, INC.

By /s/ Michael F. Vukelich
-----------------------------------
MICHAEL F. VUKELICH
Chief Executive Officer

<PAGE>

EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

COLOR SPOT NURSERIES, INC.

ARTICLE I

The name of the corporation is COLOR SPOT NURSERIES, INC. (hereinafter
referred to as the "Corporation").

ARTICLE II

The address of the Corporation's registered office in the state of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is THE CORPORATION TRUST
COMPANY.

ARTICLE III

The nature of the business of the Corporation and the purposes for
which it is organized are to engage in any business and lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware and to possess and employ all powers and privileges now or
hereafter granted or available under the laws of the State of Delaware to such
corporations.
ARTICLE IV

Section 1. AUTHORIZED SHARES. The number of shares of capital
stock of all classes which the Corporation shall have authority to issue is
55,000,000 shares, consisting of 50,000,000 shares of Common Stock, par value
$0.001 per share (the "Common Stock"), and 5,000,000 shares of Preferred Stock,
par value $0.01 per share (the "Preferred Stock").

Section 2. DESIGNATIONS, POWERS, AND PREFERENCES. The
designations and the powers, preferences and rights, and the qualifications,
limitations or restrictions of the shares of each class of stock are as follows:

A. PREFERRED STOCK. Shares of Preferred Stock may be
issued in one or more series at such time or times as the Board of Directors may
determine. All shares of any one series of Preferred Stock shall be of equal
rank and identical in all respects except as to the dates from and after which
dividends thereon shall cumulate, if cumulative. The number of authorized

<PAGE>

shares of Preferred Stock may be increased or decreased by the affirmative vote
of a majority of the capital stock of the Corporation entitled to vote without
the separate vote of holders of Preferred Stock as a class. Subject to the
limitations hereof and the limitations prescribed by law, the Board of Directors
of the Corporation (the "Board of Directors") is expressly authorized to fix
from time to time, by resolution or resolutions adopted prior to the issuance of
and providing for the establishment or issuance of any series of Preferred
Stock, the designation of such series and the powers, preferences and rights of
such series, and the qualifications, limitations or restrictions thereof. The
authority of the Board of Directors with respect to each such series shall
include, but shall not be limited to, determination of the following:

(i) The distinctive serial designation and number
of shares comprising each such series (provided that the aggregate number
of shares constituting all series of Preferred Stock shall not exceed the
total number of authorized shares of Preferred Stock pursuant to Section 1
of this Article IV), which number may (except where otherwise provided by
the Board of Directors in creating such series) be increased or decreased
(but not below the number of shares of such series then outstanding) from
time to time by action of the Board of Directors;

(ii) The rate of dividends, if any, on the shares of
that series, whether dividends shall be noncumulative, cumulative to the
extent earned or cumulative (and, if cumulative, from which date or dates),
whether dividends shall be payable in cash, property, or rights, or in
shares of the Corporation's capital stock, and the relative priority, if
any, of payment of dividends on shares of that series over shares of any
other series;

(iii) Whether the shares of that series shall be
redeemable and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable,
the event or events upon or after which they shall be redeemable or at
whose option they shall be redeemable, and the amount per share payable
upon redemption (which amount may vary under different conditions and at
different redemption dates) or the property or rights, including securities
of any other corporation, payable upon redemption;

(iv) Whether that series shall have a sinking fund
for the redemption or purchase of shares of that series and, if so, the
terms and amounts payable into such sinking fund;

(v) The rights to which the holders of the shares
of that series shall be entitled in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of that series in any such
event;

(vi) Whether the shares of that series shall be
convertible into or exchangeable for any other securities and, if so, the
terms and conditions of such conversion

<PAGE>

or exchange, including the rate or rates of conversion or exchange, the
date or dates upon or after which they shall be convertible or
exchangeable or at whose option they shall be convertible or exchangeable,
and the method, if any, of adjusting the rates of conversion or exchange
in the event of a stock split, stock dividend, combination or
reclassification of shares or similar event;

(vii) Whether the issuance of any additional shares
of such series shall be subject to restrictions, or whether any shares of
any other series shall be subject to restrictions as to issuance, or as to
the powers, preferences or rights of any such other series;

(viii) Whether the shares of that series shall have
voting rights in addition to the voting rights provided by law, and, if so,
the terms of such voting rights, including, without limitation, the
authority to confer multiple votes per share, voting rights as to specified
matters or issues or, subject to the provisions of this Amended and
Restated Certificate of Incorporation, voting rights to be exercised either
together with holders of Common Stock as a single class, or independently
as a separate class;

(ix) The rights of the holders of the shares of that
series to elect additional directors of the Corporation under specified
circumstances and the provisions under which such additional directors so
elected shall serve; and

(x) Any other preferences, privileges and powers
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of this Amended and Restated Certificate of Incorporation and to
the full extent now or hereafter permitted by the laws of the State of
Delaware.

B. COMMON STOCK.

Subject to all of the rights of the Preferred Stock, and except as may
be provided with respect to the Preferred Stock herein, by law or by the Board
of Directors pursuant to this Article IV:

(i) Dividends may be declared and paid or set apart
for payment upon the Common Stock out of any assets or funds of the
Corporation legally available for the payment of dividends;

(ii) The holders of Common Stock shall have the
right to vote for the election of directors and on all other matters
requiring stockholder action, each share being entitled to one vote; and

(iii) Upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the net assets of the
Corporation shall be distributed pro rata to the holders of the Common
Stock in accordance with their respective rights and interests.

<PAGE>

C. PREEMPTIVE RIGHTS. No holder of any stock of the
Corporation of any class shall have the preemptive right to subscribe for or
purchase any part of any new or additional issue of stock of any class
whatsoever of the Corporation, or of securities convertible into or exchangeable
for stock of any class whatsoever, whether now or hereafter authorized, or
whether issued for cash or other consideration or by way of dividend.

ARTICLE V

The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. For the management of the
business and for the conduct of the affairs of the Corporation, and in further
creation, definition, limitation and regulation of the powers of the Corporation
and of its directors and of its stockholders, it is further provided:

Section 1. ELECTIONS OF DIRECTORS. Elections of directors need
not be by written ballot unless the Bylaws of the Corporation shall so provide.

Section 2. NUMBER, ELECTION, AND TERMS OF DIRECTORS. Except as
otherwise fixed pursuant to the provisions of Article IV hereof relating to the
rights of the holders of any class or series of Preferred Stock to elect
additional directors under specified circumstances, the number of directors of
the Corporation shall be fixed from time to time exclusively by resolutions
adopted by the Board of Directors; provided, however, that no decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.

The directors, other than those who may be elected by the holders of
any class or series of Preferred Stock, shall be classified, with respect to the
time for which they severally hold office, into three (3) classes, as nearly
equal in number as possible, as shall be provided in the manner specified in the
Bylaws of the corporation, Class I to hold office initially for a term expiring
at the annual meeting of stockholders to be held during the fiscal year ending
in 1998, Class II to hold office initially for a term expiring at the annual
meeting of stockholders to be held during the fiscal year ending in 1999, and
Class III to hold office initially for a term expiring at the annual meeting of
stockholders to be held during the fiscal year ending in 2000, with the members
of each class to hold office until their successors are elected and qualified.
At each annual meeting of the stockholders of the Corporation, the successors to
the class of directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.

Section 3. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES. Advance
notice of nominations for the election of directors, other than by the Board of
Directors or a committee thereof, shall be given in the manner provided in the
Bylaws.

Section 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as
otherwise fixed pursuant to the provisions of Article IV hereof relating to the
rights of the holders of any class or series of Preferred Stock to elect
directors under specified circumstances, newly created

<PAGE>

directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole
remaining director. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred
and until such directors successor shall have been elected and qualified, or
until such director's earlier resignation or removal.

Section 5. STOCKHOLDER ACTION. Except as otherwise prescribed by
law and subject to the rights of holders or any class or series of Preferred
Stock, special meetings of stockholders of the Corporation, for any purpose or
purposes, may be called only by the Chairman of the Board, if there be one, the
President, or the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors and shall be called by the Secretary
or any Assistant Secretary, if there be one, at the request in writing of a
majority of the entire Board of Directors or by holders of outstanding stock of
the Corporation having not less than the minimum number of votes that would be
necessary to authorize such action.

Section 6. BYLAW AMENDMENTS. The Board of Directors shall have
power to make, alter, amend and repeal the Bylaws (except so far as the Bylaws
adopted by the stockholders shall otherwise provide). Any Bylaws made by the
Board of Directors under the powers conferred hereby may be altered, amended or
repealed by the Board of Directors or by the stockholders of the Corporation.
Notwithstanding the foregoing and anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, Section 7 of Article II
and Section 3 of Article III of the Bylaws shall not be altered, amended or
repealed and no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 66 2/3% of the voting power of all
the shares of capital stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), voting together as a single class.

Section 7. REMOVAL OF DIRECTORS. Any director, other than those
who may be elected by the holders of any class or series of Preferred Stock, or
the entire Board of Directors, may be removed from office only for cause by the
affirmative vote of the holders of at least a majority of the voting power of
all of the then outstanding shares of Voting Stock, voting together as a single
class.

Section 8. AMENDMENT, REPEAL, ETC. Notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation or the
Bylaws (and notwithstanding the fact that a lesser percentage may be specified
by law), the affirmative vote of the holders of at least 66 2/3% of the voting
power of all the then outstanding shares of Voting Stock, voting together as a
single class, shall be required to alter, amend, adopt any provision
inconsistent with, or repeal, this Article V or any provision hereof.

<PAGE>

ARTICLE VI

The Corporation expressly elects to be governed by Section 203 of the
General Corporation Law of the State of Delaware.

ARTICLE VII

SECTION 1. NATURE OF INDEMNITY. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he (or a person of whom
he is the legal representative), is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 of this Article VII, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by such
person only if such proceeding was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article VII shall
be a contract right and, subject to Sections 2 and 5 of this Article VII, shall
include the right to payment by the Corporation of the expenses incurred in
defending any such proceeding in advance of its final disposition. The
Corporation may, by action of the Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.

SECTION 2. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Any indemnification of a director or officer of the Corporation under Section 1
of this Article VII or advance of expenses under Section 5 of this Article VII
shall be made promptly, and in any event within 30 days, upon the written
request of the director or officer. If a determination by the Corporation that
the director or officer is entitled to indemnification pursuant to this Article
VII is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article VII shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing

<PAGE>

his right to indemnification, in whole or in part, in any such action shall
also be indemnified by the Corporation. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware for the Corporation to
indemnify the claimant for the amount claimed, but the burden of such defense
shall be on the Corporation. Neither the failure of the Corporation
(including the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.

SECTION 3. NONEXCLUSIVITY OF ARTICLE VII. The rights to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this Article VII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of this Amended and Restated Certificate of
Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.

SECTION 4. INSURANCE. The Corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the Corporation or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the Corporation would have the power
to indemnify such person against such liability under this Article VII.

SECTION 5. EXPENSES. Expenses incurred by any person described in
Section 1 of this Article VII in defending a proceeding shall be paid by the
Corporation in advance of such proceeding's final disposition unless otherwise
determined by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.

SECTION 6. EMPLOYEES AND AGENTS. Persons who are not covered by the
foregoing provisions of this Article VII and who are or were employees or agents
of the Corporation, or who are or were serving at the request of the Corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the Board of Directors.

<PAGE>

SECTION 7. CONTRACT RIGHTS. The provisions of this Article VII shall
be deemed to be a contract right between the Corporation and each director or
officer who serves in any such capacity at any time while this Article VII and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article VII or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.

SECTION 8. MERGER OR CONSOLIDATION. For purposes of this Article
VII, references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
VII with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence had
continued.

SECTION 9. LIMITATION OF LIABILITY. To the fullest extent permitted
by the General Corporation Law of the State of Delaware, no director shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.

In accordance with the provisions of Section 103(d) of the General
Corporation Law of the State of Delaware, this Amended and Restated Certificate
of Incorporation shall become effective upon its filing date.

<PAGE>

IN WITNESS WHEREOF, Color Spot Nurseries, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed and acknowledged by its
President and attested by its Secretary and its corporate seal to be affixed
hereto this 22nd day of December, 1997.

COLOR SPOT NURSERIES, INC.

By: /s/ Michael Vukelich
-----------------------------------------
Michael Vukelich, Chief Executive Officer

ATTEST:

/s/ Karla Vukelich
- ---------------------------
Karla Vukelich, Secretary

<PAGE>

CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS

13% SERIES A CUMULATIVE
PREFERRED STOCK

COLOR SPOT NURSERIES, INC.

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

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

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

Color Spot Nurseries, Inc. (the "COMPANY"), a corporation organized
and existing under the General Corporation Law of the State of Delaware,
certifies that pursuant to the authority contained in Article IV of its
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of
the Company by unanimous written consent dated November 26, 1997 duly
approved and adopted the following resolution (this "CERTIFICATE OF
DESIGNATION") which resolution remains in full force and effect on the date
hereof:

RESOLVED, that the Board of Directors does hereby designate,
create, authorize and provide for the issuance of 13% Series A Cumulative
Preferred Stock (the "SERIES A PREFERRED STOCK"), par value $0.01 per share,
with a liquidation preference of $1,000 per share, consisting of 100,000
shares, having the following voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof as follows:

1. DIVIDENDS.

(a) The Holders of shares of the Series A Preferred Stock shall be
entitled to receive in preference to holders of all other Capital Stock of
the Company, when, as and if dividends are declared by the Board of Directors
out of funds of the Company legally available therefor, cumulative
preferential dividends from the issue date of the Series A Preferred Stock
accruing at the rate of 13% per annum (subject to increase as set forth
below), payable quarterly in arrears on each March 15, June 15, September 15
and December 15 or, if any such date is not a Business Day, on the next
succeeding Business Day (each, a "DIVIDEND PAYMENT DATE"), to the Holders of
record as of the next preceding March 1, June 1, September 1 and December 1
(each, a "RECORD DATE"). Upon an Increased Dividend Triggering Event
dividends on the Series A Preferred Stock will accrue at the rate of 18% per
annum of the liquidation preference thereof until such Increased Dividend
Triggering Event is cured. Dividends shall be payable in cash, except that
on each Dividend Payment Date occurring on or prior to December 15, 2002,
dividends

<PAGE>

may be paid, at the Company's option, by the issuance of additional shares of
Series A Preferred Stock (including fractional shares) having an aggregate
Liquidation Preference equal to the amount of such dividends. The shares of
Series A Preferred Stock issued as dividends will be duly authorized, validly
issued, fully paid and non-assessable. The issuance of such additional
shares of Series A Preferred Stock shall constitute "payment" of the related
dividend for all purposes of this Certificate of Designation. The first
dividend payment shall be payable on March 15, 1998. Dividends payable on
the Series A Preferred Stock shall be computed on the basis of a 360-day year
consisting of twelve 30-day months and shall be deemed to accrue on a daily
basis.

(b) The rate of the cumulative preferential dividends of the
Series A Preferred Stock may be increased as hereinafter provided. Upon:

(i) the failure of the Company to satisfy any mandatory
redemption or repurchase obligation with respect to the Series A
Preferred Stock;

(ii) the failure of the Company to make a Change of Control
Offer on the terms and in accordance with the provisions described below
in Section 5 hereof;

(iii) the failure of the Company to comply with any of the
other covenants or agreements set forth in this Certificate of
Designation (other than the payment of dividends) and the continuance of
such failure for 30 consecutive days or more; or

(iv) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Closing Date, which default (1) is
caused by a failure to pay principal of or premium, if any, or interest
on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "PAYMENT
DEFAULT") or (2) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5,000,000 or more
(each of the events described in clauses (i), (ii), (iii) and (iv) being
referred to herein as a "INCREASED DIVIDEND TRIGGERING EVENT");

then the cumulative preferential dividends of the Series A Preferred Stock
will accrue at a rate of 18% of the Liquidation Preference per share per
annum from the date of such Increased Dividend Triggering Event until such
Increased Dividend Triggering Event is cured.

(c) Dividends on the Series A Preferred Stock shall accrue
whether or not the Company has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared. Dividends shall accrue to the extent they are not
paid on the Dividend Payment Date for the period to which they relate. The
Company shall take all actions required or permitted under the Delaware
General Corporation Law (the "DGCL") to permit the payment of dividends on
the Series A Preferred Stock, including, without limitation, through the
revaluation of its assets in accordance with the DGCL, to make or keep funds
legally available for the payment of dividends.

(d) No dividend whatsoever shall be declared or paid upon, or
any sum set apart for the payment of dividends upon, any outstanding share of
the Series A Preferred Stock with respect to any

<PAGE>

dividend period unless all dividends for all preceding dividend periods have
been declared and paid, or declared and a sufficient sum set apart for the
payment of such dividend, upon all outstanding shares of Series A Preferred
Stock. Unless full cumulative dividends on all outstanding shares of Series
A Preferred Stock have been declared and paid in cash for the current
dividend period and the two most recent dividend periods in which the Series
A Preferred Stock were outstanding, or declared and a sufficient sum for the
payment in cash thereof set apart, then: (i) no dividend (other than a
dividend payable solely in shares of any class of stock ranking junior to the
Series A Preferred Stock as to the payment of dividends and as to rights in
liquidation, dissolution or winding up of the affairs of the Company ("JUNIOR
SECURITIES")) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Junior Securities; (ii) no other
distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any shares of Junior Securities, other than
a distribution consisting solely of Junior Securities; (iii) no shares of
Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange for shares of other Junior
Securities) by the Company or any of its Subsidiaries, except as provided in
clause (3) of the notwithstanding paragraph of Section 6(a); and (iv) no
monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition or
retirement for value of any shares of Junior Securities by the Company or any
of its Subsidiaries. Holders of the Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.

2. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.

Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company or reduction or decrease in its
capital stock resulting in a distribution of assets to the holders of any
class or series of the Company's capital stock (a "REDUCTION OR DECREASE IN
CAPITAL STOCK"), each Holder of shares of the Series A Preferred Stock shall
be entitled to payment out of the assets of the Company available for
distribution of an amount equal to the Liquidation Preference per share of
Series A Preferred Stock held by such Holder, PLUS accrued and unpaid
dividends, if any, to the date fixed for liquidation, dissolution, winding up
or reduction or decrease in capital stock, before any distribution is made on
any Junior Securities, including, without limitation, common stock of the
Company. After payment in full of the Liquidation Preference and all accrued
dividends, if any, to which Holders of Series A Preferred Stock are entitled,
such Holders shall not be entitled to any further participation in any
distribution of assets of the Company. However, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with or into one
or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company or reduction or
decrease in capital stock, unless such sale, conveyance, exchange or transfer
shall be in connection with a liquidation, dissolution or winding up of the
business of the Company or reduction or decrease in capital stock.

3. REDEMPTION BY THE COMPANY.

(a) On December 15, 2008 (the "MANDATORY REDEMPTION DATE"), the
Company shall be required to redeem (subject to the legal availability of
funds therefor) all outstanding shares of Series A Preferred Stock at a price
in cash equal to the Liquidation Preference thereof, PLUS accrued and unpaid
dividends, if any, to the date of redemption. The Company shall not be
required to make sinking fund payments with respect to the Series A Preferred
Stock. The Company shall take all actions required or permitted under the
DGCL to permit such redemption.

<PAGE>

(b) The Series A Preferred Stock may not be redeemed at the option
of the Company prior to December 15, 2002, except as set forth below. The
Series A Preferred Stock may be redeemed, in whole or in part, at the option
of the Company on or after December 15, 2002, at the Applicable Redemption
Price. At any time, or from time to time, on or prior to December 15, 2002,
the Company may, at its option, use the net cash proceeds of any Public
Equity Offering to redeem the Series A Preferred Stock at a redemption price
equal to 113% of the Liquidation Preference together with accrued and unpaid
dividends, if any, to the date of redemption. In order to effect the
foregoing redemption with the proceeds of such Public Equity Offering, the
Company shall make such redemption not more than 120 days after the
consummation of such Public Equity Offering.

(c) In case of redemption of less than all of the shares of Series
A Preferred Stock at the time outstanding, the shares to be redeemed shall be
selected PRO RATA or by lot as determined by the Company in its sole
discretion.

(d) Notice of any redemption shall be sent by or on behalf of the
Company not less than 30 nor more than 60 days prior to the date specified
for redemption in such notice (including the Mandatory Redemption Date, the
"REDEMPTION DATE"), by first class mail, postage prepaid, to all Holders of
record of the Series A Preferred Stock at their last addresses as they shall
appear on the books of the Company; PROVIDED, HOWEVER, that no failure to
give such notice or any defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any shares of Series A
Preferred Stock except as to the Holder to whom the Company has failed to
give notice or except as to the Holder to whom notice was defective. In
addition to any information required by law or by the applicable rules of any
exchange upon which Series A Preferred Stock may be listed or admitted to
trading, such notice shall state: (i) whether such redemption is being made
pursuant to the optional or the mandatory redemption provisions hereof; (ii)
the Redemption Date; (iii) the Applicable Redemption Price; (iv) the number
of shares of Series A Preferred Stock to be redeemed and, if less than all
shares held by such Holder are to be redeemed, the number of such shares to
be redeemed; (v) the place or places where certificates for such shares are
to be surrendered for payment of the Applicable Redemption Price, including
any procedures applicable to redemptions to be accomplished through
book-entry transfers; and (vi) that dividends on the shares to be redeemed
will cease to accrue on the Redemption Date. Upon the mailing of any such
notice of redemption, the Company shall become obligated to redeem at the
time of redemption specified therein all shares called for redemption.

(e) If notice has been mailed in accordance with Section 3(d)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by
the Company, separate and apart from its other funds in trust for the PRO
RATA benefit of the Holders of the shares so called for redemption, so as to
be, and to continue to be available therefor, then, from and after the
Redemption Date, dividends on the shares of the Series A Preferred Stock so
called for redemption shall cease to accrue, and said shares shall no longer
be deemed to be outstanding and shall not have the status of shares of Series
A Preferred Stock, and all rights of the Holders thereof as stockholders of
the Company (except the right to receive from the Company the Applicable
Redemption Price) shall cease. Upon surrender, in accordance with said
notice, of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Company shall so require and the notice shall
so state), such shares shall be redeemed by the Company at the Applicable
Redemption Price. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares without cost to the Holder thereof.

(f) Any funds deposited with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except
that:

<PAGE>

(i) the Company shall be entitled to receive from such bank
or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the Holders of any shares redeemed
shall have no claim to such interest or other earnings; and

(ii) any balance of monies so deposited by the Company and
unclaimed by the Holders of the Series A Preferred Stock entitled
thereto at the expiration of two years from the applicable Redemption
Date shall be repaid, together with any interest or other earnings
earned thereon, to the Company, and after any such repayment, the
Holders of the shares entitled to the funds so repaid to the Company
shall look only to the Company for payment without interest or other
earnings.

(g) No Series A Preferred Stock may be redeemed except with funds
legally available for the purpose. The Company shall take all actions
required or permitted under the DGCL to permit any such redemption.

(h) Notwithstanding the foregoing provisions of this Section 3,
unless the full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been paid or contemporaneously are declared and
paid for all past dividend periods, none of the shares of Series A Preferred
Stock shall be redeemed unless all outstanding shares of Series A Preferred
Stock are simultaneously redeemed.

(i) All shares of Series A Preferred Stock redeemed pursuant to
this Section 3 shall be restored to the status of authorized and unissued
shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock other than
shares of Series A Preferred Stock.

4. VOTING RIGHTS.

(a) The Holders of record of shares of the Series A Preferred
Stock shall have no voting rights, except as required by law and as
hereinafter provided in this Section 4.

(b) Upon the accumulation of accrued and unpaid dividends on the
outstanding Series A Preferred Stock in an amount equal to six full quarterly
dividends (whether or not consecutive) (the events described above being
referred to herein as a "VOTING RIGHTS TRIGGERING EVENT"), then the number of
members of the Company's Board of Directors will be immediately and
automatically increased by one unless there is a vacancy on the Company's
Board of Directors, and the holders of a majority of the outstanding shares
of Series A Preferred Stock, voting as a separate class, will be entitled to
elect one member to the Board of Directors of the Company.

(c) Whenever such voting right shall have vested, such right may
be exercised initially either at a special meeting of the Holders of Series A
Preferred Stock, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at
such annual meetings or by the written consent of the Holders of Series A
Preferred Stock. Such right of the Holders of Series A Preferred Stock to
elect a director may be exercised until all dividends in arrears shall have
been paid in full, at which time the right of the Holders of Series A
Preferred Stock to elect such director shall cease, the term of such director
previously elected shall thereupon terminate, and the authorized number of
directors of the Company shall thereupon return to the number of authorized
directors otherwise in effect, but subject always to the same provisions for
the renewal and divestment of such special voting rights in

<PAGE>

the case of any such future dividend arrearage or defaults or any such
failure to make redemption payments.

(d) At any time when such voting right shall have vested in the
Holders of Series A Preferred Stock and if such right shall not already have
been initially exercised, a proper officer of the Company shall, upon the
written request of Holders of record of 10% or more of the Series A Preferred
Stock then outstanding, addressed to the Secretary of the Company, call a
special meeting of Holders of Series A Preferred Stock. Such meeting shall
be held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Company or, if none, at a place designated by the
Secretary of the Company. If such meeting shall not be called by the proper
officers of the Company within 30 days after the personal service of such
written request upon the Secretary of the Company, or within 30 days after
mailing the same within the United States, by registered mail, addressed to
the Secretary of the Company at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
Holders of record of 10% of the shares of Series A Preferred Stock then
outstanding may designate in writing a Holder of Series A Preferred Stock to
call such meeting at the expense of the Company, and such meeting may be
called by such person so designated upon the notice required for annual
meetings of stockholders and shall be held at the place for holding annual
meetings of the Company or, if none, at a place designated by such Holder.
Any Holder of Series A Preferred Stock that would be entitled to vote at such
meeting shall have access to the stock books of the Company for the purpose
of causing a meeting of stockholders to be called pursuant to the provisions
of this Section. Notwithstanding the provisions of this paragraph, however,
no such special meeting shall be called if any such request is received less
than 90 days before the date fixed for the next ensuing annual or special
meeting of stockholders. Any action required to be taken at a meeting of
Holders may be taken without a meeting, with 15 days prior notice and without
a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of a majority of the outstanding shares
of Series A Preferred Stock.

(e) If any director so elected by the Holders of Series A
Preferred Stock shall cease to serve as a director before his term shall
expire, the Holders of Series A Preferred Stock then outstanding may, at a
special meeting of the Holders called as provided above, elect a successor to
hold office for the unexpired term of the director whose place shall be
vacant.

(f) The Company shall not, without the affirmative vote or consent
of the Holders of a majority of the shares of Series A Preferred Stock then
outstanding (with shares held by the Company or any of its Affiliates not
being considered to be outstanding for this purpose) unless a greater
percentage is required by law:

(i) authorize, create (by way of reclassification or
otherwise) or issue any Parity Securities or any obligation or security
convertible into or evidencing the right to purchase any Parity
Securities;

(ii) amend or otherwise alter its Certificate of Incorporation
in any manner that adversely affects the rights of Holders of Series A
Preferred Stock;

(iii) amend or otherwise alter this Certificate of Designation
(including the provisions of Section 5 hereof) in any manner; or

(iv) waive any existing Voting Rights Triggering Event,
Increased Dividend Triggering Event or compliance with any provision of
this Certificate of Designation.

<PAGE>

(g) Without the consent of each Holder affected, an amendment or
waiver of the Company's Certificate of Incorporation or of this Certificate
of Designation may not (with respect to any shares of Series A Preferred
Stock held by a non-consenting Holder):

(i) alter the voting rights with respect to the Series A
Preferred Stock or reduce the number of shares of Series A Preferred
Stock whose Holders must consent to an amendment, supplement or waiver;

(ii) reduce the Liquidation Preference of or change the
Mandatory Redemption Date of any share of Series A Preferred Stock or
alter the provisions with respect to the redemption of the Series A
Preferred Stock (except as provided above with respect to Section 5
hereof);

(iii) reduce the rate of or change the time for payment of
dividends on any share of Series A Preferred Stock;

(iv) waive the consequences of any failure to pay dividends
on the Series A Preferred Stock;

(v) make any share of Series A Preferred Stock payable in
any form other than that stated in this Certificate of Designation;

(vi) make any change in the provisions of this Certificate
of Designation relating to waivers of the rights of Holders of Series A
Preferred Stock to receive the Liquidation Preference and dividends on
the Series A Preferred Stock;

(vii) waive a redemption payment with respect to any share of
Series A Preferred Stock (except as provided above with respect to
Section 5 hereof); or

(viii) make any change in the foregoing amendment and waiver
provisions.

(h) The Company shall not, without the consent of at least 75% of
the then outstanding shares of Series A Preferred Stock (with shares held by
the Company or its Affiliates not being considered to be outstanding for this
purpose), authorize, create (by way of reclassification or otherwise) or
issue any Senior Securities or any obligation or security convertible into or
evidencing a right to purchase any Senior Securities.

(i) The Company in its sole discretion may without the vote or
consent of any Holders of the Series A Preferred Stock amend or supplement
this Certificate of Designation:

(i) to cure any ambiguity, defect or inconsistency;

(ii) to provide for uncertificated Series A Preferred Stock
in addition to or in place of certificated Series A Preferred Stock; or

(iii) to make any change that would provide any additional
rights or benefits to the Holders of the Series A Preferred Stock;

provided that any such amendment or supplement does not adversely affect the
legal rights under this Certificate of Designation of any Holder.

<PAGE>

5. CHANGE OF CONTROL.

(a) Upon the occurrence of a Change of Control, each Holder of
shares of Series A Preferred Stock shall have the right to require the
Company to repurchase all or any part (but not, in the case of any Holder
requiring the Company to purchase less than all of the shares of Series A
Preferred Stock held by such Holder, any fractional shares) of such Holder's
Series A Preferred Stock pursuant to the offer described below (the "CHANGE
OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate
Liquidation Preference thereof plus accrued and unpaid dividends, if any,
thereon to the date of purchase (the "CHANGE OF CONTROL PAYMENT").

(b) The Change of Control Offer shall include all instructions and
materials necessary to enable Holders to tender their shares of Series A
Preferred Stock.

(c) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Series A Preferred Stock as a result of
a Change of Control.

(d) Within 90 days following any Change of Control, the Company
shall send, by first-class mail, a notice to each Holder stating:

(i) that the Change of Control Offer is being made pursuant
to this Section 5 and that all shares of Series A Preferred Stock
tendered will be accepted for payment;

(ii) the purchase price and the purchase date, which shall
be no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE");

(iii) that any share of Series A Preferred Stock not tendered
will continue to accrue dividends;

(iv) that, unless the Company fails to pay the Change of
Control Payment, all shares of Series A Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
dividends after the Change of Control Payment Date;

(v) that Holders electing to have any shares of Series A
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender the shares of Series A Preferred Stock, with the
form entitled "OPTION OF HOLDER TO ELECT PURCHASE" which shall be
included with the Notice of Change of Control completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control
Payment Date;

(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Series A
Preferred Stock delivered for purchase, and a statement that such Holder
is withdrawing his election to have such shares purchased; and

<PAGE>

(vii) the circumstances and relevant facts regarding such
Change of Control (including, but not limited to, information with
respect to PRO FORMA historical financial information after giving
effect to such Change of Control and information regarding the Person or
Persons acquiring control).

(e) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all shares of Series A Preferred
Stock or portions thereof properly tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all shares of Series A Preferred Stock or
portions thereof so tendered and (iii) deliver or cause to be delivered to
the Paying Agent the shares of Series A Preferred Stock so accepted together
with an Officers' Certificate stating the aggregate Liquidation Preference of
the shares of Series A Preferred Stock or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Series A
Preferred Stock so tendered the Change of Control Payment for such Series A
Preferred Stock, and the Transfer Agent shall promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new certificate
representing the shares of Series A Preferred Stock equal in Liquidation
Preference amount to any unpurchased portion of the shares of Series A
Preferred Stock surrendered, if any. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.

(f) Prior to complying with the provisions of this Section 5, but
in any event within 90 days following a Change of Control, the Company shall
either repay all outstanding Indebtedness or obtain the requisite consents,
if any, under all agreements governing outstanding Indebtedness to permit the
repurchase of Series A Preferred Stock required by this Section 5.

(g) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 5 applicable to a Change of Control
Offer made by the Company and purchases all shares of Series A Preferred
Stock validly tendered and not withdrawn under such Change of Control Offer.

6. CERTAIN COVENANTS.

(a) RESTRICTED PAYMENTS. The Company and its Restricted
Subsidiaries may not, directly or indirectly:

(i) declare or pay any dividend or make any distribution in
respect of any Equity Interests of the Company that are Junior
Securities or of any of its Subsidiaries other than dividends or
distributions payable (A) in Junior Securities of the Company that are
not Disqualified Capital Stock or (B) to the Company or any Subsidiary;

(ii) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of the Company that are Junior Securities or
of any of its Subsidiaries or other Affiliates of the Company (other
than any such Equity Interests owned by the Company or any Subsidiary);

(iii) make any Investment (other than Permitted Investments);

each of the foregoing actions set forth in clauses (i), (ii) and (iii) above
being referred to as a "STOCK RESTRICTED PAYMENT," unless, at the time of
such Stock Restricted Payment:

<PAGE>

(A) no Increased Dividend Triggering Event or Voting Rights
Triggering Event has occurred and is continuing or would occur as a
consequence thereof;

(B) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Incurrence of Additional Indebtedness and Issuance of Disqualified
Capital Stock" covenant of Section 6(b); and

(C) such Stock Restricted Payment, together with the aggregate of
all other Stock Restricted Payments made by the Company and its
Subsidiaries after the Issue Date (the amount expended for such purposes
if other than in cash, being the fair market value of such property as
determined reasonably and in good faith by the Board of Directors of the
Company), is less than the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall
be a loss, minus 100% of such loss) of the Company earned subsequent to
the Issue Date and on or prior to the date the Stock Restricted Payment
occurs (the "REFERENCE DATE") (treating such period as a single
accounting period); plus (x) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Capital Stock of the Company
(excluding net cash proceeds received from the sale of Capital Stock to
employees of the Company and any of its Subsidiaries after the Issue
Date to the extent such amounts have been applied in accordance with
clause (3) of the following paragraph); plus (y) without duplication of
any amounts included in clause (C) (x) above, 100% of the aggregate net
cash proceeds of any equity contribution received by the Company from a
holder of the Company's Capital Stock (excluding, in the case of clauses
(C) (x) and (y), any net cash proceeds from a Public Equity Offering to
the extent used to redeem the Notes or the Series A Preferred Stock);
plus (z) aggregate net cash proceeds received by the Company or any of
its Subsidiaries as a distribution or repayment with respect to, or from
the sale of, Investments (other than Permitted Investments) made after
the Issue Date up to the original amount of such Investments.

Notwithstanding the foregoing, the provisions set forth above in
the immediately preceding paragraph will not prohibit: (1) the payment of
any dividend within 60 days after the date of declaration thereof, if at such
date of declaration such payment would have complied with the provisions of
this Certificate of Designation; (2) so long as no Increased Dividend
Triggering Event or Voting Rights Triggering Event shall have occurred and be
continuing, the acquisition of any Junior Securities of the Company either
(i) solely in exchange for shares of Qualified Capital Stock of the Company,
or (ii) through the application of net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of shares of
Qualified Capital Stock of the Company; (3) so long as no Increased Dividend
Triggering Event or Voting Rights Triggering Event shall have occurred and be
continuing, repurchases by the Company of Capital Stock of the Company from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such employees or pursuant to a written contract or plan, in an aggregate
amount not to exceed $1,000,000 in any calendar year plus an aggregate amount
of net cash proceeds received by the Company subsequent to the Issue Date
from the sale of Capital Stock to employees of the Company and any of its
Subsidiaries to the extent such proceeds have not been included in making the
calculation in clause (C) of the immediately preceding paragraph; (4) the
payment of cash dividends on the Series A Preferred Stock; and (5) the
repurchase of Series A Preferred Stock after a Change of Control. In
determining the aggregate amount of Stock Restricted Payments made subsequent
to the Issue Date in accordance with clause (C) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (3) and (4) shall
be included in such calculation.

<PAGE>

The Board of Directors may designate any Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause an Increased
Dividend Triggering Event. For purposes of making such determination, all
outstanding Investments by the Company and its Subsidiaries (except to the
extent repaid in cash) in such Subsidiary so designated will be deemed to be
Stock Restricted Payments at the time of such designation and will reduce the
amount available for Stock Restricted Payments under the first paragraph of
this covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greatest of (x) the net book value of
such Investments at the time of such designation, (y) the fair market value
of such Investments at the time of such designation and (z) the original fair
market value of such Investments at the time they were made. Such designation
will only be permitted if such Stock Restricted Payment would be permitted at
such time.

(b) INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED CAPITAL STOCK. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, acquire, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for payment of (collectively,
"INCUR") any Indebtedness (other than Permitted Indebtedness) or issue any
Disqualified Capital Stock; PROVIDED, HOWEVER, that if no Increased Dividend
Triggering Event or Voting Rights Triggering Event shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness or the issuance of Disqualified Capital Stock, the Company may
incur Indebtedness (including, without limitation, Acquired Indebtedness) or
issue Disqualified Capital Stock and Restricted Subsidiaries of the Company
may incur Acquired Indebtedness, in each case if on the date of the
Incurrence of such Indebtedness, or the issuance of Disqualified Capital
Stock, after giving effect to the incurrence or issuance thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0
to 1.0.

(c) MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company may not
consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or
more related transactions, to another corporation, Person or entity unless
(i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) if the Company is not the Surviving Corporation, the Series A
Preferred Stock shall be converted into or exchanged for and shall become
shares of such successor, transferee or resulting Person, having in respect
of such successor, transferee or resulting Person the same powers,
preferences and relative participating, optional or other special rights and
the qualifications, limitations or restrictions thereon, that the Series A
Preferred Stock had immediately prior to such transaction; (iii) immediately
after such transaction no Increased Dividend Triggering Event or Voting
Rights Triggering Event exists; and (iv) the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction
and after giving PRO FORMA effect thereto as if such transaction had occurred
at the beginning of the applicable four-quarter period, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed
Charge Coverage Ratio set forth in the "Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock" covenant of Section 6(b).

(d) TRANSACTIONS WITH AFFILIATES.

(1) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit
to exist any transaction or series of

<PAGE>

related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with,
or for the benefit of, any of its Affiliates (each an "AFFILIATE
TRANSACTION"), other than (x) Affiliate Transactions permitted under
paragraph (2) below and (y) Affiliate Transactions on terms that are no
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company or such Restricted
Subsidiary. All Affiliate Transactions (and each series of related
Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a fair market value
in excess of $1,000,000 shall be approved by the Board of Directors of
the Company or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board
of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of
the Company enters into an Affiliate Transaction (or a series of related
Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $5,000,000, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of
such transaction or series of related transactions to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial
point of view, from an Independent Financial Advisor and file the same
with the Board of Directors.

(2) The restrictions set forth in clause (1) above shall not
apply to (i) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees or consultants of
the Company or any Restricted Subsidiary of the Company (including
customary provisions contained in employment agreements with executive
officers of the Company) as determined in good faith by the Company's
Board of Directors or senior management; (ii) transactions exclusively
between or among the Company and any of its Wholly Owned Restricted
Subsidiaries or exclusively between or among such Wholly Owned
Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by this Certificate of Designation; (iii) any agreement as in
effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in
any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the holders of
Series A Preferred Stock in any material respect than the original
agreement as in effect on the Issue Date; (iv) Stock Restricted Payments
permitted by this Certificate of Designation; (v) the payments by the
Company under that certain lease of its Richmond, California facility
between the Company and M. F. Vukelich Co. dated as of December 1,
1995, as amended on December 13, 1995; and (vi) the payments by the
Company under that certain residential lease rental agreement and
deposit receipt between the Company and Michael F. Vukelich, as guardian
of Trisha Vukelich, dated as of December 13, 1995.

(e) DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer
any of its property or assets to the Company or any other Restricted
Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) this Certificate of
Designation; (3) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Restricted Subsidiary of the
Company; (4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other

<PAGE>

than the Person or the properties or assets of the Person so acquired; (5)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (6) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (4) or (5) above;
PROVIDED, HOWEVER, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of
the Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred
to in such clause (4) or (5); (7) Indebtedness or other contractual
requirements of a Receivables Subsidiary in connection with a Qualified
Receivables Transaction, provided that such restrictions apply only to such
Receivables Subsidiary; or (8) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired.

(f) LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The
Company will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock
of any Restricted Subsidiary of the Company.

(g) REPORTS.

(i) The Company will mail to holders of Series A Preferred
Stock within 15 days after it files them with the Commission copies of
the annual and quarterly reports and the information, documents, and
other reports that the Company is required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC REPORTS").
In the event the Company is not required or shall cease to be required
to file SEC Reports, pursuant to the Exchange Act, the Company will
nevertheless continue to file such reports with the Commission (unless
the Commission will not accept such a filing). In the event the Company
is not required or shall cease to be required to file SEC Reports and
the Commission will not accept the filing of SEC Reports, so long as any
Series A Preferred Stock are outstanding, the Company will furnish
copies of such SEC Reports to the holders of Series A Preferred Stock at
the time the Company is required to make such information available to
investors who request it in writing.

(ii) The Company shall deliver to the Holders, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that
a review of the activities of the Company and its Subsidiaries during
the preceding fiscal year has been made under the supervision of the
signing officers with a view to determining whether the Company has
kept, observed, performed and fulfilled its obligations under this
Certificate of Designation and further stating, as to each such officer
signing such certificate, that to the best of his or her knowledge the
Company has kept, observed, performed and fulfilled each and every
covenant contained in this Certificate of Designation and is not in
default in the performance or observance of any of the terms, provisions
and conditions of this Certificate of Designation (or, if any such
default shall have occurred, describing all such defaults of which he or
she may have knowledge and what action the Company is taking or proposes
to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of
which payments on account of the Liquidation Preference of or dividends,
if any, on the Series A Preferred Stock is prohibited or if such event
has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.

<PAGE>

(iii) The Company shall, so long as any of the shares of
Series A Preferred Stock are outstanding, deliver to the Holders,
forthwith upon any Executive Officer of the Company becoming aware of
any default under this Certificate of Designation, an Officers'
Certificate specifying such default and what action the Company is
taking or proposes to take with respect thereto.

(h) CONFLICTS WITH BY-LAWS. If any provisions of the Company's
By-laws conflict in any way with this Certificate of Designation, the Company
shall, so long as any of the shares of Series A Preferred Stock are
outstanding, take all necessary actions to amend such By-laws and thereby
resolve the conflict.

7. PAYMENT.

(a) All amounts payable in cash with respect to the Series A
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State
of New York or, at the option of the Company, payment of dividends (if any)
may be made by check mailed to the Holders of the Series A Preferred Stock at
their respective addresses set forth in the register of Holders of Series A
Preferred Stock maintained by the Transfer Agent, PROVIDED that all cash
payments with respect to the Global Shares (as defined below) and shares of
Series A Preferred Stock the Holders of which have given wire transfer
instructions to the Company shall be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.

(b) Any payment on the Series A Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be made on
the next succeeding Business Day with the same force and effect as if made on
such due date.

(c) The Company has initially appointed the Transfer Agent to act
as the "PAYING AGENT." The Company may at any time terminate the appointment
of any Paying Agent and appoint additional or other Paying Agents, PROVIDED
that until the Series A Preferred Stock has been delivered to the Company for
cancellation, or moneys sufficient to pay the Liquidation Preference and
accrued dividends on the Series A Preferred Stock have been made available
for payment and either paid or returned to the Company as provided in this
Certificate of Designation, it shall maintain an office or agency in the
Borough of Manhattan, The City of New York.

(d) Dividends payable on the Series A Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date shall be
paid to the Holders of record as of the immediately preceding Record Date.

(e) All moneys and shares of Series A Preferred Stock deposited
with any Paying Agent or then held by the Company in trust for the payment of
the Liquidation Preference and dividends on any shares of Series A Preferred
Stock which remain unclaimed at the end of two years after such payment has
become due and payable shall be repaid to the Company, and the Holder of such
shares of Series A Preferred Stock shall thereafter look only to the Company
for payment thereof.

8. OFFICERS' CERTIFICATE.

Each Officers' Certificate provided for in this Certificate of
Designation shall include:

(a) a statement that the officer making such certificate or
opinion has read such covenant or condition;

<PAGE>

(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(c) a statement that, in the opinion of such officer, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and

(d) a statement as to whether or not, in the opinion of such
officer, such condition or covenant has been satisfied.

9. EXCLUSION OF OTHER RIGHTS.

Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designation (as such Certificate of Designation
may be amended from time to time) and in the Certificate of Incorporation. The
shares of Series A Preferred Stock shall have no preemptive or subscription
rights.

10. HEADINGS OF SUBDIVISIONS.

The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.

11. SEVERABILITY OF PROVISIONS.

If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as it may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as so amended) which can be given effect without the
invalid, unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.

12. FORM OF SECURITIES.

(a) The Series A Preferred Stock shall initially be issued in the
form of one or more Global Preferred Shares (the "GLOBAL SHARES"). The Global
Shares shall be deposited on the Closing Date with, or on behalf of, The
Depository Trust Company (the "DEPOSITARY") and registered in the name of
Cede & Co., as nominee of the Depositary (such nominee being referred to as
the "GLOBAL SHARE HOLDER").

(b) So long as the Global Share Holder is the registered owner
of any Series A Preferred Stock, the Global Share Holder will be considered
the sole Holder under this Certificate of Designation of any shares of Series
A Preferred Stock evidenced by the Global Shares. Beneficial owners of
shares of Series A Preferred Stock evidenced by the Global Shares shall not
be considered the owners or

<PAGE>

Holders thereof under this Certificate of Designation for any purpose. The
Company shall not have any responsibility or liability for any aspect of the
records of the Depositary relating to the Series A Preferred Stock.

(c) Payments in respect of the Liquidation Preference, dividends
on any Series A Preferred Stock registered in the name of the Global Share
Holder on the applicable record date shall be payable by the Company to or at
the direction of the Global Share Holder in its capacity as the registered
Holder under this Certificate of Designation. The Company may treat the
persons in whose names Series A Preferred Stock, including the Global Shares,
are registered as the owners thereof for the purpose of receiving such
payments. The Company does not and will not have any responsibility or
liability for the payments of such amounts to beneficial holders of Series A
Preferred Stock.

(d) Any person having a beneficial interest in a Global Share may,
upon request to the Company, exchange such beneficial interest for Series A
Preferred Stock in the form of registered definitive certificates ("CERTIFICATED
SECURITIES"). Upon any such issuance, the Company shall register such
Certificated Securities in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). If (i) the
Company notifies the Holders in writing that the Depository is no longer
willing or able to act as a depository and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option,
notifies the Holders in writing that it elects to cause the issuance of
Series A Preferred Stock in the form of Certificated Securities, then, upon
surrender by the Global Share Holder of its Global Shares, Series A Preferred
Stock in such form will be issued to each person that the Global Share Holder
and the Depositary identify as being the beneficial owner of the related
Series A Preferred Stock. If the Company elects to pay dividends on the
Series A Preferred Stock by issuing additional Series A Preferred Stock,
fractional shares, if any, issued in connection with any such dividend
payment may be issued to holders of Series A Preferred Stock as Certificated
Securities.

13. CERTAIN DEFINITIONS.

Unless the context otherwise requires, the terms defined in this
Section 13 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).

"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.

"AFFILIATE" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.

"APPLICABLE REDEMPTION PRICE" means a price per share equal to the
following redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case,

<PAGE>

together with accrued and unpaid dividends, if any, to the date of redemption
if redeemed during the 12-month period commencing on December 15 of each of
the years set forth below:

<TABLE>
Redemption
Year Rate
---- -----
<S> <C>
2002 106.500%
2003 104.875%
2004 103.250%
2005 101.625%
2006 and thereafter 100.000%
</TABLE>

"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or of any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.

"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; PROVIDED, HOWEVER,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $500,000; (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under "Merger, Consolidation and Sale of Assets;" (iii)
sales of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" to a Receivables Subsidiary in
connection with a Qualified Receivables Transaction; and (iv) sales of Permitted
Investments.

"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.

"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.

"BUSINESS DAY" means any day other than a Legal Holiday.

"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.

<PAGE>

"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.

"CASH EQUIVALENTS" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States of America or any state thereof or the District of Columbia
or any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.

"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "GROUP"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture); (ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of the Indenture); (iii) any
Person or Group (other than the Permitted Holder(s)) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 50% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company; or (iv) the replacement of a majority
of the Board of Directors of the Company over a two-year period from the
directors who constituted the Board of Directors of the Company at the beginning
of such period, and such replacement shall not have been approved by a vote of
at least a majority of the Board of Directors of the Company then still in
office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.

"COMMISSION" means the Securities and Exchange Commission.

"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.

<PAGE>

"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense, (C) Consolidated Non-cash Charges LESS any non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with GAAP, (D) any expenses or charges related to the termination of the Fee
Agreement and (E) any write-off of deferred financing costs in connection with
the refinancing of the Company's credit agreement in existence prior to the
Credit Agreement and any refinancings of the Credit Agreement.

"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "TRANSACTION DATE") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"CONSOLIDATED FIXED CHARGES" shall be calculated after giving effect on a
PRO FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income") attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give (without duplication) effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "CONSOLIDATED FIXED CHARGES" for purposes of
determining the denominator (but not the numerator) of this "CONSOLIDATED FIXED
CHARGE COVERAGE RATIO," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating

<PAGE>

to Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of the operation of such
agreements.

"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum (without duplication) of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.

"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum of (without duplication): (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries of such period determined
on a consolidated basis in accordance with GAAP, including without limitation,
(a) any amortization of debt discount and amortization or write-off of deferred
financing costs (excluding any write-off of deferred financing costs in
connection with the refinancing of the Company's credit agreement in existence
prior to the Credit Agreement or any refinancing of the Credit Agreement),
(b) the net costs under Interest Swap Obligations, (c) all capitalized interest
and (d) the interest portion of any deferred payment obligation; and (ii) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP.

"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.

"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).

<PAGE>

"CREDIT AGENT" means, at any time, the then-acting Administrative
Agent as defined in and under the Credit Agreement, which initially shall be
Credit Agricole Indosuez. The Company shall promptly notify the Trustee of any
change in the Credit Agent.

"CREDIT AGREEMENT" means the Second Amended and Restated Credit
Agreement dated as of December 24, 1997, between the Company, the lenders party
thereto in their capacities as lenders thereunder and Credit Agricole Indosuez,
as agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (PROVIDED that such increase in borrowings is Permitted Indebtedness
or is permitted by the "Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock" covenant of Section 6(b)) or adding Restricted
Subsidiaries of the Company as additional guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.

"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.

"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, other than in connection with a
Change of Control, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof on or prior to the date of
redemption for the Series A Preferred Stock as set forth in this Certificate of
Designation.

"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock or that are measured by the value of
Capital Stock (but excluding any debt security that is convertible into or
exchangeable for Capital Stock).

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.

"FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.

"FEE AGREEMENT" means that certain fee agreement between the Company
and Kohlberg & Company, LLC dated as of December 31, 1996, as amended.

<PAGE>

other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, which are in
effect as of the Issue Date.

"HOLDER" means the record holder of one or more shares of Series A
Preferred Stock, as shown on the books and records of the Transfer Agent.

"INDEBTEDNESS" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and excluding long-term, deferred purchase
price obligations for trees, PROVIDED that such obligations for trees are not
recorded as liabilities on such Person's balance sheet in accordance with GAAP),
(v) all Obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction, (vi) guarantees and
other contingent obligations in respect of Indebtedness referred to in clauses
(i) through (v) above and clause (viii) below, (vii) all Obligations of any
other Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured, (viii) all
Obligations under Currency Agreements and Interest Swap Obligations of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.

"INDENTURE" means that certain indenture between the Company and U.S.
Trust Company of California, N.A. dated as of December 24, 1997, as amended or
supplemented from time to time.

"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company (other than an interest in less than
5% of the Company's Common Stock after such time as the Company's Common Stock
is publicly traded) and (ii) which, in the judgment of the Board of Directors of
the Company, is otherwise independent and qualified to perform the task for
which it is to be engaged.

"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.

<PAGE>

"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Restricted Payments"
covenant, (i) "Investment" shall include and be valued at the fair market value
of the net assets of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated as an Unrestricted Subsidiary and shall exclude the
fair market value of the net assets of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated as a Restricted Subsidiary and
(ii) the amount of any Investment shall be the original cost of such Investment
plus the cost of all additional Investments by the Company or any of its
Restricted Subsidiaries, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment,
reduced by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such Investment; PROVIDED
that no such payment of dividends or distributions or receipt of any such other
amounts shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
indirectly, 100% of the outstanding Common Stock of such Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.

"ISSUE DATE" means the date of original issuance of the Series A
Preferred Stock.

"LEGAL HOLIDAY" means a Saturday or Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.

"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).

"LIQUIDATION PREFERENCE" means $1,000 per share of Series A Preferred
Stock.

"NOTES" means the Company's 10 1/2% Senior Subordinated Notes due
2007.

"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.

"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company that meets the requirements of Section 9.

"PARITY SECURITIES" means any class or series of Capital Stock of the
Company ranking on a parity with the Series A Preferred Stock.

<PAGE>

"PERMITTED HOLDER(S)" means KCSN Acquisition Company, L.P. and its
Affiliates, Kohlberg & Company, LLC and its Affiliates, and Michael F. Vukelich
and his Affiliates.

"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:

(i) Indebtedness under the Notes and the Indenture;

(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $150.0
million, less the amount of all mandatory principal payments actually made
by the Company in respect of the Term Loan Facility (excluding any such
payments to the extent refinanced at the time of payment under a replaced
Credit Agreement), PROVIDED that (1) not more than $110.0 million of
borrowings under the Credit Agreement are used to make Asset Acquisitions
and (2) not more than $90.0 million of borrowings under the Credit
Agreement are used for any other purpose;

(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;

(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;

(v) Indebtedness under Currency Agreements; PROVIDED that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;

(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company (other than the Lien of the Credit Agent under
the Credit Agreement); PROVIDED that if as of any date any Person other
than the Company or a Wholly Owned Restricted Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;

(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien; PROVIDED that (a) any Indebtedness of the Company to any Wholly
Owned Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns

<PAGE>

or holds any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;

(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; PROVIDED, HOWEVER, that such
Indebtedness is extinguished within two business days of incurrence;

(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;

(x) Refinancing Indebtedness;

(xi) Indebtedness incurred in a Qualified Receivables Transaction
that is without recourse to the Company or to any Restricted Subsidiary of
the Company or their assets (other than a Receivables Subsidiary and its
assets); and

(xii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $25,000,000 at
any one time outstanding.

"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; (iii) investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the Company
and its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $2,000,000 in the aggregate at any one time
outstanding; (v) Currency Agreements and Interest Swap Obligations entered into
in the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture; (vi) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (vii) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale; (viii) Investment by the Company or a Wholly Owned Restricted
Subsidiary of the Company in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other Person in connection with a Qualified
Receivables Transaction; (ix) notes received from management as payment for
purchases of Capital Stock; and (x) additional Investments by the Company or any
Restricted Subsidiary of the Company in an aggregate amount, based on original
cost, not to exceed $1,000,000 at any one time outstanding.

"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, limited liability company or a
governmental agency or political subdivision thereof.

"PREFERRED STOCK" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.

<PAGE>

"PUBLIC EQUITY OFFERING" means an underwritten public offering of
Qualified Capital Stock of the Company sold by the Company after the Issue Date
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act.

"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.

"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions that may be entered into by the Company or any of its Restricted
Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries
may sell, convey or otherwise transfer to (i) a Receivables Subsidiary (in the
case of a transfer by the Company or any of its Restricted Subsidiaries) and
(ii) any other Person (in the case of a transfer by a Receivables Subsidiary),
or may grant a security interest in, any accounts receivable (whether now
existing or arising in the future) of the Company or any of its Restricted
Subsidiaries, and any assets related thereto including, without limitation, all
collateral securing such accounts receivable, all contracts and all guarantees
or other obligations in respect of such accounts receivable, proceeds of such
accounts receivable and other assets which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable.

"RECEIVABLES SUBSIDIARY" means a Wholly Owned Restricted Subsidiary of
the Company that engages in no activities other than in connection with the
financing of accounts receivable and that is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a)
which has no Indebtedness or any other Obligations (contingent or otherwise)
which (i) is guaranteed by the Company or any other Restricted Subsidiary of the
Company (excluding guarantees of Obligations (other than the principal of, and
interest on, Indebtedness) pursuant to representations, warranties, covenants
and indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction), (ii) is recourse to or obligates the
Company or any other Restricted Subsidiary of the Company in any way other than
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction or (iii) subjects any property or asset of the Company or any other
Restricted Subsidiary of the Company, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction, (b) with which
neither the Company nor any other Restricted Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable and (c) with which neither the
Company nor any other Restricted Subsidiary of the Company has any obligation to
maintain or preserve such Restricted Subsidiary's financial condition or cause
such Restricted Subsidiary to achieve certain levelsof operating results. Any
such designation by the Board of Directors of the Company shall be evidenced to
the Transfer Agent by filing with the Transfer Agent a Board Resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.

"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, pre-pay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.

<PAGE>

"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Incurrence of Additional Indebtedness and Issuance of Disqualified Capital
Stock" covenant of Section 6(b) (other than pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii), (ix), (xi) or (xii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such Refinancing)
or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced.

"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such
Person which is not an Unrestricted Subsidiary.

"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.

"SENIOR SECURITIES" means any class or series of Capital Stock of the
Company ranking senior to the Series A Preferred Stock with respect to dividends
or upon liquidation.

"SUBSIDIARY," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.

"TERM LOAN FACILITY" means one or more term loan facilities under the
Credit Agreement.

"TRANSFER AGENT" means the entity designated from time to time by the
Company to act as the registrar and transfer agent for the Series A Preferred
Stock.

"TRUSTEE" means U.S. Trust Company of California, N.A.

"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED that (x) the
Company certifies to the Transfer Agent that the Company's investment in such
Unrestricted Subsidiary is a Permitted Investment or that such designation
complies with the "Restricted Payments" covenant and (y) each Subsidiary to be
so designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Company or any of
its

<PAGE>

Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock" covenant of Section 6(b) and (y) immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly
filing with the Transfer Agent a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.

"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.

<PAGE>

IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed by Michael F. Vukelich, Chief Executive Officer, and attested by Karla
D. Vukelich, its Secretary, this 22nd day of December, 1997.

COLOR SPOT NURSERIES, INC.

By: /s/ Michael F. Vukelich
----------------------------------
Michael F. Vukelich
Chief Executive Officer

ATTEST:

By: /s/ Karla D. Vukelich
---------------------------
Karla D. Vukelich
Secretary

<PAGE>

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

COLOR SPOT NURSERIES, INC.

AND

U.S. TRUST COMPANY OF CALIFORNIA, N.A.,

AS TRUSTEE

____________________________

INDENTURE

DATED AS OF DECEMBER 24, 1997

____________________________

$100,000,000

10 1/2% SENIOR SUBORDINATED NOTES

DUE 2007

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

<PAGE>

CROSS REFERENCE TABLE

<TABLE>
TIA Indenture
Section Section
- ------- -------
<S> <C>

310(a)(1). 8.10
310(a)(5). 8.10
310(b). 8.10
310(b)(1). 8.10
311(a). 8.11
311(b). 8.11
312(b). 11.3
312(c). 11.3
313(a). 8.6
313(b). 8.6
313(c). 8.6
314(a). 5.9
</TABLE>

NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.

<PAGE>
TABLE OF CONTENTS

ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . 1

Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Incorporation by Reference of TIA. . . . . . . . . . . 19
Section 1.3. Rules of Construction. . . . . . . . . . . . . . . . . 20

ARTICLE II. THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 20

Section 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . . 20
Section 2.2. Execution and Authentication . . . . . . . . . . . . . 21
Section 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . 21
Section 2.4. Paying Agent To Hold Assets in Trust . . . . . . . . . 22
Section 2.5. Holder Lists . . . . . . . . . . . . . . . . . . . . . 22
Section 2.6. Transfer and Exchange. . . . . . . . . . . . . . . . . 23
Section 2.7. Replacement Securities . . . . . . . . . . . . . . . . 24
Section 2.8. Outstanding Securities . . . . . . . . . . . . . . . . 24
Section 2.9. Treasury Securities. . . . . . . . . . . . . . . . . . 25
Section 2.10. Temporary Securities. . . . . . . . . . . . . . . . . 25
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . 25
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . 25
Section 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . 26

ARTICLE III. REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . 26

Section 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . 26
Section 3.2. Selection of Securities To Be Redeemed . . . . . . . . 26
Section 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . 27
Section 3.4. Effect of Notice of Redemption . . . . . . . . . . . . 27
Section 3.5. Deposit of Redemption Price. . . . . . . . . . . . . . 28
Section 3.6. Securities Redeemed in Part. . . . . . . . . . . . . . 28

ARTICLE IV. SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . 28

Section 4.1. Securities Subordinated to Senior Debt . . . . . . . . 28
Section 4.2. Suspension of Payment When Senior Debt in Default. . . 29
Section 4.3. Securities Subordinated to Prior Payment of All
Senior Debt on Dissolution, Liquidation or
Reorganization of Company . . . . . . . . . . . . . 30
Section 4.4. Holders To Be Subrogated to Rights of Holders of
Senior Debt . . . . . . . . . . . . . . . . . . . . 31
Section 4.5. Obligations of the Company Unconditional . . . . . . . 32
Section 4.6. Trustee Entitled To Assume Payments Not Prohibited
in Absence of Notice. . . . . . . . . . . . . . . . 32
Section 4.7. Application by Trustee of Assets Deposited with It . . 32

<PAGE>

Section 4.8. No Waiver of Subordination Provisions. . . . . . . . . 33
Section 4.9. Holders Authorize Trustee To Effectuate
Subordination of Securities . . . . . . . . . . . . 34
Section 4.10. Right of Trustee To Hold Senior Debt. . . . . . . . . 34
Section 4.11. No Suspension of Remedies . . . . . . . . . . . . . . 34
Section 4.12. No Fiduciary Duty of Trustee to Holders of
Senior Debt . . . . . . . . . . . . . . . . . . . . 34

ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 5.1. Payment of Securities. . . . . . . . . . . . . . . . . 35
Section 5.2. Maintenance of Office or Agency. . . . . . . . . . . . 35
Section 5.3. Limitation on Restricted Payments. . . . . . . . . . . 35
Section 5.4. Corporate Existence. . . . . . . . . . . . . . . . . . 37
Section 5.5. Payment of Taxes and Other Claims. . . . . . . . . . . 37
Section 5.6. Maintenance of Properties and Insurance. . . . . . . . 37
Section 5.7. Compliance Certificate; Notice of Default. . . . . . . 38
Section 5.8. Compliance with Laws . . . . . . . . . . . . . . . . . 39
Section 5.9. SEC Reports. . . . . . . . . . . . . . . . . . . . . . 39
Section 5.10. Waiver of Stay, Extension or Usury Laws . . . . . . . 39
Section 5.11. Limitation on Transactions with Affiliates. . . . . . 40
Section 5.12. Limitation on Incurrences of Additional
Indebtedness. . . . . . . . . . . . . . . . . . . . 41
Section 5.13. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries . . . 41
Section 5.14. Limitation on Liens . . . . . . . . . . . . . . . . . 41
Section 5.15. Limitation on Change of Control . . . . . . . . . . . 42
Section 5.16. Limitation on Asset Sales . . . . . . . . . . . . . . 44
Section 5.17. Limitation on Preferred Stock of Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . 47
Section 5.18. Limitation on Other Senior Subordinated Debt. . . . . 47
Section 5.19. Limitation on Restricted and Unrestricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . 47
Section 5.20. Limitation of Guarantees by Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . 48
Section 5.21. Conduct of Business . . . . . . . . . . . . . . . . . 48

ARTICLE VI. SUCCESSOR CORPORATION. . . . . . . . . . . . . . . . . . . . 49

Section 6.1. Limitations on Mergers and Certain Other
Transactions. . . . . . . . . . . . . . . . . . . . 49
Section 6.2. Successor Corporation Substituted. . . . . . . . . . . 50

ARTICLE VII. DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . 50

Section 7.1. Events of Default. . . . . . . . . . . . . . . . . . . 50
Section 7.2. Acceleration . . . . . . . . . . . . . . . . . . . . . 51
Section 7.3. Other Remedies . . . . . . . . . . . . . . . . . . . . 52
Section 7.4. Waiver of Past Defaults. . . . . . . . . . . . . . . . 52

<PAGE>

Section 7.5. Control by Majority. . . . . . . . . . . . . . . . . . 53
Section 7.6. Limitation on Suits. . . . . . . . . . . . . . . . . . 53
Section 7.7. Rights of Holders To Receive Payment . . . . . . . . . 53
Section 7.8. Collection Suit by Trustee . . . . . . . . . . . . . . 54
Section 7.9. Trustee May File Proofs of Claim . . . . . . . . . . . 54
Section 7.10. Priorities. . . . . . . . . . . . . . . . . . . . . . 54
Section 7.11. Rights and Remedies Cumulative. . . . . . . . . . . . 55
Section 7.12. Delay or Omission Not Waiver. . . . . . . . . . . . . 55
Section 7.13. Undertaking for Costs . . . . . . . . . . . . . . . . 55

ARTICLE VIII. TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . 55

Section 8.1. Duties of Trustee. . . . . . . . . . . . . . . . . . . 55
Section 8.2. Rights of Trustee. . . . . . . . . . . . . . . . . . . 56
Section 8.3. Individual Rights of Trustee . . . . . . . . . . . . . 57
Section 8.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . 57
Section 8.5. Notice of Default. . . . . . . . . . . . . . . . . . . 58
Section 8.6. Reports by Trustee to Holders. . . . . . . . . . . . . 58
Section 8.7. Compensation and Indemnity . . . . . . . . . . . . . . 58
Section 8.8. Replacement of Trustee . . . . . . . . . . . . . . . . 59
Section 8.9. Successor Trustee by Merger, Etc . . . . . . . . . . . 60
Section 8.10. Eligibility; Disqualification . . . . . . . . . . . . 60
Section 8.11. Preferential Collection of Claims Against Company . . 60

ARTICLE IX. SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . . . . 60

Section 9.1. Termination of the Company's Obligations . . . . . . . 60
Section 9.2. Legal Defeasance and Covenant Defeasance . . . . . . . 61
Section 9.3. Application of Trust Money . . . . . . . . . . . . . . 64
Section 9.4. Repayment to the Company . . . . . . . . . . . . . . . 64
Section 9.5. Reinstatement. . . . . . . . . . . . . . . . . . . . . 65

ARTICLE X. AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . 65

Section 10.1. Without Consent of Holders. . . . . . . . . . . . . . 65
Section 10.2. With Consent of Holders . . . . . . . . . . . . . . . 65
Section 10.3. Compliance with TIA . . . . . . . . . . . . . . . . . 66
Section 10.4. Revocation and Effect of Consents . . . . . . . . . . 67
Section 10.5. Notation on or Exchange of Securities . . . . . . . . 67
Section 10.6. Trustee To Sign Amendments, Etc . . . . . . . . . . . 67

ARTICLE XI. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 68

Section 11.1. TIA Controls. . . . . . . . . . . . . . . . . . . . . 68

<PAGE>

Section 11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.3. Communications by Holders with Other Holders. . . . . 69
Section 11.4. Certificate and Opinion as to Conditions Precedent. . 69
Section 11.5. Statements Required in Certificate or Opinion . . . . 70
Section 11.6. Rules by Trustee, Paying Agent, Registrar . . . . . . 70
Section 11.7. Legal Holidays. . . . . . . . . . . . . . . . . . . . 70
Section 11.8. Governing Law . . . . . . . . . . . . . . . . . . . . 70
Section 11.9. No Adverse Interpretation of Other Agreements . . . . 71
Section 11.10. No Recourse Against Others . . . . . . . . . . . . . 71
Section 11.11. Successors . . . . . . . . . . . . . . . . . . . . . 71
Section 11.12. Duplicate Originals. . . . . . . . . . . . . . . . . 71
Section 11.13. Severability . . . . . . . . . . . . . . . . . . . . 71

<PAGE>

INDENTURE dated as of December 24, 1997, between COLOR SPOT NURSERIES,
INC., a Delaware corporation, and U.S. TRUST COMPANY OF CALIFORNIA, N.A., a
national banking association, as Trustee.

Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's
10 1/2% Senior Subordinated Notes due 2007 (the "Securities"):

ARTICLE I.

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1. Definitions.

"Acquired Indebtedness" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.

"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.

"Affiliate Transaction" shall have the meaning provided in
Section 5.11(a).

"Agent" means any Registrar, Paying Agent or co-Registrar.

"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or of any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.

"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of

<PAGE>

the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; PROVIDED, HOWEVER, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000;
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Section 6.1,
(iii) sales of accounts receivable and related assets of the type specified in
the definition of "Qualified Receivables Transaction" to a Receivables
Subsidiary in connection with a Qualified Receivables Transaction; and (iv)
sales of Permitted Investments.

"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.

"Board of Directors" means, with respect to any Person, the Board
of Directors of such Person or of a subsidiary of such Person or any duly
authorized committee of that Board.

"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.

"Business Day" means a day that is not a Legal Holiday.

"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.

"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.

"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States of America

2
<PAGE>

or any state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (v) repurchase obligations with a term
of not more than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.

"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture); (ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of this Indenture); (iii) any
Person or Group (other than the Permitted Holder(s)) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 50% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company; or (iv) the replacement of a majority
of the Board of Directors of the Company over a two-year period from the
directors who constituted the Board of Directors of the Company at the beginning
of such period, and such replacement shall not have been approved by a vote of
at least a majority of the Board of Directors of the Company then still in
office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.

"Change of Control Offer" shall have the meaning provided in
Section 5.15(a).

"Change of Control Payment Date" shall have the meaning provided
in Section 5.15(b).

"Commission" means the Securities and Exchange Commission.

"Common Stock" of any Person means any and all shares, interests
or other participations in, and other equivalents (however designated and
whether voting or non-voting) of such Person's common stock, whether outstanding
on the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.

"Company" means Color Spot Nurseries, Inc., a Delaware
corporation, until a successor replaces it pursuant to this Indenture and
thereafter means such successor.

"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense, (C) Consolidated Non-cash Charges LESS any non-cash items
increasing Consolidated Net Income

3
<PAGE>

for such period, all as determined on a consolidated basis for such Person
and its Restricted Subsidiaries in accordance with GAAP, (D) any expenses or
charges related to the termination of the Fee Agreement and (E) any write-off
of deferred financing costs in connection with the refinancing of the
Company's credit agreement in existence prior to the Credit Agreement and any
refinancings of the Credit Agreement.

"Consolidated Fixed Charge Coverage Ratio" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a
PRO FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income") attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give (without duplication) effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3)

4
<PAGE>

notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of the operation of
such agreements.

"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum (without duplication) of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.

"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of (without duplication): (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries of such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs (excluding any write-off of deferred financing costs
in connection with the refinancing of the Company's credit agreement in
existence prior to the Credit Agreement or any refinancing of the Credit
Agreement), (b) the net costs under Interest Swap Obligations, (c) all
capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP.

"Consolidated Net Income" means, with respect to any Person, for
any period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.

5
<PAGE>

"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.

"Consolidated Non-cash Charges" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP
(excluding any such charges constituting an extraordinary item or loss or any
such charge which requires an accrual of or a reserve for cash charges for
any future period).

"Credit Agent" means, at any time, the then-acting Administrative
Agent as defined in and under the Credit Agreement, which initially shall be
Credit Agricole Indosuez. The Company shall promptly notify the Trustee of any
change in the Credit Agent.

"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of December 24, 1997, between the Company, the lenders party
thereto in their capacities as lenders thereunder and Credit Agricole Indosuez,
as agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (PROVIDED that such increase in borrowings is Permitted Indebtedness
or is permitted by Section 5.12) or adding Restricted Subsidiaries of the
Company as additional guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.

"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary of the Company against
fluctuations in currency values.

"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.

"Default" means an event or condition the occurrence of which is,
or with the lapse of time or the giving of notice or both would be, an Event of
Default.

"Depository" shall mean the Depository Trust Company, New York,
New York, or a successor thereto registered under the Exchange Act or other
applicable statute or regulation.

"Designated Senior Debt" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Debt which, at the time of determination, has an aggregate principal
amount of at least $25,000,000 and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.

6
<PAGE>

"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable (other than in connection with a
Change of Control), pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Securities.

"Event of Default" shall have the meaning provided in Section
7.1.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto and the rules and
regulations promulgated by the Commission thereunder.

"Fee Agreement" means that certain fee agreement between the
Company and Kohlberg & Company, LLC dated as of December 31, 1996, as amended.

"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.

"Global Security" shall mean a Security which is executed by the
Company and authenticated and delivered by the Trustee to the Depository or
pursuant to the Depository's instruction, all in accordance with this Indenture
and pursuant to a written order, which shall be registered in the name of the
Depository or its nominee and which, together with any other Global Security
representing Securities hereunder, shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, all of the outstanding
Securities.

"Guarantee" shall have the meaning set forth in Section 5.20.

"Holder" means the Person in whose name a Security is registered
on the Registrar's books.

"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of Indebtedness or other obligations
or the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the
foregoing).

"Indebtedness" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price

7
<PAGE>

of property, all conditional sale obligations and all Obligations under any
title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and
excluding long-term, deferred purchase price obligations for trees, PROVIDED
that such obligations for trees are not recorded as liabilities on such
Person's balance sheet in accordance with GAAP), (v) all Obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations
in respect of Indebtedness referred to in clauses (i) through (v) above and
clause (viii) below, (vii) all Obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any lien on any
property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (viii) all Obligations under Currency
Agreements and Interest Swap Obligations of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to
the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends, if any. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as
if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture,
and if such price is based upon, or measured by, the fair market value of
such Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.

"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.

"Independent Financial Advisor" means a firm (i) which does not,
and whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Company (other than an interest in less
than 5% of the Company's Common Stock after such time as the Company's Common
Stock is publicly traded) and (ii) which, in the judgment of the Board of
Directors of the Company, is otherwise independent and qualified to perform the
task for which it is to be engaged.

"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.

"Interest Swap Obligation" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.

<PAGE>

"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of
any Capital Stock, bonds, notes, debentures or other securities or evidences
of Indebtedness issued by, any Person. "Investment" shall exclude extensions
of trade credit by the Company and its Restricted Subsidiaries on
commercially reasonable terms in accordance with normal trade practices of
the Company or such Restricted Subsidiary, as the case may be. For the
purposes of Section 5.3, (i) "Investment" shall include and be valued at the
fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated as an Unrestricted Subsidiary
and shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated as a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts
received in respect of such Investment; PROVIDED that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce
the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted
Subsidiary not sold or disposed of.

"Issue Date" means December 24, 1997, the date of original issuance of
the Securities under this Indenture.

"Legal Holiday" shall have the meaning provided in Section 11.7.

"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).

"Maturity Date" means December 15, 2007.

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), (b) taxes paid or payable
after taking into account any reduction in

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<PAGE>

consolidated tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Indebtedness that is required to
be repaid in connection with such Asset Sale and (d) appropriate amounts to
be provided by the Company or any of its Restricted Subsidiaries, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.

"Net Proceeds Offer" shall have the meaning provided in Section 5.16(a).

"Net Proceeds Offer Amount" shall have the meaning provided in Section
5.16(a).

"Net Proceeds Offer Payment Date" shall have the meaning provided in
Section 5.16(a).

"Net Proceeds Trigger Date" shall have the meaning provided in
Section 5.16(a).

"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

"Officer" means, with respect to any Person, the Chief Executive
Officer, the Chief Financial Officer or the Chief Accounting Officer of such
Person.

"Officers' Certificate" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be an Officer of the
Company and otherwise complying with the requirements of Sections 11.4 and
11.5.

"operating lease" means any lease the obligations under which do not
constitute Capitalized Lease Obligations.

"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 11.4 and 11.5. Unless otherwise required by the Trustee, the legal
counsel may be an employee of or counsel to the Company or the Trustee.

"Paying Agent" shall have the meaning provided in Section 2.3, except
that for the purposes of Articles Three and Nine and Sections 5.15 and 5.16,
the Paying Agent shall not be the Company or an Affiliate of the Company.

"Permitted Holder(s)" means KCSN Acquisition Company, L.P. and its
Affiliates, Kohlberg & Company, LLC and its Affiliates and Michael F.
Vukelich and his Affiliates.

"Permitted Indebtedness" means, without duplication, each of the
following:

(i) Indebtedness under the Securities and this Indenture;

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(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $150.0
million, less the amount of all mandatory principal payments actually made by
the Company in respect of the Term Loan Facility (excluding any such payments
to the extent refinanced at the time of payment under a replaced Credit
Agreement), PROVIDED that (1) not more than $110.0 million of borrowings
under the Credit Agreement are used to make Asset Acquisitions and (2) not
more than $90.0 million of borrowings under the Credit Agreement are used for
any other purpose;

(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;

(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering Indebtedness
of such Restricted Subsidiary; PROVIDED, HOWEVER, that such Interest Swap
Obligations are entered into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred in
accordance with this Indenture to the extent the notional principal amount of
such Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;

(v) Indebtedness under Currency Agreements; PROVIDED that in the case
of Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnitees and compensation
payable thereunder;

(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company (other than the Lien of the Credit Agent under the
Credit Agreement); PROVIDED that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company owns or holds
any such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;

(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to no
Lien; PROVIDED that (a) any Indebtedness of the Company to any Wholly Owned
Restricted Subsidiary of the Company is unsecured and subordinated, pursuant
to a written agreement, to the

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<PAGE>

Company's obligations under this Indenture and the Securities and (b) if as
of any date any Person other than a Wholly Owned Restricted Subsidiary of the
Company owns or holds any such Indebtedness or any Person holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the Company;

(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness
is extinguished within two business days of incurrence;

(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;

(x) Refinancing Indebtedness;

(xi) Indebtedness incurred in a Qualified Receivables Transaction that
is without recourse to the Company or to any Restricted Subsidiary of the
Company or their assets (other than a Receivables Subsidiary and its assets);
and

(xii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $25,000,000 at
any one time outstanding.

"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; PROVIDED that any Indebtedness
evidencing such Investment is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Securities and this
Indenture; (iii) investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $2,000,000 at any one time outstanding; (v)
Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses
and otherwise in compliance with this Indenture; (vi) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers; (vii) Investments made by the Company or
its Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with Section 5.16; (viii)
Investment by the Company or a Wholly Owned Restricted Subsidiary of the
Company in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person in

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<PAGE>

connection with a Qualified Receivables Transaction; (ix) notes received from
management as payment for purchases of Capital Stock; and (x) additional
Investments by the Company or any Restricted Subsidiary of the Company in an
aggregate amount, based on original cost, not to exceed $1,000,000 at any one
time outstanding.

"Permitted Liens" means the following types of Liens:

(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to GAAP;

(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;

(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Restricted Subsidiaries;

(vi) any interest (including UCC filings) or title of a lessor under
any Capitalized Lease Obligation; PROVIDED that such Liens do not extend to
any property or assets which is not leased property subject to such
Capitalized Lease Obligation;

(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; PROVIDED, HOWEVER, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired and
(B) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition.

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<PAGE>

(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptance issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;

(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;

(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements or the
Company or any of its Restricted Subsidiaries, including rights of
offset and set-off;

(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under
this Indenture;

(xii) Liens securing Indebtedness under Currency Agreements;

(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 5.12; PROVIDED that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company
and were not granted in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and (B) such Liens do not extend to or cover
any property or assets of the Company or of any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary of the Company
and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company;

(xiv) Liens on accounts receivable and related assets of the type
described in the definition of "Qualified Receivables Transaction" or on
assets of a Receivables Subsidiary, in either case, incurred in
connection with a Qualified Receivables Transaction; and

(xv) Liens securing Indebtedness in an aggregate amount not to
exceed $5,000,000 at any one time outstanding.

"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, limited liability
company, or a governmental agency or political subdivision thereof.

"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.

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<PAGE>

"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act, as
interpreted by the Company's chief financial officer or Board of Directors in
consultation with its independent certified public accountants.

"Prospectus" means the prospectus of the Company dated December 22,
1997 relating to the Securities.

"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Company, sold by the Company, after the Issue
Date pursuant to a registration statement filed with the Commission in
accordance with the Securities Act.

"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.

"Qualified Receivables Transaction" means any transaction or series
of transactions that may be entered into by the Company or any of its
Restricted Subsidiaries pursuant to which the Company or any of its
Restricted Subsidiaries may sell, convey or otherwise transfer to (i) a
Receivables Subsidiary (in the case of a transfer by the Company or any of
its Restricted Subsidiaries) and (ii) any other Person (in the case of a
transfer by a Receivables Subsidiary), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) of
the Company or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect
of such accounts receivable, proceeds of such accounts receivable and other
assets which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable.

"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary
of the Company that engages in no activities other than in connection with
the financing of accounts receivable and that is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a)
which has no Indebtedness or any other Obligations (contingent or otherwise)
which (i) is guaranteed by the Company or any other Restricted Subsidiary of
the Company (excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness) pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction), (ii) is recourse to or
obligates the Company or any other Restricted Subsidiary of the Company in
any way other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction or (iii) subjects any property or
asset of the Company or any other Restricted Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables Transaction, (b) with which neither the Company
nor any other Restricted Subsidiary of the Company has any material contract,
agreement, arrangement or

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understanding other than on terms no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing accounts receivable
and (c) with which neither the Company nor any other Restricted Subsidiary of
the Company has any obligation to maintain or preserve such Restricted
Subsidiary's financial condition or cause such Restricted Subsidiary to
achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a Board Resolution of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.

"Record Date" means the record dates specified in the Securities;
provided, however, that if any such date is a Legal Holiday, the Record Date
shall be the first day immediately preceding such specified day that is not a
Legal Holiday.

"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and Paragraph 5 of the Securities.

"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this
Indenture and Paragraph 5 of the Securities.

"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, pre-pay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.

"Refinancing Indebtedness" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 5.12 (other than pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii), (ix), (xi) or (xii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; PROVIDED that (x) if such
Indebtedness being Refinanced is solely Indebtedness of the Company, then
such Refinancing Indebtedness shall be Indebtedness solely of the Company and
(y) if such Indebtedness being Refinanced is subordinate or junior to the
Securities, then such Refinancing Indebtedness shall be subordinate to the
Securities at least to the same extent and in the same manner as the
Indebtedness being Refinanced.

"Registrar" shall have the meaning provided in Section 2.3.

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"Replacement Assets" shall have the meaning provided in Section
5.16(a).

"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Debt; PROVIDED
that if, and for so long as, any Designated Senior Debt lacks such a
representative, then the Representative for such Designated Senior Debt shall
at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Debt in respect of any Designated Senior
Debt.

"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which is not an Unrestricted Subsidiary.

"Revolving Credit Facility" means one or more revolving credit
facilities under the Credit Agreement.

"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date
or later acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the
security of such Property.

"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.

"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable
law) on any Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities.
Without limiting the generality of the foregoing, "Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of (x) all monetary obligations of every nature of the
Company under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations and (z) all obligations under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company to a Restricted Subsidiary of the Company or any
Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of the Company or any Restricted Subsidiary of the
Company (including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented

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by Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (vi) Indebtedness (other than
Permitted Indebtedness) incurred in violation of this Indenture provisions
set forth under Section 5.12, (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to the Company and (viii) any Indebtedness
which is, by its express terms, subordinated in right of payment to any other
Indebtedness of the Company. The holders of any Indebtedness which by its
terms expressly provides that such Indebtedness is senior in right of payment
to the Securities shall be entitled to rely conclusively for purposes of
determining that such Indebtedness is not being incurred in violation of this
Indenture upon a certificate of the chief financial officer of the Company
which demonstrates that, as of the date of the most recently published
financial statements of the Company, such Indebtedness is permitted to be
incurred by the terms of this Indenture.

"Significant Subsidiary" shall have the meaning set forth in Rule
1.02(v) of Regulation S-X under the Securities Act.

"subsidiary" with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.

"Subsidiary" means any subsidiary of the Company.

"Surviving Entity" shall have the meaning provided in Section
6.1(a)(i).

"Term Loan Facility" means one or more term loan facilities under
the Credit Agreement.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date this Indenture is
qualified under the TIA, except as otherwise provided in Section 10.3.

"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.

"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.

"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the

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Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; PROVIDED that (x) the Company certifies
to the Trustee that the Company's investment in such Unrestricted Subsidiary
is a Permitted Investment or that such designation complies with Section 5.3
and (y) each Subsidiary to be so designated and each of its Subsidiaries has
not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable
with respect to any Indebtedness pursuant to which the lender has recourse to
any of the assets of the Company or any of its Restricted Subsidiaries. The
Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately after giving effect to such
designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
5.12 and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.

"U.S. Government Obligations" means direct non-callable obligations
of, or non-callable obligations guaranteed by, the United States of America
for the payment of which guarantee or obligation the full faith and credit of
the United States is pledged.

"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.

"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.

"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person
or any Wholly Owned Restricted Subsidiary of such Person.

Section 1.2. Incorporation by Reference of TIA.

Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this
Indenture. The following TIA terms used in this Indenture have the following
meanings:

"indenture securities" means the Securities.

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"indenture security holder" means a Holder.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the
Trustee.

"obligor" on the indenture securities means the Company or any
other obligor on the Securities.

All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings assigned to them
therein.

Section 1.3. Rules of Construction.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;

(3) "or" is not exclusive;

(4) words in the singular include the plural, and words in
the plural include the singular;

(5) provisions apply to successive events and transactions;
and

(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section
or other subdivision.

ARTICLE II.

THE SECURITIES

Section 2.1. Form and Dating.

The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company and the Trustee shall approve the form of the Securities
and any notation, legend or endorsement on them. Each Security shall be
dated the date of its authentication.

The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.

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Section 2.2. Execution and Authentication.

Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual
or facsimile signature.

If an Officer whose signature is on a Security was an Officer
at the time of such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.

The Trustee shall authenticate Securities for original issue
in the aggregate principal amount of $100,000,000 upon a written order of the
Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on
which the Securities are to be authenticated. Such Securities shall be in
the form of one or more Global Securities, which (i) shall represent, and
shall be denominated in an amount equal to the aggregate principal amount of,
the outstanding Securities, (ii) shall be registered in the name of the
Depository for such Global Security or Securities or its nominee, (iii) shall
be delivered by the Trustee to the Depository or pursuant to the Depository's
instruction and (iv) shall bear a legend substantially to the following
effect: "Unless and until this Global Security is exchanged in whole or in
part for the individual Securities represented hereby, this Global Security
may not be transferred except as a whole by the Depository to a nominee of
the Depository or by a nominee of the Depository to the Depository or by a
Depository or any such nominee to a successor Depository or a nominee of a
successor Depository." The aggregate principal amount of Securities
outstanding at any time may not exceed $100,000,000 (or such lesser amount as
is requested authenticated by the Trustee and issued by the Company on the
Issue Date), except as provided in Section 2.7.

The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise
provided in the appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
and Affiliates of the Company.

The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and integral multiples thereof.

Section 2.3. Registrar and Paying Agent.

The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of

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transfer or for exchange ("Registrar"), (b) Securities may be presented or
surrendered for payment ("Paying Agent") and (c) notices and demands to or
upon the Company in respect of the Securities and this Indenture may be
served. The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company
may act as its own Registrar or Paying Agent except that for the purposes of
Articles Three and Nine and Sections 5.15 and 5.16, neither the Company nor
any Affiliate of the Company shall act as Paying Agent. The Registrar shall
keep a register of the Securities and of their transfer and exchange. The
Company, upon notice to the Trustee, may have one or more co-Registrars and
one or more additional paying agents reasonably acceptable to the Trustee.
The term "Paying Agent" includes any additional paying agent. The Company
initially appoints the Trustee as Registrar and Paying Agent until such time
as the Trustee has resigned or a successor has been appointed.

The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company
shall notify the Trustee, in advance, of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.

Section 2.4. Paying Agent To Hold Assets in Trust.

The Company shall require each Paying Agent other than the
Trustee to agree in writing that, subject to Article Four, each Paying Agent
shall hold in trust for the benefit of Holders or the Trustee all assets held
by the Paying Agent for the payment of principal of, or interest on, the
Securities (whether such assets have been distributed to it by the Company or
any other obligor on the Securities), and shall notify the Trustee of any
Default by the Company (or any other obligor on the Securities) in making any
such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate such assets and hold them as a separate trust fund, subject to
Article Four. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for
any assets distributed. Upon distribution to the Trustee of all assets that
shall have been delivered by the Company to the Paying Agent, the Paying
Agent shall have no further liability for such assets.

Section 2.5. Holder Lists.

The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each Interest Payment Date and at such
other times as the Trustee may request in writing a list in such form and as
of such date as

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the Trustee may reasonably require of the names and addresses of Holders,
which list may be conclusively relied upon by the Trustee.

Section 2.6. Transfer and Exchange.

(a) When Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Securities or to
exchange such Securities for an equal principal amount of Securities of other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Securities surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
or co-Registrar, duly executed by the Holder thereof or his or her attorney
duly authorized in writing. To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-Registrar's request. No service charge
shall be made for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.2, 2.7, 2.10, 3.6, 5.15, 5.16 or 10.5). The
Registrar or co-Registrar shall not be required to register the transfer of
or exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities
and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Security being redeemed in part. A Global
Security may be transferred, in whole but not in part, in the manner provided
in this Section 2.6(a), only to a nominee of the Depository for such Global
Security, or to the Depository, or a successor Depository for such Global
Security selected or approved by the Company, or to a nominee of such
successor Depository.

(b) If at any time the Depository for the Global Security
or Securities notifies the Company that it is unwilling or unable to continue
as Depository for such Global Security or Securities or the Company becomes
aware that the Depository has ceased to be a clearing agency registered under
the Exchange Act, the Company shall appoint a successor Depository with
respect to such Global Security or Securities. If a successor Depository for
such Global Security or Securities has not been appointed within 120 days
after the Company receives such notice or becomes aware of such
ineligibility, the Company shall execute, and the Trustee, upon receipt of an
Officers' Certificate for the authentication and delivery of Securities,
shall authenticate and deliver, Securities in definitive form, in an
aggregate principal amount at maturity equal to the principal amount at
maturity of the Global Security representing such Securities, in exchange for
such Global Security. The Company shall reimburse the Registrar, the
Depository and the Trustee for expenses they incur in documenting such
exchanges and issuances of Securities in definitive form.

The Company may at any time and in its sole discretion
determine that the Securities shall no longer be represented by such Global
Security or Securities. In such event the Company will execute, and the
Trustee, upon receipt of a written order for the authentication and

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delivery of individual Securities in exchange in whole or in part for such
Global Security or Securities, will authenticate and deliver individual
Securities in definitive form in an aggregate principal amount equal to the
principal amount of such Global Security or Securities in exchange for such
Global Security or Securities.

In any exchange provided for in any of the preceding two
paragraphs, the Company will execute and the Trustee will authenticate and
deliver individual Securities in definitive registered form in authorized
denominations. Upon the exchange of a Global Security for individual
Securities, such Global Security shall be cancelled by the Trustee.
Securities issued in exchange for a Global Security pursuant to this Section
2.6(b) shall be registered in such names and in such authorized denominations
as the Depository for such Global Security, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Securities to the persons in whose names such
Securities are so registered.

None of the Company, the Trustee, any Paying Agent or the
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.

Section 2.7. Replacement Securities.

If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate
a replacement Security if the Trustee's requirements are met. If required by
the Trustee or the Company, such Holder must provide an indemnity bond or
other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge
such Holder for its reasonable out-of-pocket expenses in replacing a Security
pursuant to this Section 2.7, including reasonable fees and expenses of
counsel.

Every replacement Security is an additional obligation of the
Company.

Section 2.8. Outstanding Securities.

Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company
or any of its respective Affiliates holds the Security.

If a Security is replaced pursuant to Section 2.7 (other than
a mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser. A mutilated Security
ceases to be outstanding upon surrender of such Security and replacement
thereof pursuant to Section 2.7.

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If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company or a Subsidiary) holds U.S. Legal Tender or U.S.
Government Obligations sufficient to pay all of the principal and interest
due on the Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue
unless, pursuant to the provisions of Article Four, the Paying Agent is
unable to make payments on the Securities to the Holders thereof.

Section 2.9. Treasury Securities.

In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, the Subsidiaries or any of their respective
Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
waiver or consent, only Securities that the Trustee knows or has reason to
know are so owned shall be disregarded.

Section 2.10. Temporary Securities.

Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Securities in exchange for
temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges as definitive
Securities. Notwithstanding the foregoing, so long as the Securities are
represented by a Global Security, such Global Security may be in typewritten
form.

Section 2.11. Cancellation.

The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent (other than the Company or a Subsidiary), and no one else, shall cancel
and, at the written direction of the Company, shall dispose of all Securities
surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.7, the Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation. If the
Company shall acquire any of the Securities, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by
such Securities unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.

Section 2.12. Defaulted Interest.

If the Company defaults in a payment of interest on the
Securities, it shall, unless the Trustee fixes another record date pursuant
to Section 7.10, pay the defaulted interest, plus (to the extent lawful) any
interest payable on the defaulted interest, to the persons who are Holders on
a subsequent special record date, which date shall be the fifteenth day next
preceding the date

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fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest,
and interest payable on such defaulted interest, if any, to be paid.

Section 2.13. CUSIP Number.

The Company in issuing the Securities may use a "CUSIP"
number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities.

ARTICLE III.

REDEMPTION

Section 3.1. Notices to Trustee.

If the Company elects to redeem Securities pursuant to
Paragraph 5 of the Securities, it shall notify the Trustee, with a copy to
the Credit Agent, of the Redemption Date and the principal amount of
Securities to be redeemed and whether it wants the Trustee to give notice of
redemption to the Holders at least 30 days (unless a shorter notice shall be
satisfactory to the Trustee) but not more than 60 days before the Redemption
Date. Any such notice may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.

Section 3.2. Selection of Securities To Be Redeemed.

If fewer than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed pro rata, by lot or by any
other method that the Trustee considers fair and appropriate and, if such
Securities are listed on any securities exchange, by a method that complies
with the requirements of such exchange; provided, however, that any
redemption pursuant to Paragraph 5 of the Securities with the proceeds of a
Public Equity Offering shall be made on a pro rata basis or on as nearly a
pro rata basis as is practicable (subject to Depository procedures), unless
such method is otherwise prohibited.

The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly
notify the Company in writing of the Securities selected for redemption and,
in the case of any Security selected for partial redemption, the principal
amount thereof to be redeemed. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or integral multiples thereof) of the principal amount of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.

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Section 3.3. Notice of Redemption.

At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first class mail to
each Holder whose Securities are to be redeemed at such Holder's registered
address, with a copy to the Trustee and the Credit Agent. In order to effect
a redemption pursuant to Paragraph 5 of the Securities with the proceeds of a
Public Equity Offering, the Company shall send the redemption notice not
later than 120 days after the consummation of such Public Equity Offering.
At the Company's request, the Trustee shall give the notice of redemption in
the Company's name and at the Company's expense. Each notice for redemption
shall identify the Securities to be redeemed and shall state:

(1) the Redemption Date;

(2) the Redemption Price;

(3) the name and address of the Paying Agent;

(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price;

(5) that, unless (a) the Company defaults in making the
redemption payment on the Redemption Date or (b) such redemption payment is
prohibited pursuant to Article Four or otherwise, interest on Securities
called for redemption ceases to accrue on and after the Redemption Date, and
the only remaining right of the Holders of such Securities is to receive
payment of the Redemption Price upon surrender to the Paying Agent of the
Securities redeemed;

(6) if any Security is being redeemed in part, the portion
of the principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued; and

(7) if fewer than all the Securities are to be redeemed,
the identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption.

Section 3.4. Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section
3.3, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender to the Trustee
or Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price unless prohibited pursuant to Article Four or otherwise
pursuant to this Indenture. Securities that are redeemed by the Company or
that are purchased by the Company pursuant to a Net Proceeds Offer as
described in Section 5.16 or pursuant to a

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Change of Control Offer as described in Section 5.15 or that are otherwise
acquired by the Company will be surrendered to the Trustee for cancellation.

Section 3.5. Deposit of Redemption Price.

On or before 11:00 a.m. New York City time on the Redemption
Date, the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price of all Securities to be redeemed on
that date (other than Securities or portions thereof called for redemption on
that date which have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited which is not required for that purpose upon the
written request of the Company, except with respect to monies owed as
obligations to the Trustee pursuant to Article Eight.

If the Company complies with the preceding paragraph and
payment of the Securities called for redemption is not prohibited under
Article Four or otherwise, then, unless the Company defaults in the payment
of such Redemption Price, interest on the Securities or portions thereof to
be redeemed will cease to accrue on and after the applicable Redemption Date,
whether or not such Securities are presented for payment.

Section 3.6. Securities Redeemed in Part.

Upon surrender of a Security that is to be redeemed in part,
the Trustee shall authenticate for the Holder a new Security or Securities
equal in principal amount to the unredeemed portion of the Security
surrendered.

ARTICLE IV.

SUBORDINATION

Section 4.1. Securities Subordinated to Senior Debt.

Anything herein to the contrary notwithstanding, the Company,
for itself and its successors, and each Holder, by his or her acceptance of
Securities, agrees that the payment of the Obligations on the Securities is
subordinated, to the extent and in the manner provided in this Article Four,
to the prior payment in full in cash or Cash Equivalents of all Senior Debt,
whether outstanding on the Issue Date or thereafter Incurred, including with
respect to Designated Senior Debt, any interest accruing thereon subsequent
to the occurrence of any Event of Default specified in clauses (vi) or (vii)
of Section 7.1 relating to the Company, whether or not such interest is an
allowed claim enforceable against the Company under any Bankruptcy Law.

This Article Four shall constitute a continuing offer to all
persons who become holders of, or continue to hold, Senior Debt, and such
provisions are made for the benefit of the holders of Senior Debt and such
holders are made obligees hereunder and any one or more of them may enforce
such provisions.

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The obligations of the Company to the Trustee under Section
8.7 shall not be subject to the provisions of this Article Four.

Section 4.2. Suspension of Payment When Senior Debt in Default.

(a) Unless Section 4.3 shall be applicable, no direct or
indirect payment (other than payments by a trust previously established
pursuant to Article Nine) or distribution of any asset of the Company of any
kind or character by or on behalf of the Company of Obligations on the
Securities or on account of the purchase or redemption or other acquisition
of the Securities whether pursuant to the terms of the Securities or upon
acceleration or otherwise shall be made if, at the time of such payment or
distribution, there exists a default in the payment of all or any portion of
principal of, premium, if any, or interest on any Designated Senior Debt and
such default shall not have been cured or waived by or on behalf of the
holders of such Designated Senior Debt or shall have ceased to exist, until
such default shall have been cured or waived or shall have ceased to exist or
such Designated Senior Debt shall have been discharged or paid in full in
cash or Cash Equivalents, after which the Company shall resume making any and
all required payments in respect of the Securities, including any missed
payments.

(b) Unless Section 4.3 shall be applicable, during the
continuance of any other event of default with respect to any Designated
Senior Debt pursuant to which the maturity thereof may be accelerated, upon
the earlier to occur of (a) receipt by the Trustee of written notice from the
holders of a majority of the outstanding principal amount of the Designated
Senior Debt or their Representative stating that such notice is a notice
pursuant to Section 4.2 of this Indenture, or (b) if such event of default
results from the acceleration of the Securities, the date of such
acceleration, no such payment (other than payments by a trust previously
established pursuant to Article Nine) or distribution of any asset of the
Company of any kind or character shall be made by the Company upon or in
respect of the Securities (including without limitation on account of any
principal of, premium, if any, or interest on the Securities) or on account
of the purchase or redemption or other acquisition of Securities for a period
("Payment Blockage Period") commencing on the earlier of the date of receipt
of such notice or the date of such acceleration and ending 180 days
thereafter (provided such Designated Senior Debt shall theretofore not have
been accelerated) (unless (x) such Payment Blockage Period shall be
terminated by written notice to the Trustee from the holders of a majority of
the outstanding principal amount of such Designated Senior Debt or their
Representative who delivered such notice or (y) such default is cured or
waived, or ceases to exist or such Designated Senior Debt is discharged or
paid in full in cash or Cash Equivalents), after which the Company shall
promptly notify the Trustee of such cure or waiver and resume making any and
all required payments in respect of the Securities, including any missed
payments. Notwithstanding anything herein to the contrary, in no event will
a Payment Blockage Period extend beyond 180 days from the date on which such
Payment Blockage Period was commenced. Not more than one Payment Blockage
Period may be commenced with respect to the Securities during any period of
360 consecutive days. No event of default which existed or was continuing on
the date of the commencement of any Payment Blockage Period with respect to
the Designated Senior Debt initiating such Payment Blockage Period shall be,
or be made, the basis for the commencement of a second Payment Blockage
Period by the holders of such Designated Senior Debt or their

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Representative whether or not within a period of 360 consecutive days unless
such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing
after the date of commencement of such Blockage Period that, in either case,
would give rise to an event of default pursuant to any provisions under which
an event of default previously existed or was continuing shall constitute a
new event of default for this purpose).

(c) In the event that, notwithstanding the foregoing, the
Trustee or a Holder shall have received any payment prohibited by the
foregoing provisions of this Section 4.2, then and in such event such payment
shall be paid over and delivered forthwith to the Representative or as a
court of competent jurisdiction shall direct.

Section 4.3. Securities Subordinated to Prior Payment of All Senior Debt on
Dissolution, Liquidation or Reorganization of Company.

Upon any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, upon any
dissolution, winding-up, total or partial liquidation or reorganization of
the Company (including, without limitation, in bankruptcy, insolvency or
receivership proceedings or upon any assignment for the benefit of creditors
or any other marshalling of the Company's assets and liabilities and whether
voluntary or involuntary):

(a) the holders of Senior Debt shall first be entitled to
receive payments in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Debt, of all
amounts payable under Senior Debt before the Holders will be entitled to
receive any payment with respect to the Securities, or for the acquisition of
any of the Securities for cash or property or otherwise;

(b) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to which the
Holders or the Trustee on behalf of the Holders would be entitled except for
the provisions of this Article Four, shall be paid by the liquidating trustee
or agent or other person making such a payment or distribution, directly to
the holders of Senior Debt or their Representative, ratably according to the
respective amounts of Senior Debt remaining unpaid held or represented by
each, until all Senior Debt remaining unpaid shall have been paid in full in
cash or Cash Equivalents after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt; and

(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
Holders or any Paying Agent on account of principal of, premium, if any, or
interest on the Securities before all Senior Debt is paid in full in cash or
Cash Equivalents, such payment or distribution (subject to the provisions of
Sections 4.6 and 4.7) shall be received, segregated from other funds, and held
in trust by the Trustee or such Holder or Paying Agent for the benefit of, and
shall immediately be paid over to, the holders of Senior Debt or their
Representative, ratably according to the respective amounts of Senior Debt held
or represented by each, until all Senior Debt remaining unpaid shall have been
paid in full in

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cash or Cash Equivalents, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt. Notwithstanding anything
to the contrary contained herein, in the absence of its gross negligence or
willful misconduct, the Trustee shall have no duty to collect or retrieve
monies previously paid by it in good faith; provided, however, that this
sentence shall not affect the obligation of any other party receiving such
payment to hold such payment for the benefit of, and to pay over such payment
over to, the holders of Senior Debt or their Representative.

The consolidation of the Company with, or the merger of the
Company with or into, another person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and
assets substantially as an entirety to another person upon the terms and
conditions set forth in Article Six shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the benefit of
creditors or marshaling of assets and liabilities of the Company for the
purposes of this Article Four if the person formed by such consolidation or
the surviving entity of such merger or the person which acquires by
conveyance, transfer or lease such properties and assets substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance, transfer or lease, comply with the conditions set forth in such
Article Six.

The Company shall give prompt notice to the Trustee prior to
any dissolution, winding-up, total or partial liquidation or reorganization
(including, without limitation, in bankruptcy, insolvency, or receivership
proceedings or upon any assignment for the benefit of creditors or any other
marshalling of the Company's assets and liabilities).

Section 4.4. Holders To Be Subrogated to Rights of Holders of Senior Debt.

Subject to the payment in full in cash or Cash Equivalents of
all Senior Debt, Holders shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of assets of the Company
applicable to the Senior Debt until all amounts owing on the Securities shall
be paid in full in cash, and for the purpose of such subrogation no payments
or distributions to the holders of Senior Debt by or on behalf of the
Company, or by or on behalf of the Holders by virtue of this Article Four,
which otherwise would have been made to the Holders, shall, as between the
Company and the Holders, be deemed to be payment by the Company to or on
account of the Senior Debt, it being understood that the provisions of this
Article Four are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of Senior
Debt, on the other hand.

If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Four
shall have been applied, pursuant to the provisions of this Article Four, to
the payment of all amounts payable under the Senior Debt, then the Holders
shall be entitled to receive from the holders of such Senior Debt any
payments or distributions received by such holders of Senior Debt in excess
of the amount sufficient to pay all amounts payable under or in respect of
the Senior Debt in full in cash or Cash Equivalents.

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Section 4.5. Obligations of the Company Unconditional.

Nothing contained in this Article Four or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Securities as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of
the Holders and creditors of the Company other than the holders of the Senior
Debt, nor shall anything herein or therein prevent the Trustee or any Holder
from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this
Article Four, of the holders of Senior Debt in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets or securities of the Company
referred to in this Article Four, the Trustee, subject to the provisions of
Sections 8.1 and 8.2, and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any
dissolution, winding-up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidating
trustee or agent or other person making any payment or distribution to the
Trustee or to the Holders for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders of
Senior Debt and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Four. Nothing in this
Section 4.5 shall apply to the claims of, or payments to, the Trustee under
or pursuant to Section 8.7.

Section 4.6. Trustee Entitled To Assume Payments Not Prohibited in Absence of
Notice.

The Trustee shall not at any time be charged with knowledge of
the existence of any facts that would prohibit the making of any payment to
or by the Trustee unless and until the Trustee shall have received written
notice thereof from the Company or from one or more holders of Senior Debt or
from any Representative therefor and, prior to the receipt of any such
notice, the Trustee, subject to the provisions of Sections 8.1 and 8.2, shall
be entitled in all respects conclusively to assume that no such fact exists.

Section 4.7. Application by Trustee of Assets Deposited with It.

U.S. Legal Tender or U.S. Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Section 9.2 shall
be for the sole benefit of Holders and, to the extent allocated for the
payment of Securities, shall not be subject to the subordination provisions
of this Article Four. Otherwise, any deposit of assets or securities by or
on behalf of the Company with the Trustee or any Paying Agent (whether or not
in trust) for the payment of principal of or interest on any Securities shall
be subject to the provisions of this Article Four; provided, however, that if
prior to the second Business Day preceding the date on which by the terms of
this Indenture any such assets may become distributable for any purpose
(including, without limitation, the payment of principal of or premium or
interest on any Security) the Trustee or such Paying Agent shall not have
received with respect to such assets the

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notice provided for in Section 4.6, then the Trustee or such Paying Agent
shall have full power and authority to receive such assets and to apply the
same to the purpose for which they were received, and shall not be affected
by any notice to the contrary received by it on or after such date. The
foregoing shall not apply to the Paying Agent if the Company or any
Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing
contained in this Section 4.7 shall limit the right of the holders of Senior
Debt to recover payments as contemplated by this Article Four.

Section 4.8. No Waiver of Subordination Provisions.

(a) No right of any present or future holder of any Senior
Debt to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.

(b) Without limiting the generality of subsection (a) of
this Section 4.8, the holders of Senior Debt may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders
without incurring responsibility to the Holders and without impairing or
releasing the subordination provided in this Article Four or the obligations
hereunder of the Holders to the holders of Senior Debt, do any one or more of
the following: (1) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;
(2) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Debt; (3) release any person liable in
any manner for the collection or payment of Senior Debt; and (4) exercise or
refrain from exercising any rights against the Company and any other person;
provided, however, that in no event shall any such actions limit the right of
the Holders to take any action to accelerate the maturity of the Securities
pursuant to Article Seven or to pursue any rights or remedies hereunder or
under applicable laws if the taking of such action does not otherwise violate
the terms of this Indenture.

(c) Each Holder by accepting a Security agrees that the
Representative of any Senior Debt (including, without limitation, the Credit
Agent), in its discretion, without notice or demand and without affecting any
rights of any holder of Senior Debt under this Article Four, may foreclose
any mortgage or deed of trust covering interests in real property secured
thereby, by judicial or nonjudicial sale; and such Holder hereby waives any
defense to the enforcement by the Representative of any Senior Debt
(including, without limitation, the Credit Agent) or by any holder of any
Senior Debt against such Holder of this Article Four after a judicial or
nonjudicial sale or other disposition of its interests in real property
secured by such mortgage or deed of trust; and such Holder expressly waives
any defense or benefits that may be derived from comparable provisions of the
laws of any jurisdiction or any similar statute in effect in any jurisdiction.

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Section 4.9. Holders Authorize Trustee To Effectuate Subordination of
Securities.

Each Holder by his or her acceptance of a Security authorizes
and expressly directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to effect the subordination provisions
contained in this Article Four, and appoints the Trustee his or her
attorney-in-fact for such purpose, including, in the event of any
dissolution, winding-up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or any other marshalling of assets
and liabilities of the Company) tending towards liquidation or reorganization
of the business and assets of the Company, the immediate filing of a claim
for the unpaid balance of such Holder's Securities in the form required in
said proceedings and cause said claim to be approved. If the Trustee does not
file a proper claim or proof of debt in the form required in such proceeding
prior to 30 days before the expiration of the time to file such claim or
claims, then the holders of the Senior Debt or their Representative is hereby
authorized to file an appropriate claim for and on behalf of the Holders.
Nothing herein contained shall be deemed to authorize the Trustee or the
holders of Senior Debt or their Representative to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee or the holders of Senior
Debt or their Representative to vote in respect of the claim of any Holder in
any such proceeding.

Section 4.10. Right of Trustee To Hold Senior Debt.

The Trustee shall be entitled to all of the rights set forth
in this Article Four in respect of any Senior Debt at any time held by it to
the same extent as any other holder of Senior Debt, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.

Section 4.11. No Suspension of Remedies.

The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article Four
shall not be construed as preventing the occurrence of a Default or an Event
of Default under Section 7.1.

Nothing contained in this Article Four shall limit the right
of the Trustee or the Holders to take any action to accelerate the maturity
of the Securities pursuant to Article Seven or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any,
under this Article Four of the holders, from time to time, of Senior Debt.

Section 4.12. No Fiduciary Duty of Trustee to Holders of Senior Debt.

The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Debt, and shall not be liable to any such holders
(other than for its willful misconduct or gross negligence) if it shall in
good faith mistakenly pay over or deliver to the Holders or the Company or
any other person, money or assets to which any holders of Senior Debt shall
be entitled by virtue of this Article Four or otherwise. Nothing in this
Section 4.12 shall affect the

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obligation of any person other than the Trustee to hold such payment for the
benefit of, and to pay such payment over to, the holders of Senior Debt or
their Representative.

ARTICLE V.

COVENANTS

Section 5.1. Payment of Securities.

The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent (other than the
Company or a Subsidiary) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment; provided, however, that U.S. Legal
Tender held by the Trustee for the benefit of holders of Senior Debt or the
payment of which to the Holders is prohibited pursuant to the provisions of
Article Four or otherwise shall not be considered to be designated for the
payment of any installment of principal or interest on the Securities within
the meaning of this Section 5.1.

The Company shall pay interest on overdue principal at the
rate borne by the Securities and it shall pay interest on overdue
installments of interest at the same rate, to the extent lawful.

Section 5.2. Maintenance of Office or Agency.

The Company shall maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.3. The
Company shall give prior notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 11.2.

Section 5.3. Limitation on Restricted Payments.

(a) The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, (a) declare or pay
any dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Company) on or in respect of shares
of the Company's Capital Stock to holders of such Capital Stock, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock
of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire
for value, prior to any scheduled final maturity, scheduled repayment or
scheduled sinking fund payment, any Indebtedness of the Company that is
subordinate or junior in right of payment to the Securities or (d) make any
Investment (other than Permitted Investments) (each of the foregoing actions
set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after

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giving effect thereto, (i) a Default of an Event of Default shall have
occurred and be continuing or (ii) the Company is not able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the proviso in Section 5.12 or (iii) the aggregate amount of
Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned subsequent to the Issue Date and on or prior to the
date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net
cash proceeds received by the Company from any Person (other than a
Subsidiary) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company
(excluding net cash proceeds received from the sale of Capital Stock to
employees of the Company and any of its Subsidiaries after the Issue Date to
the extent such amounts have been applied in accordance with clause (4) of
the following paragraph); plus (y) without duplication of any amounts
included in clause (iii) (x) above, 100% of the aggregate net cash proceeds
of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii) (x) and (y),
any net cash proceeds from a Public Equity Offering to the extent used to
redeem the Securities); plus (z) aggregate net cash proceeds received by the
Company or any of its Subsidiaries as a distribution or repayment with
respect to, or from the sale of, Investments (other than Permitted
Investments) made after the Issue Date up to the original amount of such
Investments.

(b) Notwithstanding the foregoing, the provisions set forth
in the immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or (ii) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Securities either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary) of (A) shares of Qualified Capital Stock of the Company or
(B) Refinancing Indebtedness; (4) so long as no Default or Event of Default
shall have occurred and be continuing, repurchases by the Company of Capital
Stock of the Company from employees of the Company or any of its Subsidiaries or
their authorized representatives upon the death, disability or termination of
employment of such employees or pursuant to a written contract or plan, in an
aggregate amount not to exceed $1,000,000 in any calendar year plus an aggregate
amount of net cash proceeds received by the Company subsequent to the Issue Date
from the sale of Capital Stock to employees of the Company and any of its
Subsidiaries to the extent such proceeds have not been included in making the
calculation in clause (iii) of the immediately preceding paragraph; (5) so long
as no Default or

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Event of Default shall have occurred and be continuing, the payment of cash
dividends on the Series A Preferred Stock commencing with the first payment
due after December 15, 2002; and (6) so long as no Default or Event of
Default shall have occurred and be continuing, the repurchase of Series A
Preferred Stock after a Change of Control; PROVIDED that the Company has
completed the Change of Control Offer. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with
clause (iii) of the immediately preceding paragraph, amounts expended
pursuant to clauses (1), (2), (4) and (5) shall be included in such
calculation.

Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment complies with this Indenture and setting forth in
reasonable detail the basis upon which the required calculations were
computed, which calculations may be based upon the Company's latest available
internal quarterly financial statements.

Section 5.4. Corporate Existence.

Except as otherwise permitted by Article Six, the Company
shall do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the rights (charter and
statutory) and franchises of the Company; provided, however, that the Company
shall not be required to preserve, with respect to itself, any right or
franchise, if the Board of Directors of the Company, as the case may be,
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company.

Section 5.5. Payment of Taxes and Other Claims.

The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any
of the Restricted Subsidiaries or properties of it or any of the Restricted
Subsidiaries and (ii) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a Lien upon the property of it or any of
the Restricted Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim if either (a) the amount, applicability or
validity thereof is being contested in good faith by appropriate proceedings
and an adequate reserve has been established therefor to the extent required
by GAAP or (b) the failure to make such payment or effect such discharge
(together with all other such failures) would not have a material adverse
effect on the financial condition or results or operations of the Company and
the Restricted Subsidiaries taken as a whole.

Section 5.6. Maintenance of Properties and Insurance.

(a) The Company shall cause all properties used or useful
to the conduct of its business or the business of any of the Restricted
Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all

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<PAGE>

as in its judgment may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times unless the failure to so maintain such properties (together with all
other such failures) would not have a material adverse effect on the
financial condition or results of operations of the Company and the
Restricted Subsidiaries taken as a whole; provided, however, that nothing in
this Section 5.6 shall prevent the Company or any Restricted Subsidiary from
discontinuing the operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is either (i) in
the ordinary course of business, (ii) in the good faith judgment of the Board
of Directors of the Company or the Restricted Subsidiary concerned, or of the
senior officers of the Company or such Restricted Subsidiary, as the case may
be, desirable in the conduct of the business of the Company or such
Restricted Subsidiary, as the case may be, or (iii) is otherwise permitted by
this Indenture.

(b) The Company shall provide or cause to be provided, for
itself and each of the Restricted Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
reasonable, good faith opinion of the Company are adequate and appropriate
for the conduct of the business of the Company and the Restricted
Subsidiaries in a prudent manner, with reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall
be either (i) consistent with past practices of the Company or the applicable
Restricted Subsidiary or (ii) customary, in the reasonable, good faith
opinion of the Company, for corporations similarly situated in the industry,
unless the failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition
or results of operations of the Company and the Restricted Subsidiaries,
taken as a whole.

Section 5.7. Compliance Certificate; Notice of Default.

(a) The Company shall deliver to the Trustee within 120
days after the end of the Company's fiscal year an Officers' Certificate
stating that a review of its activities and the activities of the
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether it has
kept, observed, performed and fulfilled its obligations under this Indenture
and further stating, as to each such Officer signing such certificate, that
to the best of his or her knowledge the Company during such preceding fiscal
year has kept, observed, performed and fulfilled each and every such covenant
and no event of default in respect of any payment obligation under the Credit
Agreement and no Default or Event of Default occurred during such year or, if
such signers do know of such an event of default, Default or Event of
Default, the certificate shall describe the event of default, Default or
Event of Default and its status with particularity. The Officers'
Certificate shall also notify the Trustee should the Company elect to change
the manner in which it fixes its fiscal year end.

(b) So long as, and to the extent, not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee within 120 days after
the end of each fiscal year a written statement by the Company's independent
certified public accountants stating (A) that their audit examination has

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included a review of the terms of this Indenture and the Securities as they
relate to accounting matters, and (B) whether, in connection with their audit
examination, any Default has come to their attention and if such a Default
has come to their attention, specifying the nature and period of existence
thereof.

(a) The Company shall deliver to the Trustee, forthwith
upon becoming aware, and in any event within 5 days after the occurrence, of
(i) any Default or Event of Default; (ii) any event of default in respect of
any payment obligation under the Credit Agreement or any event of default
under any bond, debenture, note, or other evidence of Indebtedness of the
Company or any of the Subsidiaries, or under any mortgage, indenture or other
instrument, an Officers' Certificate specifying with particularity such event.

Section 5.8. Compliance with Laws.

The Company shall comply, and shall cause each of the
Restricted Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all
states and municipalities thereof, and of any governmental department,
commission, board, regulatory authority, bureau, agency and instrumentality
of the foregoing, in respect of the conduct of their respective businesses
and the ownership of their respective properties, except such as are being
contested in good faith and by appropriate proceedings and except for such
noncompliances as would not in the aggregate have a material adverse effect
on the financial condition or results of operations of the Company and the
Restricted Subsidiaries taken as a whole.

Section 5.9. SEC Reports.

The Company will deliver to the Trustee within 15 days after
the filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d)
of the Exchange Act. The Company will also comply with the other provisions
of TIA Section 314(a).

Section 5.10. Waiver of Stay, Extension or Usury Laws.

The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law or any usury law or other law that would prohibit or forgive the Company
from paying all or any portion of the principal of or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein

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granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.

Section 5.11. Limitation on Transactions with Affiliates.

(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms
that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company or such Restricted
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $1,000,000
shall be approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or
a series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $5,000,000, the Company
or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from an Independent Financial Advisor and file the same with the Trustee.

(b) The restrictions set forth in clause (a) shall not
apply to (i) reasonable fees and compensation paid to and indemnity provided
on behalf of, officers, directors, employees or consultants of the Company or
any Restricted Subsidiary of the Company (including customary provisions
contained in employment agreements with executive officers of the Company) as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and
any of its Wholly Owned Restricted Subsidiaries or exclusively between or
among such Wholly Owned Restricted Subsidiaries, provided such transactions
are not otherwise prohibited by this Indenture; (iii) any agreement as in
effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (iv) Restricted
Payments permitted by Section 5.3; (v) the payments by the Company under that
certain lease of its Richmond, California facility between the Company and M.
F. Vukelich Co. dated as of December 1, 1995, as amended on December 13,
1995; and (vi) the payments by the Company under that certain residential
lease rental agreement and deposit receipt between the Company and Michael F.
Vukelich, as guardian of Trisha Vukelich, dated as of December 13, 1995.

<PAGE>

Section 5.12. Limitation on Incurrences of Additional Indebtedness.

The Company will not, and will not permit any of its Restricted
Subsidiaries to Incur any Indebtedness (other than Permitted Indebtedness);
PROVIDED, HOWEVER, that if no Default or Event of Default shall have occurred
and be continuing at the time of or as a consequence of the incurrence of any
such Indebtedness, the Company may incur Indebtedness (including, without
limitation, Acquired Indebtedness) and Restricted Subsidiaries of the Company
may incur Acquired Indebtedness, in each case if on the date of the Incurrence
of such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1.0.

Section 5.13. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.

The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired; (5) agreements existing on the
Issue Date to the extent and in the manner such agreements are in effect on the
Issue Date; (6) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2), (4) or (5) above; PROVIDED, HOWEVER, that the provisions relating to
such encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4) or (5); (7) Indebtedness or other
contractual requirements of a Receivables Subsidiary in connection with a
Qualified Receivables Transaction, provided that such restrictions apply only to
such Receivables Subsidiary; or (8) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired.

Section 5.14. Limitation on Liens.

The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds

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therefrom, or assign or otherwise convey any right to receive income or
profits therefrom unless (i) in the case of Liens securing Indebtedness that
is expressly subordinate or junior in right of payment to the Securities, the
Securities are secured by Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the Securities
are equally and ratably secured, except for (A) Liens existing as of the
Issue Date to the extent and in the manner such Liens are in effect on the
Issue Date; (B) Liens securing Senior Debt; (C) Liens securing the
Securities; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary
of the Company on assets of any Subsidiary of the Company; (E) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness
which has been secured by a Lien permitted under this Indenture and which has
been incurred in accordance with the provisions of this Indenture; PROVIDED,
HOWEVER, that such Liens (A) are no less favorable to the Holders and are not
more favorable to the lienholders with respect to such Liens than the Liens
in respect of the Indebtedness being Refinanced and (B) do not extend to or
cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (F) Permitted
Liens.

Section 5.15. Limitation on Change of Control.

(a) Upon the occurrence of a Change of Control, each Holder
will have the right to require that the Company purchase all or a portion of
such Holder's Securities pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued interest to the date of purchase.

(b) No later than 30 days following the date upon which the
Change of Control occurred, the Company must send, by first class mail, a notice
to each Holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer. Notice of an event giving rise to a Change of
Control shall be given on the same date and in the same manner to all Holders.
Such notice shall state:

(1) that the Change of Control Offer is being made
pursuant to this Section 5.15 and that all Securities tendered will be accepted
for payment;

(2) the purchase price (including the amount of
accrued interest) and the purchase date (which shall be no earlier than 30 days
nor later than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");

(3) that any Security not tendered will continue to
accrue interest if interest is then accruing;

(4) that, unless (i) the Company defaults in making
payment therefor or (ii) such payment is prohibited pursuant to Article Four,
any Security accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;

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(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two Business Days prior to
the Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such Holder is
withdrawing his or her election to have such Security purchased;

(7) that Holders whose Securities are purchased only
in part will be issued new Securities equal in principal amount to the
unpurchased portions of the Securities surrendered; provided that each Security
purchased and each Security issued shall be in an original principal amount of
$1,000 or integral multiples thereof;

(8) that each Change of Control Offer is required to
remain open for at least 20 Business Days or such longer period as may be
required by law and until 5:00 p.m. New York City time on the applicable Change
of Control Payment Date; and

(9) the circumstances and relevant facts regarding
such Change of Control.

(c) On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S.
Legal Tender sufficient to pay the purchase price of all Securities so tendered
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price (and the
Trustee shall promptly authenticate and mail to such Holders new Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered provided that each such new Security shall be in the principal
amount of $1,000 or integral multiples thereof) unless such payment is
prohibited pursuant to Article Four or otherwise. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date. For purposes of this Section 5.15,
the Trustee shall act as the Paying Agent.

(d) Notwithstanding the foregoing, prior to the mailing of
the notice of a Change of Control Offer referred to above, within 30 days
following a Change of Control, the Company shall either (i) repay in full and
terminate all commitments under Indebtedness under the Credit Agreement and all
other Senior Debt the terms of which require repayment upon a Change of Control
or offer to repay in full and terminate all such commitments under all
Indebtedness under the Credit Agreement and all such other Senior Debt and to
repay the Indebtedness owed to each lender which has accepted such offer, or
(ii) obtain the requisite consents under the Credit Agreement and all other
Senior Debt to permit the repurchase of the

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Securities as provided above. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Securities pursuant to the provisions described above.

(e) The Company must comply with Rule 14e-1 under the
Exchange Act and other provisions of state and federal securities laws to the
extent applicable in connection with a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of this Section 5.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of this Section 5.15 by virtue thereof.

Section 5.16. Limitation on Asset Sales.

(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as determined in
good faith by the Company's Board of Directors), (ii) at least 70% of the
consideration received by the Company or the Restricted Subsidiary, as the
case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition; and (iii) upon
the consummation of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 365 days of receipt thereof either (A) to prepay any Senior Debt
and, in the case of any Senior Debt under any revolving credit facility,
effect a permanent reduction in the availability under such revolving credit
facility, (B) to make an investment in a similar business or properties or
assets that replace the business, properties or assets that were the subject
of such Asset Sale or in properties and assets that will be used in the
business of the Company and its Restricted Subsidiaries as existing on the
Issue Date or in businesses reasonably related thereto ("Replacement
Assets"), or (C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii)(B). On the 366th day after an Asset
Sale or such earlier date, if any, as the Board of Directors of the Company
or of such Restricted Subsidiary determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(A),
(iii)(B) and (iii)(C) of the next preceding sentence (each, a "Net Proceeds
Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have
not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company
or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30
nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a PRO RATA basis, that amount of Securities equal
to the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Securities to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; PROVIDED, HOWEVER, that if at any
time any non-cash consideration received by the Company or any Restricted
Subsidiary of the Company, as the case may be, in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to

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<PAGE>

constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this Section 5.16. The Company may defer the
Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and
not just the amount in excess of $5,000,000, shall be applied as required
pursuant to this paragraph).

(b) In the event of the transfer of substantially all (but
not all) of the property and assets of the Company and its Restricted
Subsidiaries as an entirety to a Person in a transaction permitted under Section
6.1, the successor corporation shall be deemed to have sold the properties and
assets of the Company and its Restricted Subsidiaries not so transferred for
purposes of this covenant, and shall comply with the provisions of this Section
5.16 with respect to such deemed sale as if it were an Asset Sale. In addition,
the fair market value of such properties and assets of the Company or its
Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this Section 5.16.

(c) Notwithstanding Sections 5.16(a) and (b), the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 70% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; PROVIDED, that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.

(d) Each Net Proceeds Offer will be mailed to the record
Holders as shown on the register of Holders of such Securities within 25 days
following the Net Proceeds Offer Trigger Date, with a copy to the Trustee. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Net Proceeds Offer and shall state
the following terms:

(1) that the Net Proceeds Offer is being made pursuant
to Section 5.16 and that all Securities tendered will be accepted for payment,
provided, however, that if the aggregate principal amount of Securities tendered
in a Net Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall select
the Securities to be purchased on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Securities in denominations of
$1,000 or multiples thereof shall be purchased);

(2) the purchase price (including the amount of
accrued interest) and the Net Proceeds Offer Payment Date;

(3) that any Security not tendered will continue to
accrue interest if interest is then accruing;

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<PAGE>

(4) that, unless (i) the Company defaults in making
payment therefor or (ii) such payment is prohibited pursuant to Article Four or
otherwise, any Security accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest after the Net Proceeds Offer Payment Date;

(5) that Holders electing to have a Security purchased
pursuant to a Net Proceeds Offer will be required to surrender the Security,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day prior to the Net
Proceeds Offer Payment Date;

(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two Business Days prior to
the Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such Holder is
withdrawing his or her election to have such Security purchased;

(7) that Holders whose Securities were purchased only
in part will be issued new securities equal in principal amount to the
unpurchased portion of the Securities surrendered; provided, however, that each
Security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof; and

(8) that the Net Proceeds Offer shall remain open for
a period of 20 Business Days or such longer period as may be required by law.

(e) On or before the Net Proceeds Offer Payment Date, the
Company shall (i) accept for payment Securities or portions thereof tendered
pursuant to the Net Proceeds Offer which are to be purchased in accordance with
item (b)(1) above, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price of all Securities to be purchased and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price (and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount to any unpurchased portion of the Security surrendered
provided that each such new Security shall be in the principal amount of $1,000
or integral multiples thereof) unless such payment is prohibited pursuant to
Article Four or otherwise. The Company will publicly announce the results of
the Net Proceeds Offer on or as soon as practicable after the Net Proceeds Offer
Payment Date. For purposes of this Section 5.16, the Trustee shall act as the
Paying Agent.

(f) Any amounts remaining after the purchase of Securities
pursuant to a Net Proceeds Offer shall be returned by the Trustee to the
Company.

(g) The Company must comply with Rule 14e-1 under the
Exchange Act and other provisions of State and federal securities laws to the
extent applicable in connection with a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations

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conflict with the provisions of this Section 5.16, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed
to have breached its obligations under the provisions of this Section 5.16 by
virtue thereof.

Section 5.17. Limitation on Preferred Stock of Restricted Subsidiaries.

The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.

Section 5.18. Limitation on Other Senior Subordinated Debt.

The Company will not incur or suffer to exist Indebtedness that is
senior in right of payment to the Securities and subordinate in right of payment
to any other Indebtedness of the Company.

Section 5.19. Limitation on Restricted and Unrestricted Subsidiaries.

(a) The Board of Directors of the Company may, if no Default
or Event of Default shall have occurred and be continuing or would result
therefrom, designate any Restricted Subsidiary to be an Unrestricted Subsidiary
if such designation is at that time permitted under Section 5.3. The Board of
Directors of the Company may, if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, designate an Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that (i) any such
redesignation shall be deemed to be an Incurrence as of the date of such
redesignation by the Company and the Restricted Subsidiaries of the Indebtedness
(if any) of such redesignated Subsidiary for purposes of Section 5.12; and (ii)
unless such redesignated Subsidiary shall not have any Indebtedness outstanding
(other than Indebtedness which would be Permitted Indebtedness), no such
designation shall be permitted if immediately after giving effect to such
redesignation and the Incurrence of any such Indebtedness, the Company could not
incur $1.00 of additional Indebtedness pursuant to the proviso of Section 5.12.
Any such designation by the Board of Directors of the Company shall be evidenced
to the Trustee by the filing with the Trustee of a Board Resolution of the
Company giving effect to such designation or redesignation and an Officers'
Certificate certifying that such designation or redesignation complied with the
foregoing conditions and setting forth in reasonable detail the underlying
calculations.

(b) Subsidiaries that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries will be deemed to be
Restricted Subsidiaries. The designation of a Restricted Subsidiary as an
Unrestricted Subsidiary shall be deemed to include a designation of all of the
subsidiaries of such Unrestricted Subsidiary as Unrestricted Subsidiaries.

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Section 5.20. Limitation of Guarantees by Restricted Subsidiaries.

(a) The Company will not permit any of its Restricted
Subsidiaries, directly or indirectly, by way of the pledge of any intercompany
note or otherwise, to assume, guarantee or in any other manner become liable
with respect to any Indebtedness of the Company or any other Restricted
Subsidiary of the Company (other than (A) Indebtedness and other obligations
under the Credit Agreement, (B) Permitted Indebtedness of a Restricted
Subsidiary of the Company, (C) Indebtedness under Currency Agreements in
reliance on clause (v) of the definition of Permitted Indebtedness, or (D)
Interest Swap Obligations incurred in reliance on clause (iv) of the definition
of Permitted Indebtedness), unless, in any such case (a) such Restricted
Subsidiary executes and delivers a supplemental indenture to this Indenture,
providing a guarantee of payment of the Securities by such Restricted Subsidiary
(the "Guarantee") and (b) (x) if any such assumption, guarantee or other
liability of such Restricted Subsidiary is provided in respect of Senior Debt,
the guarantee or other instrument provided by such Restricted Subsidiary in
respect of such Senior Debt may be superior to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the Securities than
those contained in this Indenture and (y) if such assumption, guarantee or other
liability of such Restricted Subsidiary is provided in respect of Indebtedness
that is expressly subordinated to the Securities, the guarantee or other
instrument provided by such Restricted Subsidiary in respect of such
subordinated Indebtedness shall be subordinated to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the Securities than
those contained in this Indenture.

(b) Notwithstanding the foregoing, any such Guarantee by a
Restricted Subsidiary of the Securities shall provide by its terms that it shall
be automatically and unconditionally released and discharged, without any
further action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; PROVIDED that
(a) such sale or disposition of such Capital stock or assets is otherwise in
compliance with the terms of this Indenture and (b) such assumption, guarantee
or other liability of such Restricted Subsidiary has been released by the
holders of the other Indebtedness so guaranteed.

Section 5.21. Conduct of Business.

The Company and its Restricted Subsidiaries will not engage in
any businesses which are not the same, similar or related to the businesses in
which the Company and its Restricted Subsidiaries are engaged on the Issue Date.

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ARTICLE VI.

SUCCESSOR CORPORATION

Section 6.1. Limitations on Mergers and Certain Other Transactions.

(a) The Company will not, in a single transaction or series
of related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless:

(i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Securities and the
performance of every covenant of the Securities and this Indenture on the part
of the Company to be performed or observed;

(ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be,
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 5.12;

(iii) immediately before and immediately after giving
effect to such transaction and the assumption contemplated by clause (i)(2)(y)
above (including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be continuing; and

(iv) the Company or the Surviving Entity shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with the
applicable provisions of this Indenture and that all conditions precedent in
this Indenture relating to such transaction have been satisfied.

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(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.

Section 6.2. Successor Corporation Substituted.

Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 6.1,
in which the Company is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, lease or transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
and the Securities with the same effect as if such surviving entity had been
named as such.

ARTICLE VII.

DEFAULT AND REMEDIES
Section 7.1. Events of Default.

Each of the following events constitutes an "Event of Default":

(i) the failure to pay interest on any Securities when the
same becomes due and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by Article Four);

(ii) the failure to pay the principal on any Securities, when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Securities
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether
or not such payment shall be prohibited by Article Four);

(iii) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Securities
(except in the case of a failure to comply with Section 6.1, which will
constitute an Event of Default with such notice requirement but without such
passage of time requirement);

(iv) the failure to pay at final maturity (giving effect to
any applicable grace periods and any extensions thereof) the principal amount of
any Indebtedness of the Company or any Restricted Subsidiary of the Company, or
the acceleration of the final stated maturity of any such Indebtedness if the
Aggregate principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay principal at
final maturity or which has been accelerated, aggregates $5,000,000 or more at
any time;

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(v) one or more judgments in an aggregate amount in excess of
$5,000,000 (excluding any amounts covered by insurance as to which the insurer
has acknowledged coverage) shall have been rendered against the Company or any
of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become final
and non-appealable;

(vi) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law: (a) commences a
voluntary case or proceeding; (b) consents to the entry of an order for relief
against it in an involuntary case or proceeding; (c) consents to the appointment
of a Custodian of it or for all or substantially all of its property; (d) makes
a general assignment for the benefit of its creditors; or (e) generally is not
paying its debts as they become due;

(vii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (a) is for relief against the Company or
any of its Significant Subsidiaries in an involuntary case or proceeding; (b)
appoints a Custodian of the Company or any of its Significant Subsidiaries, or
for all or any substantial part of their respective properties; or (c) orders
the liquidation of the Company or any of its Significant Subsidiaries, and in
each case the order or decree remains unstayed and in effect for 60 days; or

(viii) the lenders under the Credit Agreement shall commence
judicial proceedings to foreclose upon any material portion of the assets of the
Company and the Subsidiaries.

Section 7.2. Acceleration.

(a) If an Event of Default (other than an Event of Default
specified in clauses (vi) or (vii) of Section 7.1 with respect to the Company)
shall occur and be continuing, the Trustee or the Holders of at least 25% in
principal amount of outstanding Securities may declare the principal of and
accrued interest on all the Securities to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the Credit Agreement, shall become immediately due
and payable upon the first to occur of an acceleration under the Credit
Agreement or 5 business days after receipt by the Company and the Credit Agent
under the Credit Agreement of such Acceleration Notice. If an Event of Default
specified in clauses (vi) or (vii) of Section 7.1 with respect to the Company
occurs and is continuing, then all unpaid principal of, and premium, if any, and
accrued and unpaid interest on all of the outstanding Securities shall IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.

(b) At any time after a declaration of acceleration with
respect to the Securities as described in the preceding paragraph, the Holders
of a majority in principal amount of the Securities may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely

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because of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, (iv) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances and (v)
in the event of the cure or waiver of an Event of Default of the type described
in clauses (vi) or (vii) of Section 7.1, the Trustee shall have received an
Officers' Certificate and an Opinion of Counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.

(c) The Holders of a majority in principal amount of the
Securities may waive any existing Default or Event of Default under this
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any Securities.

(d) Holders of the Securities may not enforce this Indenture
or the Securities except as provided in this Indenture and under the TIA.
Subject to the provisions of Article Eight, the Trustee is under no obligation
to exercise any of its rights or powers under this Indenture at the request,
order or direction of any of the Holders, unless such Holders have offered to
the Trustee reasonable indemnity. Subject to all provisions of Section 7.5 and
applicable law, the Holders of a majority in aggregate principal amount of the
then outstanding Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.

(e) The Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.

Section 7.3. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.

Section 7.4. Waiver of Past Defaults.

Subject to Sections 7.7 and 10.2, the Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of

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Default and its consequences, except a Default in the payment of principal of
or interest on any Security as specified in clauses (i) and (ii) of Section
7.1 (other than any such Default arising solely by reason of acceleration of
the Securities). When a Default or Event of Default is waived, it is cured
and ceases.

Section 7.5. Control by Majority.

Subject to Section 2.9, the Holders of a majority in principal
amount of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it, including, without limitation, any remedies
provided for in Section 7.3. Subject to Section 8.1, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of another
Holder, or that may involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.

Section 7.6. Limitation on Suits.

A Holder may not pursue any remedy with respect to this Indenture
or the Securities unless:

(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;

(2) the Holder or Holders of at least 25% in principal amount
of the outstanding Securities make a written request to the Trustee to pursue
the remedy;

(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense to be
incurred in compliance with such request;

(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and

(5) during such 60-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent with
the request.

A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.

Section 7.7. Rights of Holders To Receive Payment.

Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of and interest on a Security, on
or after the respective due dates expressed in such Security, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder.
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Section 7.8. Collection Suit by Trustee.

If an Event of Default in payment of principal or interest
specified in clause (i) or (ii) of Section 7.1 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express
trust against the Company or any other obligor on the Securities for the
whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each
case at the rate per annum borne by the Securities and such further amount as
shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.

Section 7.9. Trustee May File Proofs of Claim.

The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Securities, any of their respective creditors or any
of their respective property and shall be entitled and empowered to collect
and receive any monies or other property payable or deliverable on any such
claims and to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agent and counsel, and any other amounts due the Trustee
under Section 8.7. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding. The
Trustee may enforce claims on behalf of Holders without possession of such
Holders' Securities.

Section 7.10. Priorities.

If the Trustee collects any money pursuant to this Article
Seven, it shall pay out the money in the following order:

First: to the Trustee for amounts due under Section 8.7;

Second: subject to Article Four, to Holders for interest
accrued on the Securities, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
interest; and

Third: subject to Article Four, to Holders for principal
amounts due and unpaid on the Securities, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal.

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The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this
Section 7.10.

Section 7.11. Rights and Remedies Cumulative.

No right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.

Section 7.12. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default
or an acquiescence therein. Every right and remedy given by this Article
Seven or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.

Section 7.13. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 7.13 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 7.7, or a suit by a Holder or Holders of
more than 10% in principal amount of the outstanding Securities.

ARTICLE VIII.

TRUSTEE

The Company hereby appoints and employs the Trustee and the
Trustee hereby accepts the express trust imposed upon it by this Indenture
and covenants and agrees to perform the same, subject to the conditions and
terms hereof.

Section 8.1. Duties of Trustee.

(a) If a Default or an Event of Default of which a Trust
Officer of the Trustee is actually aware has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof
as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs.

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(b) Except during the continuance of a Default or an Event
of Default of which the Trust Officer of the Trustee is actually aware:

(1) The Trustee need undertake to perform only
those duties as are expressly and specifically set forth in this Indenture
and no covenants or obligations whatsoever shall be implied in this Indenture
against the Trustee.

(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.

(c) The Trustee shall have no liability except for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

(1) This paragraph does not limit the effect of
paragraph (b) of this Section 8.1.

(2) The Trustee shall not be liable for any error
of judgment made in good faith by a Trust Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.

(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 7.5.

(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.

(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this
Section 8.1.

(f) The Trustee shall not be liable for interest on any
assets received by it. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by law.

Section 8.2. Rights of Trustee.

Subject to Section 8.1:

(a) The Trustee may rely on and shall be protected in acting
or refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person, including, without
limitation, any Person purporting to be a holder of Senior

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Debt or a Representative. The Trustee need not investigate any fact or
matter stated in the document or the status of any such Person delivering
such document.

(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require in addition to the receipt of written
direction(s) from the Company accompanied by an Officers' Certificate or an
Opinion of Counsel, which opinion or certificate shall conform to Sections
11.4 and 11.5 of this Indenture. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.

(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any attorney
or agent appointed with due care.

(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.

(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request, direction,
consent, order, bond, debenture, or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit; provided, however, that in so doing the
Tustee shall not be deemed to undertake any liability or additional duty
hereunder.

(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.

Section 8.3. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company,
its Subsidiaries, or their respective Affiliates with the same rights it
would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 8.10 and 8.11.

Section 8.4. Trustee's Disclaimer.

The Trustee makes no representation or warranty and shall have
no liability whatsoever as to and for the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement in the Securities other than the Trustee's certificate of
authentication.

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Section 8.5. Notice of Default.

If a Default or an Event of Default occurs and is continuing
and if it is actually known to a Trust Officer of the Trustee, the Trustee
shall mail to each Holder notice of the Default or Event of Default within 90
days after such Default or Event of Default occurs or if such Default or
Event of Default is known to a Trust Officer of the Trustee during such
90-day period, promptly after such Default or Event of Default becomes known
to a Trust Officer of the Trustee; provided, however, that, except in the
case of a Default or Event of Default in the payment of the principal of or
interest on any Security, including the failure to make payment on a Change
of Control Payment Date pursuant to a Change of Control Offer or payment when
due pursuant to a Net Proceeds Offer, the Trustee may withhold such notice if
it in good faith determines that withholding such notice is in the interest
of the Holders.

Section 8.6. Reports by Trustee to Holders.

Within 60 days after each September 30 beginning with the
first September 30 following the date of this Indenture, the Trustee shall,
to the extent that any of the events described in TIA Section
313(a)313(a)8.6 occurred within the previous twelve months, but not
otherwise, mail to each Holder a brief report dated as of such September 30
that complies with TIA Section 313(a). The Trustee also shall comply with
TIA Sections 313(b)313(b)8.6 and 313(c)313(c)8.6 .

A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the Commission and each stock
exchange, if any, on which the Securities are listed.

The Company shall notify the Trustee in writing if the
Securities become listed on any stock exchange.

Section 8.7. Compensation and Indemnity.

The Company shall pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust.
The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.

The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability incurred by it except for such
actions to the extent caused by any negligence or willful misconduct on its
part, arising out of or in connection with the administration of this trust
and its rights or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel; provided,
however, that the Company will not be required to pay such fees and expenses
if it assumes the Trustee's defense and there is no conflict of interest
between the Company and the Trustee in connection

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with such defense as reasonably determined by the Trustee. The Company need
not pay for any settlement made without its written consent. The Company
need not reimburse any expense or indemnify against any loss or liability to
the extent incurred by the Trustee through its negligence, bad faith or
willful misconduct.

To secure the Company's payment obligations in this Section
8.7, the Trustee shall have a lien prior to the Securities on all assets held
or collected by the Trustee, in its capacity as Trustee, except assets held
in trust to pay principal of or interest on particular Securities.

When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 7.1(vi) or (vii) occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

Section 8.8. Replacement of Trustee.

The Trustee may resign by so notifying the Company. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee and appoint a successor trustee with the Company's
consent, by so notifying the Company and the Trustee. The Company may remove
the Trustee if:

(1) the Trustee fails to comply with Section 8.10;

(2) the Trustee is adjudged a bankrupt or an insolvent;

(3) a receiver or other public officer takes charge of the
Trustee or its property; or

(4) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year
after the successor Trustee takes office, the Holders of a majority in principal
amount of the Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, subject to the lien provided in Section 8.7, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.

If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in

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principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 8.10, any Holder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

Notwithstanding replacement of the Trustee pursuant to this
Section 8.8, the Company's obligations under Section 8.7 shall continue for
the benefit of the retiring Trustee.

Section 8.9. Successor Trustee by Merger, Etc.

If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the resulting, surviving or transferee corporation
without any further act shall, if such resulting, surviving or transferee
corporation is otherwise eligible hereunder, be the successor Trustee.

Section 8.10. Eligibility; Disqualification.

This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1)310(a)(1)8.10 and
310(a)(5)310(a)(5)8.10 . The Trustee shall have (or in the case of a
corporation trust company included in a bank holding company system, the
related bank holding company shall have) a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA Section 310(b)310(b)8.10 ;
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1)310(b)(1)8.10 any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.

Section 8.11. Preferential Collection of Claims Against Company.

The Trustee shall comply with TIA Section 311(a)311(a)8.11 ,
excluding any creditor relationship listed in TIA Section 311(b)311(b)8.11 .
A Trustee who has resigned or been removed shall be subject to TIA Section
311(a) to the extent indicated.

ARTICLE IX.

SATISFACTION AND DISCHARGE OF INDENTURE

Section 9.1. Termination of the Company's Obligations.

The Company may terminate its obligations under the Securities
and this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 9.1, if

(1) either (a) all Securities theretofore authenticated and
delivered (except lost, stolen or destroyed Securities which have been
replaced or paid or Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the

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Company and thereafter repaid to the Company or discharged from such trust,
as provided in Section 9.4) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or
(b) all Securities not theretofore delivered to the Trustee for cancellation
have become due and payable and the Company has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient to pay
and discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if any,
and interest on the Securities to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be;

(2) the Company has paid all other sums payable by it
hereunder; and

(3) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for the termination of the Company's
obligations under the Securities and this Indenture have been complied with.
Such Opinion of Counsel shall also state that such satisfaction and discharge
does not result in a default under the Credit Agreement (if then in effect)
or any other agreement or instrument then known to such counsel that binds or
affects the Company.

Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.5, 2.6, 2.7, 2.8, 5.1, 5.2 and 8.7 shall survive
until the Securities are no longer outstanding pursuant to the last paragraph
of Section 2.8. After the Securities are no longer outstanding, the
Company's obligations in Sections 8.7, 9.4 and 9.5 in respect thereof shall
survive.

After such delivery or irrevocable deposit the Trustee upon
request shall acknowledge in writing the discharge of the Company's
obligations under the Securities and this Indenture except for those
surviving obligations specified above.

Section 9.2. Legal Defeasance and Covenant Defeasance.

(a) The Company may, at its option by Board Resolution of
the Board of Directors of the Company, at any time, with respect to the
Securities, elect to have either paragraph (b) or paragraph (c) below be
applied to the outstanding Securities upon compliance with the conditions set
forth in paragraph (d).

(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be deemed to have
been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, legal defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred to in (i) and
(ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Securities and any amounts deposited
under paragraph (d) below shall cease to be

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subject to any obligations to, or the rights of, any holder of Senior Debt
under Article Four or otherwise, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of
Holders to receive payments in respect of the principal of, premium, if any,
and interest on the Securities when such payments are due, (ii) the Company's
obligations with respect to such Securities under Sections 2.6, 2.7 and 5.2,
and, with respect to the Trustee, under Section 8.7, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (iv) this Section 9.2 and
Section 9.5. Subject to compliance with this Section 9.2, the Company may
exercise its option under this paragraph (b) notwithstanding the prior
exercise of its option under paragraph (c) below with respect to the
Securities.

(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article Four
and Article Six and in Sections 5.3, 5.5 through 5.9 and 5.11 through 5.21
with respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder and Holders of the Securities and any
amounts deposited under paragraph (d) below shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Debt under Article
Four or otherwise. For this purpose, covenant defeasance means that, with
respect to the outstanding Securities, the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant listed above, whether directly or indirectly,
by reason of any reference elsewhere herein to any such covenant or by reason
of any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 7.1(iii), but, except as specified above,
the remainder of this Indenture and such Securities shall be unaffected
thereby.

(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Securities:

(i) the Company must have irrevocably deposited
with the Trustee (or another trustee satisfying the requirements of Section
8.10 who shall agree to comply with the provisions of this Section 9.2
applicable to it) in trust, for the benefit of the Holders, cash in U.S.
dollars, U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the Securities on the Maturity Date or Redemption Date, as
the case may be; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities on the Maturity
Date or such Redemption Date, as the case may be;

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(ii) in the case of legal defeasance, the Company
shall have delivered to the Trustee one or more Opinions of Counsel to the
effect that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such legal defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such legal defeasance had not
occurred;

(iii) in the case of covenant defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred;

(iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clauses
(vi) or (vii) of Section 7.1 are concerned, at any time in the period ending
on the 91st day after the date of deposit;

(v) such legal defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute a default under
this Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound;

(vi) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company or others;

(vii) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the legal defeasance or the
covenant defeasance have been complied with; and

(viii) the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally.

(a) All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company or any Affiliate of the Company), to the
Holders of such Securities of

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all sums due and to become due thereon in respect of principal, premium and
interest, but such money need not be segregated from other funds except to
the extent required by law.

The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to paragraph (d) above or the principal,
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of
the outstanding Securities. The Company's obligations to pay and indemnify
the Trustee as set forth in this paragraph shall survive the termination of
this Indenture and the Securities.

Anything in this Section 9.2 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request, in writing, by the Company any money or U.S. Government Obligations
held by it as provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.

Section 9.3. Application of Trust Money.

The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Sections 9.1 and 9.2, and shall
apply the deposited money and the money from U.S. Government Obligations in
accordance with this Indenture to the payment of principal of, premium, if
any, and interest on the Securities.

Section 9.4. Repayment to the Company.

Subject to Sections 8.7, 9.1 and 9.2, the Trustee shall
promptly pay to the Company upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Section 9.2,
held by it at any time. The Trustee and the Paying Agent shall pay to the
Company, as the case may be, upon receipt by the Trustee or the Paying Agent,
as the case may be, of an Officers' Certificate, any money held by it for the
payment of principal, premium, if any, or interest that remains unclaimed for
two years after payment to the Holders is required; provided, however, that
the Trustee and the Paying Agent before being required to make any payment
may, but need not, at the expense of the Company cause to be published once
in a newspaper of general circulation in The City of New York or mail to each
Holder entitled to such money notice that such money remains unclaimed and
that after a date specified therein, which shall be at least 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, as
the case may be, Holders entitled to money must look solely to the Company
for payment as general creditors unless an applicable abandoned property law
designates another person, and all liability of the Trustee or Paying Agent
with respect to such money shall thereupon cease.

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Section 9.5. Reinstatement.

If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Indenture by reason of
any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then and only then the Company's, if any, obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had been made pursuant to this Indenture until such time as the
Trustee is permitted to apply all such money or U.S. Government Obligations
in accordance with this Indenture; provided, however, that if the Company
have made any payment of principal of, premium, if any, or interest on any
Securities because of the reinstatement of its obligations, the Company shall
be subrogated to the rights of the holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.

ARTICLE X.

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 10.1. Without Consent of Holders.

The Company when authorized by a Board Resolution, and the
Trustee, together, may amend or supplement this Indenture or the Securities
without notice to or consent of any Holder:

(1) to cure any ambiguity, defect or inconsistency or to
comply with requirements of the Commission in order to maintain the
qualification of this Indenture under the TIA, so long as such change does
not, in the opinion of the Trustee, adversely affect the rights of any of the
Holders in any material respect; and

(2) to comply with Article Six.

In formulating its opinion on such matters, the Trustee will
be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an Opinion of Counsel.

Section 10.2. With Consent of Holders.

Subject to Section 7.7, the Company, when authorized by a
Board Resolution, the Trustee and the Holders of not less than a majority in
aggregate principal amount of the Securities then outstanding, may amend or
supplement (or waive compliance with any provision of) this Indenture or the
Securities without any notice to any other Holder, except that without the
consent of each Holder of the Securities affected, no such amendment,
supplement or waiver may:

(1) reduce the principal amount of the Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;

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(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted interest, on any
Securities;

(3) reduce the principal of or change or have the
effect of changing the fixed maturity of any Securities, or change the date on
which any Securities may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor (other than a payment required under
Sections 5.15 or 5.16);

(4) make the principal of, or interest on, any
Securities payable with anything or in any manner other than as provided for in
the Securities;

(5) make any changes in the provisions of this
Indenture protecting the right of each Holder to receive payment of principal of
and interest on such Securities on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in principal
amount of Securities to waive Defaults or Events of Default; or

(6) modify or change any provision of this Indenture
or the related definitions affecting the Subordination or ranking of the
Securities in a manner which adversely affects the Holders.

The Company agrees that no amendment, supplement or waiver under
this Article Ten may make any change that adversely affects the rights under
Article Four of any holders of any Senior Debt unless the holders of such Senior
Debt consent to the change.

It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.

In connection with any amendment, supplement or waiver under this
Article Ten, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.

Section 10.3. Compliance with TIA.

From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.

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Section 10.4. Revocation and Effect of Consents.

Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his or her Security or portion of his or her Security by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver.

The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated proxies),
and only those persons, shall be entitled to revoke any consent previously
given, whether or not such persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.

After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in Section 10.2, in
which case, the amendment, supplement or waiver shall bind only each Holder of a
Security who has consented to it and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security; provided, however, that any such waiver shall not impair or affect the
right of any Holder to receive payment of principal of and interest on a
Security, on or after the respective due dates expressed in such Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.

Section 10.5. Notation on or Exchange of Securities.

If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms.

Section 10.6. Trustee To Sign Amendments, Etc.

The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Ten; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any

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amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture.

ARTICLE XI.

MISCELLANEOUS

Section 11.1. TIA Controls.

If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the TIA shall
control.

Section 11.2. Notices.

Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:

if to the Company:

Color Spot Nurseries, Inc.
3478 Buskirk Avenue
Pleasant Hill, California 94523
Attention: Chief Executive Officer

w/a copy to:

Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202
Attention: Steven S. Siegel

if to the Trustee:

U.S. Trust Company of California, N.A.
515 South Flower Street
Suite 2700
Los Angeles, California 90071
Attention: Corporate Trust Administration

w/a copy to:

Oppenheimer Wolff & Donnelly
2029 Century Park East
38th Floor
Los Angeles, CA 90067
Attention: W. Mark Levinson

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if to the Credit Agent:

Credit Agricole Indosuez
1211 Avenue of the Americas
7th Floor
New York, NY 10036
Attention: Credit Department

Each of the Company, the Trustee and the Credit Agent by written
notice to each other such person may designate additional or different addresses
for notices to such person. Any notice or communication to the Company, the
Trustee and the Credit Agent shall be deemed to have been given or made as of
the date so delivered if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).

Any notice or communication mailed to a Holder shall be mailed to
him or her by first class mail or other equivalent means at his or her address
as it appears on the registration books of the Registrar and shall be
sufficiently given to him or her if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

Section 11.3. Communications by Holders with Other Holders.

Holders may communicate pursuant to TIA Section 312(b)312(b)11.3
with other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c)312(c)11.3 .

Section 11.4. Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company, upon request, shall furnish
to the Trustee:

(1) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and

(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.

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Section 11.5. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 5.7, shall include:

(1) a statement that the person making such certificate or
opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;

(3) a statement that, in the opinion of such person, he or
she has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

(4) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may rely on
an Officers' Certificate or certificates of public officials.

Section 11.6. Rules by Trustee, Paying Agent, Registrar.

The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Paying Agent or Registrar may make reasonable rules for
its functions.

Section 11.7. Legal Holidays.

A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, in the city in which the principal corporate trust office of the
Trustee is located or at such place of payment are not required to be open. If
a payment date is a Legal Holiday at such place, payment may be made at such
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.

Section 11.8. Governing Law.

THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture.

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Section 11.9. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture,
loan or debt agreement of any of the Company or any of its Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.

Section 11.10. No Recourse Against Others.

No director, officer, employee, stockholder or incorporator,
as such, of the Company or its Subsidiaries shall have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Securities.

Section 11.11. Successors.

All agreements of the Company in this Indenture and the
Securities shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successor.

Section 11.12. Duplicate Originals.

All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall
represent the same agreement.

Section 11.13. Headings and Table of Contents.

The headings and table of contents contained in this Indenture
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Indenture.

Section 11.14. Severability.

In case any one or more of the provisions in this Indenture or
in the Securities shall be held invalid, illegal or unenforceable, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions shall be enforceable to the full extent permitted by law.

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SIGNATURES

IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the date first written above.

COLOR SPOT NURSERIES, INC.

By: /s/ Michael F. Vukelich
-----------------------------
Name: Michael F. Vukelich
Title: Chair of the Board and Chief
Executive Officer

Attest: /s/ Karla D. Vukelich
---------------------------
Karla D. Vukelich
Secretary

U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee

By: /s/ Sandee Parks
--------------------
Name: Sandee Parks
Title: Vice President

Attest: [ILLEGIBLE]
---------------------------
Name:
Authorized Officer

<PAGE>
EXHIBIT A

FORM OF SECURITY

[FACE OF SECURITY]

Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to the Company or its agent for registration of transfer, exchange,
or payment, and any certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

Unless and until this Global Security is exchanged in whole or
in part for the individual Securities represented hereby, this Global
Security may not be transferred except as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or by a Depository or any such nominee to a successor Depository or a nominee
of a successor Depository.

COLOR SPOT NURSERIES, INC.

10 1/2% Senior Subordinated Note
due 2007

No. $_______________________
Cusip No. ___________

COLOR SPOT NURSERIES, INC., a Delaware corporation (the
"Company," which term includes any successor corporation), for value received
promises to pay to ____________________ or registered assigns, the principal
sum of ________________ Dollars, on December 15, 2007.

Interest Payment Dates: June 15 and December 15 commencing on
June 15, 1998.

Record Dates: June 1 and December 1.

Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

<PAGE>

IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.

Dated:
COLOR SPOT NURSERIES, INC.

By:________________________________
Name:
Title:

Trustee's Certification of Authentication

This is one of the 10 1/2% Senior Subordinated Notes Due 2007 described in the
within-mentioned Indenture

U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee

By:____________________________________
Authorized Signatory

A-2

<PAGE>

[REVERSE SIDE OF SECURITY]

COLOR SPOT NURSERIES, INC.

10 1/2% SENIOR SUBORDINATED NOTE

DUE 2007

1. Interest.

COLOR SPOT NURSERIES, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on each
June 15 and December 15 of each year (the "Interest Payment Date"),
commencing on June 15, 1998, to the Holders of record on the immediately
preceding June 1 and December 1. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from the date of issuance of the Securities. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.

The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at a rate equal to
the rate of interest otherwise payable on the Securities.

2. Method of Payment.

The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest
by wire transfer of Federal funds, or interest by its check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
Notwithstanding the foregoing, the Company shall pay or cause to be paid all
amounts payable with respect to non-DTC eligible Securities by wire transfer
of Federal funds to the account of the Holders of such Securities.

3. Paying Agent and Registrar.

Initially, U.S. Trust Company of California, N.A. (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders. The Company
or any of its Subsidiaries may, subject to certain exceptions, act as Paying
Agent, Registrar or co-Registrar.

A-3

<PAGE>

4. Indenture.

The Company issued the Securities under an Indenture, dated as of
December 24, 1997 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and said Act for a statement of
them. The Securities are general unsecured obligations of the Company
limited in aggregate principal amount to $100,000,000.

5. Optional Redemption.

The Securities will be redeemable, at the option of the Company, in
whole at any time or in part from time to time, on and after December 15,
2002, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the twelve-month period commencing on
December 15 of the year set forth below, plus, in each case, accrued and
unpaid interest to the date of redemption:

<TABLE>
<CAPTION>
Redemption
Year Price
<S> <C>

2002............................................... 105.25%
2003............................................... 103.50%
2004............................................... 101.75%
2005 and thereafter................................ 100.000%

</TABLE>

In addition, at any time, or from time to time, on or prior to December 15,
2000, the Company may, at its option, use the Net Cash Proceeds of one or
more Public Equity Offerings to redeem up to an aggregate of 35% of the
principal amount of the Securities originally issued, at a price equal to
110.5% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 65% of the
original aggregate principal amount of the Securities remains outstanding and
provided that the redemption notice shall have been sent not later than 120
days after the consummation of such Public Equity Offering.

6. Notice of Redemption.

Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. In order to effect a
redemption with the proceeds of a Public Equity Offering, the Company shall
send the redemption notice not later than 120 days after the consummation of
such Public Equity Offering. Securities in denominations larger than $1,000
may be redeemed in part.

A-4

<PAGE>

Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date and payment of the Securities called for redemption is not
prohibited under Article Four of the Indenture, then, unless the Company
defaults in the payment of such Redemption Price, the Securities called for
redemption will cease to bear interest and the only right of the Holders of
such Securities will be to receive payment of the Redemption Price.

7. Change of Control Offer.

Upon the occurrence of a Change of Control, each Holder shall have
the right to require the repurchase of such Holder's Securities pursuant to a
Change of Control Offer at a purchase price equal to 101% of the principal
amount thereof plus accrued interest, if any, to the date of purchase. The
Company shall not be required to repurchase Securities until it has complied
with its covenants to repay in full all Indebtedness of the Company and its
Subsidiaries under the Credit Agreement or offer to repay in full all such
Indebtedness and repay the Indebtedness of each lender who has accepted its
offer to repay such Indebtedness or to obtain the requisite consent under the
Credit Agreement to permit the repurchase of the Securities pursuant to a
Change of Control Offer.

8. Limitation on Asset Sales.

Under certain circumstances the Company is required to apply the
net proceeds from Asset Sales to the repayment of Senior Debt, to make an
investment in Replacement Assets, an investment in properties and assets that
replace the properties and assets that are the subject of such Asset Sale, an
investment in properties and assets that will be used in the business of the
Company and the Restricted Subsidiaries existing on the Issue Date or in a
business reasonably related thereto or to purchase in a Net Proceeds Offer
(at a price equal to 100% of the aggregate principal amount thereof, plus
accrued interest to the date of purchase) such aggregate principal amount of
Securities which, when added to the accrued interest thereon, shall be equal
to the net proceeds required to be applied thereto.

9. Denominations; Transfer; Exchange.

The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange any Securities or portions thereof selected for
redemption.

10. Persons Deemed Owners.

The registered Holder of a Security shall be treated as the owner
of it for all purposes.

A-5

<PAGE>

11. Unclaimed Money.

If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agents will pay the money back to
the Company at its request. After that, all liability of the Trustee and
such Paying Agents with respect to such money shall cease.

12. Discharge Prior to Redemption or Maturity.

If the Company at any time deposits with the Trustee U.S. Legal
Tender or U.S. Government Obligations sufficient to pay the principal of and
interest on the Securities to redemption or maturity and complies with the
other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the Indenture and the Securities
(including the financial covenants, but excluding its obligation to pay the
principal of and interest on the Securities).

13. Amendment; Supplement; Waiver.

Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with
any provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to cure any ambiguity, defect or inconsistency or
to comply with requirements of the Commission in order to maintain the
qualification of the Indenture under the TIA; so long as such change does
not, in the opinion of the Trustee, adversely affect the rights of any of the
Holders in any material respect, and to comply with Article Six of the
Indenture.

14. Restrictive Covenants.

The Indenture imposes certain limitations on the ability of the
Company and the Restricted Subsidiaries to, among other things, incur
additional Indebtedness or Liens, make payments in respect of its Capital
Stock and merge or consolidate with any other person and sell, lease,
transfer or otherwise dispose of substantially all of its properties or
assets. The limitations are subject to a number of important qualifications
and exceptions. The Company must annually report to the Trustee on compliance
with such limitations.

15. Subordination.

The Securities will be subordinated in right of payment to the
prior payment in full of all Senior Debt (as defined in the Indenture) of the
Company. To the extent and in the manner provided in the Indenture, Senior
Debt must be paid before any payment may be made to any Holder of this
Security. Any Holder by accepting this Security agrees to the subordination
and authorizes the Trustee to give it effect.

A-6

<PAGE>

16. Successors.

When a successor assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor will be released from
those obligations.

17. Defaults and Remedies.

If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately
in the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of Securities notice
of any continuing Default or Event of Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.

18. Trustee Dealings with Company.

The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if
it were not the Trustee.

19. No Recourse Against Others.

No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.

20. Authentication.

This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on this
Security.

21. Abbreviations and Defined Terms.

Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).

A-7

<PAGE>

22. CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP
numbers to be printed on the Securities immediately prior to the
qualification of the Indenture under the TIA as a convenience to the Holders
of the Securities. No representation is made as to the accuracy of such
numbers as printed on the Securities and reliance may be placed only on the
other identification numbers printed hereon.

The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:

Color Spot Nurseries, Inc.
3478 Buskirk Avenue
Pleasant Hill, CA 94523
Attention: Corporate Secretary

A-8
<PAGE>

[FORM OF ASSIGNMENT]

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Print or type assignee's name, address and zip code)

Please insert Social Security or other
identifying number of assignee

_______________________________________

and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him or
her.

Dated:____________________ Signature:_____________________________________

__________________________________________________________________________
(Sign exactly as your name appears on the face of this Security)

Signature Guarantee:__________________________________________

A-9
<PAGE>

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the Company
pursuant to Section 5.15 or Section 5.16 of the Indenture, as the case may be,
check the appropriate box below: Section 5.15 [ ] Section 5.16 [ ]

If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 5.15 or Section 5.16 of the Indenture, as the
case may be, state the amount you want to be purchased:

$
<TABLE>
<S> <C>
Date:____________ Signature:________________________________________________________________
(Sign exactly as your name appears on the face of this Security)
</TABLE>

Signature Guarantee:______________________________________

A-10

<PAGE>

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

WARRANT AGREEMENT

Dated as of December 24, 1997

by and between

COLOR SPOT NURSERIES, INC.

and

AMERICAN STOCK TRANSFER AND TRUST COMPANY,

as Warrant Agent

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

<PAGE>
WARRANT AGREEMENT

TABLE OF CONTENTS

Page

SECTION 1. APPOINTMENT OF WARRANT AGENT. 2

SECTION 2. ISSUANCE OF WARRANTS. 2

SECTION 3. WARRANT CERTIFICATES. 2

SECTION 4. EXECUTION OF WARRANT CERTIFICATES. 3

SECTION 5. LEGENDING OF WARRANTS. 3

SECTION 6. REGISTRATION AND COUNTERSIGNATURE. 4

SECTION 7. REGISTRATION OF TRANSFERS AND EXCHANGES. 4

SECTION 8. TERMS OF WARRANTS; EXERCISE OF WARRANTS. 6

SECTION 9. REPORTS. 9

SECTION 10. PAYMENT OF TAXES. 9

SECTION 11. MUTILATED OR MISSING WARRANT CERTIFICATES. 9

SECTION 12. RESERVATION OF WARRANT SHARES. 9

SECTION 13. OBTAINING STOCK EXCHANGE LISTINGS. 10

SECTION 14. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES ISSUABLE. 10

SECTION 15. NO DILUTION OR IMPAIRMENT. 18

SECTION 16. FRACTIONAL INTERESTS. 18

SECTION 17. NOTICES TO WARRANT HOLDERS. 19

i
<PAGE>

SECTION 18. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. 20

SECTION 19. WARRANT AGENT. 21

SECTION 20. REGISTRATION RIGHTS. 22

SECTION 21. HOLDERS' RIGHTS. 35

SECTION 22. CHANGE OF WARRANT AGENT. 36

SECTION 23. NOTICES TO THE COMPANY AND WARRANT AGENT. 37

SECTION 24. SUPPLEMENTS AND AMENDMENTS. 38

SECTION 25. SUCCESSORS. 38

SECTION 26. TERMINATION. 38

SECTION 27. GOVERNING LAW; JURISDICTION. 39

SECTION 28. BENEFITS OF THIS AGREEMENT. 39

SECTION 29. COUNTERPARTS. 39

SECTION 30. FURTHER ASSURANCES. 39

<PAGE>

WARRANT AGREEMENT, dated as of December 24, 1997, between Color
Spot Nurseries, Inc., a Delaware corporation (the "Company"), and American
Stock Transfer and Trust Company, as warrant agent (the "Warrant Agent").

WHEREAS, the Company has entered into an underwriting agreement
(the "UNDERWRITING AGREEMENT"), dated December 22, 1997 with BT Alex. Brown
Incorporated (the "UNDERWRITER") in which the Company has agreed to sell to
the Underwriter $40,000,000 aggregate principal amount of units (the
"UNITS"), consisting of 40,000 shares of the Company's __% Series A
Cumulative Preferred Stock (the "PREFERRED STOCK") and 825,000 warrants, as
hereinafter described (the "WARRANTS"), to purchase up to an aggregate of
825,000 shares of common stock, par value $0.001 per share (the "COMMON
STOCK"), of the Company (the Common Stock issuable upon exercise of the
Warrants being referred to herein as the "WARRANT SHARES"). The Preferred
Stock will be governed by the Company's Certificate of Designation,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions relating to
the Preferred Stock (the "CERTIFICATE OF DESIGNATION"). The transfer agent
for the Preferred Stock will be American Stock Transfer and Trust Company
(the "TRANSFER AGENT") unless and until a successor is selected by the
Company pursuant to the Certificate of Designation. Each Unit shall consist
of one share of Preferred Stock and 20.625 Warrants. Each Warrant entitles
the holder of the Warrant upon exercise to receive from the Company, as
adjusted as provided herein, one fully paid and nonassessable share of Common
Stock of the Company in exchange for the Exercise Price (as defined in
Exhibit A hereto), as provided herein;

WHEREAS, the Warrants and the Preferred Stock will be sold in units
and shall be immediately separately transferable; and

WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with
the issuance of Warrant Certificates (as hereinafter defined) and other
matters as provided herein.

NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:

SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth hereinafter in this Agreement, and the Warrant
Agent hereby accepts such appointment.

SECTION 2. ISSUANCE OF WARRANTS. Warrants shall be originally
issued in connection with the issuance of the Units and shall be immediately
separately transferable from the Preferred Stock.

SECTION 3. WARRANT CERTIFICATES. The Warrants will be issued in
global form (the "GLOBAL WARRANTS"), substantially in the form of Exhibit A
(including the text accompanying footnotes 1 and 2 thereto but excluding such
footnotes), and in definitive form (the "DEFINITIVE WARRANTS"), substantially
in the form of Exhibit A (not including footnotes 1 and 2 thereto or the text
accompanying such footnotes). Each Definitive Warrant shall represent such
of the

<PAGE>

outstanding Warrants as shall be specified therein and each Global Warrant
shall provide that it shall represent the aggregate amount of outstanding
Warrants from time to time endorsed thereon and that the aggregate amount of
outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Any endorsement of a Global Warrant to reflect
the amount of any increase or decrease in the amount of outstanding Warrants
represented thereby shall be made by the Warrant Agent and the depositary
with respect to the Global Warrants (the "DEPOSITARY") in accordance with
instructions given by the holder thereof. The Depository Trust Company shall
act as the Depositary until a successor shall be appointed by the Company and
the Warrant Agent. Upon request, a holder may receive from the Depositary
and the Warrant Agent separate Definitive Warrants as set forth in Section 7
below. Any certificates (the "WARRANT CERTIFICATES") evidencing the Global
Warrants or the Definitive Warrants to be delivered pursuant to this
Agreement shall be substantially in the form set forth in Exhibit A attached
hereto.

SECTION 4. EXECUTION OF WARRANT CERTIFICATES. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, President or Vice
President and Secretary or an Assistant Secretary. Each such signature upon
the Warrant Certificates may be in the form of a facsimile signature of the
present or any future Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, President or Vice President and Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer, Chief Financial Officer, President or Vice President and
Secretary or Assistant Secretary, notwithstanding the fact that at the time
the Warrant Certificates shall be countersigned and delivered or disposed of
he or she shall have ceased to hold such office.

In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the
execution of this Warrant Agreement any such person was not such officer.

Warrant Certificates shall be dated the date of countersignature by
the Warrant Agent.

SECTION 5. LEGENDING OF WARRANTS.

Upon original issuance, the Warrant Certificates will bear the
following legend (the "WARRANT LEGEND"):

<PAGE>

ACT") AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION
FROM REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT HOLDER SHALL BE
ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME
OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT RELATING
TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT (THE
"WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING
THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC
OR (ii) THE ISSUANCE OF THE WARRANT SHARES IS PERMITTED PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

SECTION 6. REGISTRATION AND COUNTERSIGNATURE. The Warrant Agent,
on behalf of the Company, shall number and register the Warrant Certificates
in a register as they are issued by the Company.

Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board,
Chief Executive Officer, President, Vice President or the Chief Financial
Officer of the Company, initially countersign and deliver Warrants entitling
the holders thereof to purchase not more than the number of Warrant Shares
referred to above in the first recital hereof and shall countersign and
deliver Warrants as otherwise provided in this Agreement.

The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.

SECTION 7. REGISTRATION OF TRANSFERS AND EXCHANGES.

(a) TRANSFER AND EXCHANGE OF DEFINITIVE WARRANTS. When Definitive
Warrants are presented to the Warrant Agent with a request:

(i) to register the transfer of the Definitive Warrants; or

(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,

the Warrant Agent shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; PROVIDED,
HOWEVER, that the Definitive Warrants presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Warrant Agent,
duly executed by the holder thereof or by his attorney, duly authorized in
writing. Upon any such registration of

<PAGE>

transfer, a new Definitive Warrant shall be issued to the transferee(s) and
the surrendered Definitive Warrant shall be cancelled by the Warrant Agent.
Cancelled Definitive Warrants shall thereafter be disposed of in a manner
satisfactory to the Company.

(b) EXCHANGE OR TRANSFER OF A DEFINITIVE WARRANT FOR A BENEFICIAL
INTEREST IN A GLOBAL WARRANT. A Definitive Warrant may be exchanged for a
beneficial interest in a Global Warrant upon satisfaction of the requirements
set forth below. Upon receipt by the Warrant Agent of a Definitive Warrant,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Warrant Agent, together with written instructions
directing the Warrant Agent to make, or to direct the Depositary to make, an
endorsement on the Global Warrant to reflect an increase in the number of
Warrants represented by the Global Warrant, then the Warrant Agent shall
cancel such Definitive Warrant and cause, or direct the Depositary to cause,
in accordance with the standing instructions and procedures existing between
the Depositary and the Warrant Agent, the number of Warrants represented by
the Global Warrant to be increased accordingly. If no Global Warrants are
then outstanding, the Company shall issue and the Warrant Agent shall
countersign a new Global Warrant representing the appropriate number of
Warrants and Warrant Shares.

(c) TRANSFER AND EXCHANGE OF GLOBAL WARRANTS. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement and the
procedures of the Depositary therefor.

(d) EXCHANGE OF A BENEFICIAL INTEREST IN A GLOBAL WARRANT FOR A
DEFINITIVE WARRANT.

(i) Any person having a beneficial interest in a Global Warrant may
upon request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such other form
of instructions as is customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest in a Global
Warrant then the Warrant Agent shall cause, in accordance with the standing
instructions and procedures existing between the Depositary and Warrant
Agent, the number of Warrants represented by the Global Warrant to be reduced
and, following such reduction, the Company shall execute and the Warrant
Agent shall countersign and deliver to the transferee a Definitive Warrant.

(ii) Definitive Warrants issued in exchange for a beneficial interest in
a Global Warrant pursuant to this Section 7(d) shall be registered in such
names as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Warrant Agent. The Warrant
Agent shall deliver such Definitive Warrants to the persons in whose names
such Warrants are so registered.

(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL WARRANTS.
Notwithstanding any other provisions of this Warrant Agreement (other
than the provisions set forth in subsection (f) of this Section 7), a Global
Warrant may not be transferred as a whole except by the Depositary to a
nominee of the

<PAGE>

Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.

(f) COUNTERSIGNING OF DEFINITIVE WARRANTS IN ABSENCE OF
DEPOSITARY. If at any time:

(i) the Depositary for the Global Warrants notifies the Company that
the Depositary is unwilling or unable to continue as Depositary for the
Global Warrants and a successor Depositary for the Global Warrants is not
appointed by the Company within 90 days after delivery of such notice; or

(ii) the Company, in its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants under
this Warrant Agreement,

then the Company shall execute, and the Warrant Agent, upon written
instructions signed by two officers of the Company, shall countersign and
deliver Definitive Warrants, in an aggregate number equal to the number of
Warrants represented by Global Warrants, in exchange for such Global Warrants.

(g) CANCELLATION OF GLOBAL WARRANT. At such time as all
beneficial interests in Global Warrants have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, all Global Warrants
shall be returned to or retained and cancelled by the Warrant Agent.

(h) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF WARRANTS.

(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Warrant Agent is hereby authorized to countersign, in
accordance with the provisions of Section 6 and this Section 7, Definitive
Warrants and Global Warrants as required pursuant to the provisions of this
Section 7.

(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to the same
benefits under this Warrant Agreement, as the Definitive Warrants or Global
Warrants surrendered upon such registration of transfer or exchange.

(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the person in
whose name any Warrant is registered as the absolute owner of such Warrant
and neither the Warrant Agent nor the Company shall be affected by notice to
the contrary.

(iv) No service charge shall be made to a holder for any registration,
transfer or exchange.

SECTION 8. TERMS OF WARRANTS; EXERCISE OF WARRANTS. Subject to
the terms of this Agreement, each Warrant holder shall have the right, which
may be exercised until 5:00 p.m.,

<PAGE>

New York, New York time on December 15, 2008 (the "EXPIRATION DATE"), to
exercise each Warrant and receive from the Company the number of fully paid
and nonassessable Warrant Shares which the holder may at the time be entitled
to receive on exercise of such Warrants and payment of the Exercise Price
then in effect for such Warrant Shares; PROVIDED, HOWEVER, that no Warrant
holder shall be entitled to exercise such holder's Warrants at any time
unless, at the time of exercise, (i) a registration statement under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), relating to the
Warrant Shares has been filed with, and declared effective by, the Securities
and Exchange Commission (the "SEC"), and no stop order suspending the
effectiveness of such registration statement has been issued by the SEC or
(ii) the issuance of the Warrant Shares is permitted pursuant to an exemption
from the registration requirements of the Securities Act. Each Warrant, when
exercised, will entitle the holder thereof to purchase one fully paid and
nonassessable share of Common Stock at the Exercise Price. In the absence of
an exercise the Warrants will be automatically deemed to have been exercised
immediately before 5:00 p.m. on the Expiration Date with payment of the
Exercise Price pursuant to clause (A) in the next succeeding paragraph. No
adjustments as to dividends will be made upon exercise of the Warrants.

The Warrants may be exercised by surrendering to the Warrant Agent
the Warrant Certificates evidencing the Warrants to be exercised with the
accompanying form of election to purchase properly completed and executed,
together with payment of the Exercise Price. Payment of the Exercise Price
may be made (A) by tendering Warrants having a fair market value equal to the
Exercise Price, (B) in the form of cash or by certified or official bank
check payable to the order of the Company or (C) by any combination of
Warrants and cash. For purposes of clause (A) above, the fair market value
of the Warrants shall be determined as follows: (A) if the Common Stock is
publicly traded and listed on the Nasdaq National Market or a national
securities exchange, the fair market value shall be equal to the number of
shares represented by such Warrant multiplied by the greater of (1) the
difference between (a) the average closing price as quoted on the Nasdaq
National Market of the Common Stock for each of the ten trading days
immediately prior to the exercise date (or, if the Common Stock is listed on
a national securities exchange, the average closing price as reported on such
national securities exchange during such ten trading day period) and (b) the
Exercise Price, and (2) zero; or (B) if the Common Stock is not publicly
traded, or otherwise is not listed on a national securities exchange, the
fair market value of the Warrants shall be equal to the value per share as
determined in good faith by the Board of Directors of the Company (the "BOARD
OF DIRECTORS").

In the event that Warrants are surrendered by a Warrant holder in
payment of the Exercise Price, the Warrant Agent shall notify the Company of
such, which notice shall also include the amount of the Exercise Price and
the amount of cash, if any, received by the Warrant Agent as partial payment
of the Exercise Price. Within a reasonable time of receiving such notice,
the Company shall advise the Warrant Agent whether the Warrant Agent has
received payment in full of the Exercise Price.

Subject to the provisions of Section 10 hereof, upon such surrender
of Warrants and payment of the Exercise Price, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written
order of the holder and in such name or names as the Warrant holder may
designate, a certificate or certificates for the number of full Warrant
Shares

<PAGE>

issuable upon the exercise of such Warrants together with cash, if any, as
provided in Section 16 hereof; PROVIDED, HOWEVER, that if any consolidation,
merger or lease or sale of assets is proposed to be effected by the Company
as described in subsection (j) of Section 14 hereof, or a tender offer or an
exchange offer for shares of Common Stock of the Company shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid,
the Successor (as hereinafter defined), the Company or the Warrant Agent, as
applicable, shall, as soon as possible, but in any event not later than two
business days thereafter, issue and cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence together with cash, if any, as provided in Section
16 hereof. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the Exercise Price. No fractional
shares shall be issued upon exercise of any Warrants in accordance with
Section 16 hereof. The Company will pay to the holder of the Warrant at the
time of exercise an amount in cash equal to the current market value of any
such fractional share of Common Stock less a corresponding fraction of the
Exercise Price.

The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part (in whole shares) and,
in the event that a certificate evidencing Warrants is exercised in respect
of fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the Expiration Date, a new certificate evidencing the remaining
Warrant or Warrants will be issued, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
Certificate or Certificates pursuant to the provisions of this Section and of
Section 4 of this Agreement, and the Company, whenever required by the
Warrant Agent, will supply the Warrant Agent with Warrant Certificates duly
executed on behalf of the Company for such purpose.

All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall be held by the Warrant Agent until termination of its duties hereunder,
at which time it shall deliver such cancelled Warrants to any successor
Warrant Agent, if applicable, otherwise to the Company. Upon receipt by the
Company, such cancelled Warrant Certificates shall then be disposed of by the
Company in accordance with applicable law. The Warrant Agent shall account
promptly to the Company with respect to Warrants exercised and concurrently
pay to the Company all monies received by the Warrant Agent for the purchase
of the Warrant Shares through the exercise of such Warrants.

All certificates representing Warrant Shares issued in a
transaction exempt from registration under the Securities Act pursuant to
Section 4(2) thereof shall bear the following legend (provided that if no
legend is required none shall be placed on the Warrant Shares):

THIS SECURITY MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM REGISTRATION
REQUIREMENTS.

<PAGE>

The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement
as the Warrant Agent may request.

SECTION 9. REPORTS. Whether or not required by the rules and
regulations of the SEC, so long as any Warrants are outstanding, the Company
shall furnish to the Warrant Agent and mail to the holders of Warrants within
15 days after it files them with the Commission copies of the annual and
quarterly reports and the information, documents, and other reports that the
Company is required to file with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act ("SEC Reports"). In the event the Company is not
required or shall cease to be required to file SEC Reports, pursuant to the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), the Company will nevertheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing). In the
event the Company is not required or shall cease to be required to file SEC
Reports and the Commission will not accept the filing of SEC Reports, so long
as any Warrants are outstanding, the Company will furnish copies of such SEC
Reports to the holders of Warrants at the time the Company is required to
make such information available to investors who request it in writing.

SECTION 10. PAYMENT OF TAXES. No service charge shall be made to
any holder of a Warrant for any exercise, exchange or registration of
transfer of Warrant Certificates, and the Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant,
and the Company shall not be required to issue or deliver such Warrant
Certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.

SECTION 11. MUTILATED OR MISSING WARRANT CERTIFICATES. If any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and the Warrant Agent may countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and in substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of
evidence satisfactory to the Company and the Warrant Agent of such loss,
theft or destruction of such Warrant Certificate and indemnity and security
therefor, if requested, also satisfactory to them. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or the
Warrant Agent may prescribe.

SECTION 12. RESERVATION OF WARRANT SHARES. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants,

9
<PAGE>

the maximum number of shares of Common Stock which may then be deliverable
upon the exercise of all outstanding Warrants.

The Company or the transfer agent for the Common Stock (the "COMMON
STOCK TRANSFER AGENT") and every subsequent transfer agent for any shares of
the Company's capital stock issuable upon the exercise of any of the rights
of purchase represented by the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Common Stock Transfer Agent and with every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from
such Common Stock Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of
this Agreement. The Company will supply such Common Stock Transfer Agent
with duly executed certificates for such purposes and will provide or
otherwise make available any cash which may be payable as provided in Section
16 hereof. The Company will furnish such Common Stock Transfer Agent a copy
of all notices of adjustments and certificates related thereto, transmitted
to each holder pursuant to Section 17 hereof.

The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will be, upon payment of the Exercise Price and
issuance thereof, fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to
the issue thereof.

SECTION 13. OBTAINING STOCK EXCHANGE LISTINGS. The Company shall
also from time to time take all action necessary so that the Warrant Shares,
promptly upon their issuance upon the exercise of Warrants, will be listed on
the Nasdaq National Market or such other principal securities exchanges,
interdealer quotation systems and markets within the United States of
America, if any, on which other shares of Common Stock are then listed or
quoted.

SECTION 14. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES ISSUABLE. The Exercise Price and the number of Warrant Shares
issuable upon the exercise of each Warrant are subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 14.
For purposes of this Section 14, "COMMON STOCK" means the Common Stock and
any other stock of the Company, however designated, that has the right
(subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company
without limit as to per share amount.

(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.

If the Company:

(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;

10
<PAGE>

(ii) subdivides its outstanding shares of Common Stock into a greater
number of shares;

(iii) combines its outstanding shares of Common Stock into a smaller
number of shares;

(iv) makes a distribution on its Common Stock in shares of its capital
stock other than Common Stock; or

(v) issues by reclassification of its Common Stock any shares of its
capital stock,

then the Exercise Price and the number and kind of shares of capital stock of
the Company issuable upon the exercise of a Warrant (as in effect immediately
prior to such action) shall be proportionately adjusted so that the holder of
any Warrant thereafter exercised may receive the aggregate number and kind of
shares of capital stock of the Company which he would have owned immediately
following such action if such Warrant had been exercised immediately prior to
such action.

The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.

If after an adjustment a holder of a Warrant upon exercise may
receive shares of two or more classes or series of capital stock of the
Company, the Company shall determine the allocation of the adjusted Exercise
Price between the classes or series of capital stock. After such allocation,
the exercise privilege and the Exercise Price of each class or series of
capital stock shall thereafter be subject to adjustment on terms comparable
to those applicable to Common Stock in this Section 14.

Such adjustment shall be made successively whenever any event
listed above shall occur.

(b) ADJUSTMENT FOR RIGHTS ISSUE.

If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 60
days after the record date mentioned below to purchase shares of Common Stock
or securities convertible into, or exchangeable or exercisable for, Common
Stock at a price per share (or with an initial conversion, exchange or
exercise price) less than the current market price per share on that record
date, the Exercise Price shall be adjusted in accordance with the following
formula:

O + N x P
-----
E' = E x M
-----
O + N
where:

E' = the adjusted Exercise Price.

11
<PAGE>
E = the current Exercise Price.

O = the number of shares of Common Stock outstanding on the record
date.

N = the number of additional shares of Common Stock offered.

P = the offering price per share of the additional shares.

M = the current market price per share of Common Stock on the
record date.

The adjustment pursuant to this subsection (b) shall be made
successively whenever any such rights, options or warrants are issued and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights, options or
warrants. If at the end of the period during which such rights, options or
warrants are exercisable, not all rights, options or warrants shall have been
exercised, the Exercise Price shall be immediately readjusted to what it
would have been if "N" in the above formula had been the number of shares
actually issued.

If the Company distributes to all holders of its Common Stock any
of its assets (including cash), debt securities, preferred stock or any
rights or warrants to purchase debt securities, assets or other securities of
the Company, the Exercise Price shall be adjusted in accordance with the
following formula:

E' = E x M - F
-----
M
where:

E' = the adjusted Exercise Price.

E = the current Exercise Price.

M = the current market price per share of Common Stock on the record date
mentioned below.

F = the fair market value on the record date of the assets, securities,
rights or warrants applicable to one share of Common Stock. The
Board of Directors shall determine the fair market value.

The adjustment pursuant to this subsection (c) shall be made
successively whenever any such distribution is made and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive the distribution.

Notwithstanding the foregoing, if "F" in the above formula equals
or exceeds "M" in the above formula, then "M" in the above formula shall be
equal to the fair market value per

12
<PAGE>

share of the Common Stock on the record date as determined in good faith by
the Board of Directors and described in a Board resolution which shall be
filed with the Warrant Agent.

This subsection (c) does not apply to rights, options or warrants
referred to in subsection (b) of this Section 14.

(d) ADJUSTMENT FOR COMMON STOCK ISSUE.

If the Company issues after the date hereof shares of Common Stock
or securities convertible into or exercisable for Common Stock ("Convertible
Securities") to KSCN Acquisition Company and its Affiliates, Kolhberg &
Company, LLC and its Affiliates, Michael F. Vukelich and his Affiliates, or
any other Affiliates of the Company (other than options outstanding on the
date hereof), for a consideration per share less than the current market
price per share of Common Stock on the date the Company fixes the offering,
conversion or exercise price of such additional shares, the Exercise Price
shall be adjusted in accordance with the following formula:

P
-
E' = x O + M
-----------
A

where:

E' = the adjusted Exercise Price.

E = the then current Exercise Price.

O = the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional securities.

P = the aggregate consideration received for the issuance of such
additional securities.

M = the current market price per share of Common Stock on the date of
issuance of such additional securities.

A = the number of shares of Common Stock outstanding immediately after
the issuance of such additional securities, assuming conversion or
exercise thereof if applicable.

Affiliate shall mean, with respect to any specified person, any other person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified person.

The Exercise Price shall be adjusted as provided in this subsection
(d) on the basis that (1) the maximum number of additional shares of Common
Stock necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date of such
issuance or sale and (2) the aggregate consideration received for such
additional shares of Common Stock shall be deemed equal to the minimum
consideration received

13
<PAGE>

and receivable by the Company in connection with the issuance and exercise of
such Convertible Securities. For the purposes of this subsection, the
adjustment shall be made successively whenever any such issuance is made, and
shall become effective immediately after such issuance; PROVIDED, HOWEVER,
that no further adjustment of the Exercise Price shall be made upon the
actual issuance of Common Stock upon conversion or exchange of Convertible
Securities. In the event any of the Convertible Securities are not converted
prior to redemption or maturity, and an adjustment was made with respect to
the conversion or exchange of such Convertible Securities, then a subsequent
readjustment shall be effected to give effect to only those shares of Common
Stock actually issued upon conversion or exercise.

For purposes of this subsection (d), the consideration received or
receivable by the Company for the issuance or sale of additional shares of
Common Stock, stock purchase rights or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall be valued as follows:

(i) In the case of securities or other property, at the
lesser of (1) the current market price of the security for which such
consideration was received, and (2) the fair market value of such
consideration (in both cases as of the date immediately preceding the
issuance or sale in question).

(ii) In the event additional shares of Common Stock are
issued or sold together with other securities or other assets of the Company
for a consideration which covers both, the consideration received (computed
as provided in (i) above) shall be allocable to such additional shares of
Common Stock as determined in good faith by the Board of Directors.

(iii) In case any stock purchase rights or Convertible
Securities shall be issued or sold together with other securities or other
assets of the Company, together comprising one integral transaction in which
no specific consideration is allocated to the stock purchase rights or
Convertible Securities, an allocation between the components will be
determined in good faith by the Board of Directors.

(iv) The consideration for which shares of Common Stock
shall be deemed to be issued upon the issuance of any stock purchase rights
or Convertible Securities shall be determined by dividing (1) the total
consideration, if any, received or receivable by the Company as consideration
for the granting of such stock purchase rights or the issuance of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of such stock purchase
rights, or, in the case of such Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the conversion or
exchange thereof, in each case after deducting any accrued interest,
dividends, or any expenses paid or incurred or any underwriting commissions
or concessions paid or allowed by the Company, by (2) the maximum number of
shares of Common Stock issuable upon the exercise of such stock purchase
rights or upon the conversion or exchange of all such Convertible Securities.

14
<PAGE>

(e) CURRENT MARKET PRICE.

In subsections (b), (c) and (d) of this Section 14 and in Section
16 the current market price per share of Common Stock on any date is the
average of the Quoted Prices of the Common Stock for 10 trading days
commencing immediately prior to the date in question. The "QUOTED PRICE" of
the Common Stock is the closing price of the Common Stock as reported by the
Nasdaq National Market or if the Common Stock is listed on a securities
exchange, the last reported sales price of the Common Stock on such exchange
which shall be for consolidated trading if applicable to such exchange, or if
not so reported or listed, the last reported bid price of the Common Stock.
In the absence of one or more such quotations, the Board of Directors shall
determine the current market price on such basis as it in good faith
considers appropriate.

(f) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.

No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the
Exercise Price. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment.

All calculations under this Section 14 shall be made to the nearest
1/1000th of a cent or to the nearest 1/1000th of a share, as the case may be.

(g) WHEN NO ADJUSTMENT REQUIRED.

No adjustment need be made for a transaction referred to in
subsections (a), (b) or (c) of this Section 14 if Warrant holders are to
participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and
notice on which holders of Common Stock participate in the transaction.

No adjustment need be made for rights to purchase Common Stock
pursuant to any of the Company's plan for reinvestment of dividends or
interest.

No adjustment need be made for a change in the par value, or from par
value to no par value, or from no par value to par value, of the Common Stock.

To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.

Notwithstanding any other provision of this Section 14, if an
adjustment to the Exercise Price would reduce the Exercise Price below the
then par value per share of the Common Stock, then the Company shall prior to
such adjustment to the Exercise Price reduce the par value per share of the
Common Stock so that the Exercise after such adjustment would exceed the par
value per share of Common Stock. The Company hereby covenants not to take
any action to increase the par value per share of the Common Stock.

15
<PAGE>

(h) NOTICE OF ADJUSTMENT.

Whenever the Exercise Price or the number of Warrants issuable upon
exercise of each Warrant is adjusted, the Company shall provide the notices
required by Section 17 hereof.

(i) NOTICE OF CERTAIN TRANSACTIONS.

If:

(i) The Company takes any action that would require an adjustment in the
Exercise Price pursuant to subsections (a), (b), (c) or (d) of this
Section 14 and if the Company does not arrange for and provide
notice to Warrant holders to participate pursuant to subsection (g)
of this Section 14;

(ii) The Company takes any action that would require a supplemental Warrant
Agreement pursuant to subsection (j) of this Section 14; or

(iii) there is a liquidation or dissolution of the Company,

the Company shall mail to Warrant holders and the Warrant Agent a notice
stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution. The
Company shall mail the notice at least 15 days before such date. Failure to
mail the notice or any defect in it shall not affect the validity of the
transaction.

(j) REORGANIZATION OF THE COMPANY.

(1) If the Company consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any person,
upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other
assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised
the Warrant immediately before the record date (or, if none, the
effective date) of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than the Company, or the person to
which such sale or conveyance shall have been made (any such person, the
"Successor"), shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this
Section 14. The Successor shall mail to Warrant holders a notice
describing the supplemental Warrant Agreement. If the issuer of
securities deliverable upon exercise of Warrants under the supplemental
Warrant Agreement is an affiliate of the formed, surviving, transferee
or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.

(2) If this subsection (j) applies, subsections (a), (b), (c)
and (d) of this Section 14 do not apply.

16
<PAGE>

(k) WARRANT AGENT'S DISCLAIMER.

The Warrant Agent has no duty to determine when an adjustment under
this Section 14 should be made, how it should be made or what it should be.
The Warrant Agent has no duty to determine whether any provisions of a
supplemental Warrant Agreement under subsection (j) of this Section 14 are
correct. The Warrant Agent makes no representation as to the validity or
value of any securities or assets issued upon exercise of Warrants. The
Warrant Agent shall not be responsible for the Company's failure to comply
with this Section 14.

(l) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.

In any case in which this Section 14 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record
date the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise over and above the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise on the
basis of the Exercise Price and (ii) paying to such holder any amount in cash
in lieu of a fractional share pursuant to Section 16 hereof; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional Warrant Shares, other capital stock and cash upon the occurrence
of the event requiring such adjustment.

(m) ADJUSTMENT IN NUMBER OF SHARES.

Upon each adjustment of the Exercise Price pursuant to this Section
14, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated
to the nearest thousandth) obtained from the following formula:

N' = N x E
--
E'
where:

N' = the adjusted number of Warrant Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.

N = the number of Warrant Shares previously issuable upon exercise of a
Warrant by payment of the Exercise Price prior to adjustment.

E' = the adjusted Exercise Price.

E = the Exercise Price prior to adjustment.

(n) FORM OF WARRANTS.

Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued

17
<PAGE>

may continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.

SECTION 15. NO DILUTION OR IMPAIRMENT. (a) If any event shall
occur as to which the provisions of Section 14 are not strictly applicable
but the failure to make any adjustment would adversely affect the purchase
rights represented by the Warrants in accordance with the essential intent
and principles of such Section 14, then, in each such case, the Company shall
appoint an investment banking firm of recognized national standing, or any
other financial expert that does not (or whose directors, officers,
employees, affiliates or stockholders do not) have a direct or material
indirect financial interest in the Company or any of its subsidiaries, who
has not been, and, at the time it is called upon to give independent
financial advice to the Company, is not (and none of its directors, officers,
employees, affiliates or stockholders are) a promoter, director or officer of
the Company or any of its subsidiaries, which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Section 14, necessary to preserve, without
dilution, the purchase rights, represented by the Warrants. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to the holders of
the Warrants and shall make the adjustments described therein.

(b) The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer
of assets, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of the
Warrants against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (1) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock on the exercise of
the Warrants from time to time outstanding and (2) will not take any action
which results in any adjustment of the Exercise Price if the total number of
Warrant Shares issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock then
authorized by the Company's certificate of incorporation and available for
the purposes of issue upon such exercise. A consolidation, merger,
reorganization or transfer of assets involving the Company covered by Section
14(j) shall not be prohibited by or require any adjustment under this Section
15.

SECTION 16. FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same
time by the same holder, the number of full Warrant Shares which shall be
issuable upon the exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the Warrants so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 16, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall notify the Warrant Agent in
writing of the amount to be paid in lieu of the fraction of a Warrant Share
and concurrently pay or provide to the Warrant Agent for payment to the
Warrant holder an amount in cash equal to the product of (i) such fraction of
a Warrant Share and (ii) the difference of the current market price of a
share of Common Stock over the Exercise Price.

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<PAGE>

SECTION 17. NOTICES TO WARRANT HOLDERS. Upon any adjustment of
the Exercise Price or the number of Warrant Shares issuable upon the exercise
of each Warrant pursuant to Section 14 hereof, the Company shall within 15
days thereafter (i) cause to be filed with the Warrant Agent a certificate of
a firm of independent public accountants of recognized standing selected by
the Board of Directors (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters
set forth therein, and (ii) cause to be given to each of the registered
holders of the Warrant Certificates at such registered holder's address
appearing on the Warrant register written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 17.

In case:

(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or

(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or
distributions referred to in subsection (a) of Section 14 hereof); or

(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or a tender offer or
exchange offer for shares of Common Stock; or

(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or

(e) the Company or any subsidiary of the Company shall authorize a
tender offer for all or any portion of the Common Stock;

(f) a Change of Control (as defined in the Certificate of
Designation) occurs; or

(g) the Company proposes to take any action (other than actions of
the character described in Section 14(a)) which would require an adjustment
of the Exercise Price pursuant to Section 14;

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<PAGE>

then the Company shall cause to be filed with the Warrant Agent and shall
cause to be given to each of the registered holders of the Warrant
Certificates at his address appearing on the Warrant register, at least 15
days prior to the applicable record date hereinafter specified, or promptly
in the case of events for which there is no record date, by first-class mail,
postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange offer
for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall
be entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 17 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, lease, dissolution, liquidation
or winding up, or the vote upon any action.

Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice as shareholders in respect
of the meetings of shareholders or the election of Directors of the Company
or any other matter, or any rights whatsoever as shareholders of the Company.

SECTION 18. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT
AGENT. Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to
the Warrant Agent hereunder without the execution or filing of any paper or
any further act on the part of any of the parties hereto, PROVIDED that such
corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 21 hereof. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall
have been countersigned but not delivered, any such successor to the Warrant
Agent may adopt the countersignature of the original Warrant Agent; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such
Warrant Certificates either in the name of the predecessor Warrant Agent or
in the name of the successor to the Warrant Agent; and in all such cases such
Warrant Certificates shall have the full force and effect provided in the
Warrant Certificates and in this Agreement.

In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been
changed may adopt the countersignature under its prior name, and in case at
that time any of the Warrant Certificates shall not have been countersigned,
the Warrant Agent may countersign such Warrant Certificates either in its
prior name or in its changed name, and in all such cases such Warrant
Certificates shall have the full force and effect provided in the Warrant
Certificates and in this Agreement.

20
<PAGE>

SECTION 19. WARRANT AGENT. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:

(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company. The Warrant Agent
assumes no responsibility for the correctness of any of the same except such
as describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates except as herein otherwise provided.

(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.

(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion or the
advice of such counsel.

(d) The Warrant Agent shall incur no liability or responsibility
to the Company or to any holder of any Warrant Certificate for any action
taken in reliance on any Warrant Certificate, certificate of shares of Common
Stock, notice, resolution, waiver, consent, order, certificate, or other
paper, document or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties. The Warrant Agent
shall not be bound by any notice or demand, or any waiver, modification,
termination or revision of this Agreement or any of the terms hereof, unless
evidenced by a writing between the Company and the Warrant Agent.

(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution
of this Agreement and the performance of its responsibilities hereunder, to
reimburse the Warrant Agent for all expenses, taxes (including withholding
taxes) and governmental charges and other charges of any kind and nature
incurred by the Warrant Agent in the execution, delivery and performance of
its responsibilities under this Agreement and to indemnify the Warrant Agent
and save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent in
the execution, delivery and performance of its responsibilities under this
Agreement except as a result of its gross negligence or bad faith.

(f) The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more registered holders of
Warrant Certificates shall furnish the Warrant Agent with reasonable security
and indemnity for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such action
as it may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the

21
<PAGE>

possession of any of the Warrant Certificates or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.

(g) Except as prohibited by law, the Warrant Agent, and any
stockholder, director, officer or employee of the Warrant Agent, may buy,
sell or deal in any of the Warrants or other securities of the Company or
become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.

(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own gross
negligence or bad faith.

(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to
be made any adjustment of the Exercise Price or number of the Warrant Shares
or other securities or property deliverable as provided in this Agreement, or
to determine whether any facts exist which may require any of such
adjustments, or with respect to the nature or extent of any such adjustments,
when made, or with respect to the method employed in making the same. The
Warrant Agent shall not be accountable with respect to the validity or value
or the kind or amount of any Warrant Shares or of any securities or property
which may at any time be issued or delivered upon the exercise of any Warrant
or with respect to whether any such Warrant Shares or other securities will
when issued be validly issued and fully paid and nonassessable, and makes no
representation with respect thereto.

(j) In the absence of bad faith on its part, the Warrant Agent may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Warrant Agent and conforming to the requirements of this Warrant
Agreement. However, the Warrant Agent shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Agreement.

(k) The Warrant Agent may rely and shall be fully protected in
relying upon any document believed by it to be genuine and to have been
signed or presented by the proper person.

SECTION 20 REGISTRATION RIGHTS.

(a) PIGGY-BACK REGISTRATION. If at any time the Company shall
determine to file a registration statement under the Securities Act relating to
a proposed sale to the public of

22
<PAGE>

Common Stock either for its own account or the account of a holder or holders
(other than on Form S-8 or S-4 or any successor form), the Company shall:

(1) promptly give to each holder of a Warrant or Warrant
Share written notice thereof (which notice will include a list of the
jurisdictions in which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state securities laws,
the proposed offering price, and the plan of distribution);

(2) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Warrant Shares specified in a
written request or requests, made within 20 days after such written notice
from the Company, by any holder or holders of Warrant Shares;

(3) use its best efforts to cause the managing underwriter or
underwriters of such proposed underwritten offering to permit the Warrant
Shares requested to be included in the registration statement for such
offering to be included on the same terms and conditions as the Common
Stock included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering deliver a written opinion to
the holders of such Warrant Shares that marketing considerations require a
limitation on the number of shares of Common Stock offered pursuant to any
registration statement subject to this Section 20(a), then subject to the
advice of said managing underwriter or underwriters as to the size and
composition of the offering, the Company will include Common Stock in such
registration in accordance with the following priorities: (i) first,
Common Stock to be sold for the account of the Company; (ii) second, Common
Stock to be sold for the account of any holder who has exercised demand
registration rights, and (iii) third, pro rata with respect to all holders
of Common Stock of the Company who have requested to be included in the
registration pursuant to this Section or pursuant to other, analogous
piggy-back registration provisions of other agreements, in proportion to
the number of shares each such holder requested to be included in the
offering pursuant to their piggy-back rights. The Company will bear all
Registration Expenses (as hereinafter defined) in connection with a
piggy-back registration.

Holders of Warrant Shares may exercise piggy-back registration rights
under this Section at any time or from time to time.

(b) DEMAND REGISTRATION RIGHTS.

(i) After the initial underwritten public offering of the Common Stock,
when the Company receives from the holder(s) of 50% or more of the
Warrant Shares outstanding which have registration rights under this
Agreement, a written request that the Company effect a registration
or qualification of such Warrant Shares (a "Demand Registration"),
the Company will:

(1) promptly give written notice of the proposed registration
or qualification to all other holders of

23
<PAGE>

Warrants and Warrant Shares, which holders of Warrant Shares may request in
writing within 10 days after receipt of such notice that the Warrant Shares
held by them be included in such Demand Registration, and the number of
Warrant Shares requested to be so included shall be deemed a part of such
Demand Registration; and

(2) as soon as practicable, use its best efforts to effect
such registration or qualification (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under the applicable blue sky or other state securities laws
and appropriate compliance with exemptive regulations issued under the
Securities Act and any other governmental requirements or regulations) as
may be so requested and as is reasonably necessary to permit or facilitate
the sale and distribution of all or such portion of such holder's or
holders' Warrant Shares as is specified in such request; PROVIDED that the
Company will not be obligated to effect more than two Demand Registrations
pursuant to a request under this Section.

Subject to the foregoing provisions, the Company will file a
registration statement covering the Warrant Shares so requested to be registered
as soon as practicable (which shall be on Form S-3, if available, unless the
Company otherwise elects), but in any event within three months, after receipt
of the request or requests of the initiating holders.

Notwithstanding the foregoing, the Company will not be obligated to
effect any Demand Registration within three months (in addition to the three
months period in the preceding paragraph) after the effective date of a
registration in which the holders of Warrant Shares were given piggyback rights
pursuant to Section 20(a) and in which there was no reduction in the number of
Warrant Shares requested to be included. The Company may postpone for up to
three months (in addition to the three months period in the preceding paragraph)
the filing or the effectiveness of a registration statement for a Demand
Registration if the Board of Directors reasonably determines in its good faith
judgment that such Demand Registration would have an adverse effect on any
proposal or plan by the Company or any of its subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business), stock
acquisition or any merger, consolidation, tender offer or similar transaction;
provided that only one such Demand Registration may be so postponed.

(ii) If the holder or holders of a majority in number of the Warrant Shares
to be registered in a Demand Registration under this Section 20(b) so
elect, the offering of such Warrant Shares pursuant to such Demand
Registration shall be in the form of an underwritten offering. In
such event, if the managing underwriter or underwriters of such
offering advise the Company and the holders in writing that in their
opinion the number of Warrant Shares requested to be included in such
offering is sufficiently large so as to adversely affect the success
of the offering, then the Company will include in such registration
the maximum amount of Warrant Shares which in the opinion of such
managing underwriter or underwriters can be sold without any such
adverse effect. Subject to the advice of the managing underwriter or
underwriters concerning the size and composition of the offering, the
Company will include in such registration, first, Warrant Shares,
allocated PRO RATA among such holders (based upon the number of
Warrant Shares requested to

24
<PAGE>

be included in such Demand Registration). If all Warrant Shares
requested to be sold are included therein, the Company may include
other shares of Common Stock in such offering as determined by the
Company.

(iii)If any Demand Registration is to be in the form of an underwritten
offering, the investment banker or bankers and manager or managers
that will administer the offering will be selected by the Company;
PROVIDED that such investment bankers and managers must be reasonably
satisfactory to the holders of a majority in number of the Warrant
Shares to be included in such offering.

(iv) A registration of Warrant Shares will not count as a Demand
Registration (A) until it has become effective and has remained
effective for 180 days or until all Warrant Shares included therein
have been sold, if earlier, and (B) if any of the Warrant Shares
requested to be included therein may not be included in such
registration under the circumstances contemplated by Section
20(b)(ii). The Company will pay all Registration Expenses in
connection with any registration initiated as a Demand Registration,
whether or not it becomes effective.

(c) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF WARRANT SHARES. Each
holder of Warrants or Warrant Shares whether or not its Warrant Shares are
covered by a registration statement filed pursuant to Section 20(a) or (b)
agrees not to effect any public sale or distribution of securities of the
Company of the same class as the securities included in such registration
statement, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration), during the 90-day period
following, the effective date of the registration statement for each
underwritten offering made pursuant to such registration statement unless the
Company and the managing underwriter otherwise agree in writing; provided that
the foregoing provisions shall not apply to any transferee or successor of the
holders of Warrants or Warrant Shares that (i) holds such securities without the
registration rights of this Section 20 and such transferee or successor did not
acquire such securities at any time from the date of filing of a registration
statement by the Company, so long as the Company is actively seeking to have
such registration statement declared effective, until 90 days after any such
registration statement is effective, (ii) acquires such securities in a
transaction pursuant to Rule 144 under the Securities Act, or (iii) acquires
such securities in a transaction pursuant to a registration statement of the
Company under Section 20(a) or (b) of this Agreement. The foregoing provisions
shall not apply, however, to any holder of Warrant Shares if such holder is
prevented by an applicable statute or regulation from entering into any such
agreement.

(d) REGISTRATION PROCEDURES.

In connection with the Company's registration obligations pursuant to
Section 20 hereof, the Company will use its best efforts to effect such
registration to permit the sale of such Common Stock in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:

(i) before filing a registration statement or prospectus or any amendments
or supplements thereto, furnish to the holders of the Common Stock
covered by such

25
<PAGE>

registration statement and the underwriters, if any, copies of all
such documents proposed to be filed, which documents will be made
available for prior review by such holders and underwriters, and
the Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto to which the
holders of a majority in number of the Common Stock covered by such
registration statement or the underwriters, if any, shall
reasonably object; provided that in the event the Company seeks
confidential treatment with the SEC for any document to be filed,
the Company need not provide such document to any such holder
unless such holder enters into an appropriate confidentiality
agreement;

(ii) prepare and file with the SEC such amendments and post-effective
amendments to any registration statement, and such supplements to
the prospectus, as may be reasonably requested by any holder of
Common Stock or any underwriter of Common Stock or as may be
required by the rules, regulations or instructions applicable to
the registration form utilized by the Company or by the Securities
Act or otherwise necessary to keep such registration statement
effective for the applicable period and cause the prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities
Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance
with the intended methods of disposition by the sellers thereof set
forth in such registration statement or supplement to the
prospectus;

(iii)notify the selling holders of Common Stock and the managing
underwriters, if any, promptly, and (if requested by any such
person) confirm such advice in writing,

(1) when the prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the
registration statement or any post-effective amendment, when the same has
become effective,

(2) of any request by the SEC for amendments or supplements
to the registration statement or the prospectus or for additional
information,

(3) of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement or the initiation of any
proceedings for that purpose,

(4) if at any time the representations and warranties of the
Company contemplated by paragraph (xiv) below cease to be true and correct,

(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Common Stock for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and

(6) of the existence of any fact which results in the
registration statement, the prospectus or any document incorporated therein
by reference containing

26
<PAGE>

an untrue statement of material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading;

(iv) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the
earliest possible moment;

(v) if reasonably requested by the managing underwriter or underwriters
or a holder of Common Stock being sold in connection with an
underwritten offering, promptly incorporate in a prospectus
supplement or post-effective amendment such necessary information
as the managing underwriters or the holders of a majority in number
of the Common Stock being sold reasonably request to have included
therein relating to the plan of distribution with respect to such
Common Stock, including, without limitation, information with
respect to the amount of Common Stock being sold to such
underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Common
Stock to be sold in such offering; and make all required filings of
such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment;

(vi) at the request of any selling holder of Common Stock, furnish to
such selling holder of Common Stock and each managing underwriter,
without charge, at least one copy of the registration statement and
any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by
reference);

(vii) deliver to each selling holder of Common Stock and the
underwriters, if any, without charge, as many copies of the
prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such persons may reasonably
request; the Company consents to the use of the prospectus or any
amendment or supplement thereto by each of the selling holders of
Common Stock and the underwriters, if any, in connection with the
offering and sale of the Common Stock covered by the prospectus or
any amendment or supplement thereto;

(viii)prior to any public offering of Common Stock, register or qualify
or cooperate with the selling holders of Common Stock, the
underwriters, if any, and their respective counsel in connection
with the registration or qualification of such Common Stock for
offer and sale under the securities or blue sky laws of such
jurisdictions as any seller or underwriter reasonably requests in
writing and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such
jurisdictions of the Common Stock covered by the registration
statement; PROVIDED that the Company will not be required to
qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it
to general service of process in any such jurisdiction where it is
not then so subject;

<PAGE>

(ix) cooperate with the selling holders of Common Stock and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Common Stock to be sold
and not bearing any restrictive legends; and enable such Common
Stock to be in such denominations and registered in such names as
the managing underwriters may request at least two business days
prior to any sale of Common Stock to the underwriters;

(x) use its best efforts to cause the Common Stock covered by the
applicable registration statement to be registered with or approved
by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof and the
underwriters, if any, to consummate the disposition of such Common
Stock;

(xi) if any fact contemplated by paragraph (iii)(6) above shall exist,
prepare a supplement or post-effective amendment to the registration
statement or the related prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Common Stock, the
prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;

(xii) cause all Common Stock covered by the registration statement to be
listed on each securities exchange on which similar securities
issued by the Company are then listed, if requested by the holders
of a majority in number of such Common Stock or by the managing
underwriters, if any;

(xiii) not later than the effective date of the applicable registration
statement, provide a CUSIP number for all Common Stock and provide
the applicable trustee(s) or transfer agent(s) with printed
certificates for the Common Stock which are in a form eligible for
deposit with the Depositary;

(xiv) enter into agreements (including underwriting agreements) and take
all other appropriate actions in order to expedite or facilitate the
disposition of such Common Stock and in such connection, whether or
not an underwriting agreement is entered into and whether or not
the registration is an underwritten registration:

(1) make such representations and warranties to the holders
of such Common Stock and the underwriters, if any, in form, scope and
substance as are customarily made by issuers to underwriters in primary
underwritten offerings;

(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions shall be reasonably satisfactory in
form, scope and substance to the managing underwriters, if any) addressed
to each selling holder and the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such holders and
underwriters;

<PAGE>

(3) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to the
selling holders of Common Stock and the underwriters, if any, such letters
to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters to underwriters in connection with
primary underwritten offerings;

(4) if an underwriting agreement is entered into, cause the
same to set forth in full the indemnification provisions and procedures of
Section 20(f) hereof (or such other substantially similar provisions and
procedures as the underwriters shall reasonably request) with respect to
all parties to be indemnified pursuant to said Section; and

(5) deliver such documents and certificates as may be
reasonably requested by the holders of a majority of the Common Stock being
sold and the managing underwriters, if any, to evidence compliance with
paragraph (xi) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.

The above shall be done at the effectiveness of such registration statement,
each closing under any underwriting or similar agreement as and to the extent
required thereunder and from time to time as may reasonably be requested by any
selling holder in connection with the disposition of Common Stock pursuant to
such registration statement, all in a manner consistent with customary industry
practice;

(xv) make available to a representative of the holders of a majority in
number of the Common Stock, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney or accountant retained by the sellers or underwriter all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such representative, underwriter, attorney or
accountant in connection with the registration, with respect to each
at such time or times as the Company shall reasonably determine;
PROVIDED that any records, information or documents that are
designated by the Company in writing as confidential shall be kept
confidential by such persons unless disclosure of such records,
information or documents is required by court or administrative
order;

(xvi) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to its
security holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than 30 days after the
end of any 12-month period (or 45 or 90 days if the end of such
12-month period coincides with the end of a fiscal quarter or fiscal
year, respectively, of the Company) (1) commencing at the end of any
month in which Common Stock are sold to underwriters in an
underwritten offering, or, if not sold to underwriters in such an
offering, (2) beginning with the first month commencing after the
effective date of the registration statement, which statements shall
cover said 12-month periods; and

<PAGE>

(xvii) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter"
that is required to be retained in accordance with the rules and
regulations of the NASD).

The Company may require each seller of Common Stock as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing.

Each holder of Warrants or Warrant Shares agrees by acquisition
of such Warrants or Warrant Shares that, upon receipt of any notice from the
Company of the happening of any event of the kind described in paragraph (xi)
above, such holder will forthwith discontinue disposition of Common Stock
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (xi) above, or until it is advised in
writing by the Company that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by the
Company, such holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's
possession, of the prospectus covering such Common Stock current at the time
of receipt of such notice. In the event the Company shall give any such
notice, the time period mentioned in Section 20(b)(iv) hereof shall be
extended by the number of days during the period from and including the date
of the giving of such notice to and including the date when each seller of
Common Stock covered by such registration statement either receives the
copies of the supplemented or amended prospectus contemplated by paragraph
(xi) above or is advised in writing by the Company that the use of the
prospectus may be resumed.

(e) REGISTRATION EXPENSES

(i) All expenses incident to the Company's performance of or compliance
with this Agreement will be paid by the Company, regardless whether
the registration statement becomes effective, including, without
limitation:

(1) all registration and filing fees (including, without
limitation, with respect to filings required to be made with the NASD);

(2) fees and expenses of compliance with securities or blue
sky laws (including, without limitation, fees and disbursements of one
counsel for the selling holders in connection with blue sky qualifications
of the Common Stock and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters or
holders of Common Stock being sold may designate);

(3) printing (including, without limitation, expenses of
printing or engraving certificates for the Common Stock in a form eligible
for deposit with the Depositary and of printing prospectuses), messenger,
telephone and delivery expenses;

<PAGE>

(4) fees and disbursements of counsel for the Company and for
the selling holders of the Common Stock (subject to the provisions of
Section 20(e)(ii) hereof);

(5) fees and disbursements of all independent certified
public accountants of the Company (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or
incident to such performance);

(6) fees and expenses of other persons retained by the
Company; and

(7) fees and expenses associated with any NASD filing
required to be made in connection with the registration statement,
including, if applicable, the fees and expenses of any "qualified
independent underwriter" (and its counsel) that is required to be retained
in accordance with the rules and regulations of the NASD

(all such expenses being herein called "Registration Expenses").

The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed, rating agency fees and the
fees and expenses of any person, including special experts, retained by the
Company.

(ii) In connection with each registration statement required hereunder,
the Company will reimburse the holders of Common Stock being
registered pursuant to such registration statement for the
reasonable fees and disbursements of not more than one counsel (or
more than one counsel if a legal opinion is required from more than
one counsel by the terms of any underwriting agreement relating to
the registered offering or if a conflict exists among such selling
holders in the exercise of the reasonable judgment of counsel for
the selling holders and counsel for the Company, provided that such
selling holders shall use their best efforts to minimize any such
conflict) chosen by the holders of a majority of such Common Stock.

(f) INDEMNIFICATION.

(i) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each holder of Warrant Shares, its officers, directors,
employees and agents and each person who controls such holder within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes hereinafter referred to as an
"Indemnified Holder"), against any losses, claims, damages or liabilities,
joint or several, to which such Indemnified Holder may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon:

(1) Any untrue statement or alleged untrue statement of any
material fact contained in (A) the registration statement originally filed
with respect to the Warrant

<PAGE>

Shares or any amendment thereto or any preliminary prospectus or prospectus
or any amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Warrant Shares under the
securities or "Blue Sky" laws thereof or filed with the SEC or any
securities association or securities exchange (each an "Application"); or

(2) The omission or alleged omission to state, in such
registration statement or any amendment thereto, any preliminary prospectus
or prospectus or any amendment or supplement thereto, or any Application, a
material fact required to be stated therein or necessary to make the
statements therein not misleading,

and will reimburse, as incurred, the Indemnified Holders for any legal or
other expenses incurred by the Indemnified Holders in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, the Company will not be liable in any such case to the extent that
any such loss, claim, damage, or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement or any amendment thereto, any preliminary
prospectus or prospectus or any amendment or supplement thereto, or any
Application in reliance upon and in conformity with written information
furnished to the Company by the Indemnified Holders specifically for use
therein; and PROVIDED, FURTHER, that the Company will not be liable to the
Indemnified Holders with respect to any such untrue statement or omission
made in any preliminary prospectus that is corrected in the prospectus (or
any amendment or supplement thereto) if the person asserting any such loss,
claim, damage or liability purchased Common Stock from the Indemnified Holder
in reliance upon the preliminary prospectus but was not sent or given a copy
of the prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Common Stock to such person in any case
where such delivery of the prospectus (as so amended or supplemented) is
required by the Securities Act, unless such failure to deliver the prospectus
(as amended or supplemented) was a result of the Company not delivering a
corrected prospectus to the Indemnified Holder. This indemnity agreement
will be in addition to any liability that the Company may otherwise have to
the indemnified parties. The Company shall not be liable under this Section
for any settlement of any claim or action effected without its consent, which
shall not be unreasonably withheld.

(ii) INDEMNIFICATION BY HOLDER OF WARRANT SHARES. Each holder of Warrant
Shares severally agrees to indemnify and hold harmless the Company,
its directors and officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such holder, but only with
respect to information relating to such holder furnished in writing
by such holder expressly for use in any registration statement or
prospectus, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be
brought against the Company or its directors or officers or any such
controlling person, in respect of which indemnity may be sought
against a holder of Warrant Shares, such holder shall have the
rights and duties given the Company and the Company or its directors
or officers or such

<PAGE>

controlling person shall have the rights and duties given to each
holder by the preceding paragraph. In no event shall the liability
of any selling holder of Warrant Shares hereunder be greater in
amount than the dollar amount of the net proceeds received by such
holder upon the sale of the Warrant Shares giving rise to such
indemnification obligation.

The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, to the same extent
as provided above with respect to information so furnished in writing by such
persons specifically for inclusion in any prospectus or registration
statement or any amendment or supplement thereto, or any preliminary
prospectus.

(iii) NOTIFICATION. Promptly after receipt by an indemnified party
under this Section 20(f) of notice of the commencement of any action for
which such indemnified party is entitled to indemnification under this
Section 20(f), such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under this Section 20(f), notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party (i) will not relieve it from any liability
under paragraph (i) or (ii) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not,
in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraphs (i) and (ii) above. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER,
that if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it and/or
other indemnified parties that are different from or additional to those
available to the indemnifying party, or (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of
such indemnified party or parties and such indemnified party or parties shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 20(f) for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof, unless (i) the indemnified
party shall have employed separate counsel in accordance with the proviso to
the immediately preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for
the expenses of more than one separate counsel (in addition to local counsel)
in any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by

<PAGE>

the majority of the Indemnified Holders in the case of paragraph (i) of this
Section 20(f) or the Company in the case of paragraph (ii) of this Section
20(f), representing the indemnified parties under such paragraph (i) or
paragraph (ii), as the case may be, who are parties to such action or
actions) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs
and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party, unless such indemnified
party waived in writing its rights under this Section 20(f), in which case
the indemnified party may effect such a settlement without such consent.

(iv) CONTRIBUTION. If the indemnification provided for in this
Section 20(f) is unavailable to an indemnified party under Section 20(f)(i)
or Section 20(f)(ii) hereof (other than by reason of exceptions provided in
those Sections) in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Indemnified
Holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Indemnified Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 20(f)(i) hereof, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.

The Company and each holder of Warrant Shares agree that it would
not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section, an Indemnified Holder shall not be required to contribute any amount
in excess of the amount by which the total price at which the Securities sold
by such Indemnified Holder or its affiliated Indemnified Holders and
distributed to the public were offered to the public exceeds the amount of
any damages which such Indemnified Holder, or its affiliated Indemnified
Holders, has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

(g) SUCCESSORS. The provisions of this Section 20 shall inure
to the benefit of the successors and transferees of the holders of Warrants
or Warrant Shares if such successor or

34
<PAGE>

transferee purchased such Warrants or Warrant Shares in a transaction exempt
from registration under the Securities Act other than pursuant to Rule 144.

SECTION 21. HOLDERS' RIGHTS.

The Holders of Warrants and Warrant Shares shall have the rights
described under Section 21(a) and (b), provided that such rights shall
terminate and be of no further force and effect upon consummation of the
Company's initial public offering of its Common Stock under the Securities
Act:

(a) PARTICIPATION RIGHTS. Not less than 30 days prior to any
proposed transfer of Common Stock by KCSN Acquisition Company, L.P., a
Delaware limited partnership ("KCSN"), or any Affiliate of KCSN (each, a
"Stockholder"), such transferring Stockholder shall deliver to the holders of
Warrants or Warrant Shares a written notice (the "Sale Notice") specifying in
reasonable detail the identity of the proposed transferee(s) and the terms
and conditions of the proposed transfer. Each holder of Warrant Shares may
elect to participate in the proposed transfer by delivering to the
transferring Stockholder a written notice of such election within the 20-day
period following delivery of the Sale Notice.

If any holders of Warrant Shares elect to participate in such
transfer, the transferring Stockholder and each such participating holder of
Warrant Shares will be entitled to sell in such proposed transfer, at the
same price and on the same terms, a number of shares of Common Stock equal to
the product of (i) the quotient determined by dividing the percentage of the
Common Stock then held by the transferring Stockholder or such participating
holder of Warrant Shares, as the case may be, by the aggregate percentage of
the Common Stock then held by the transferring Stockholder and all
participating holders of Common Stock (including those participating outside
of this Section 21), multiplied by (ii) the number of shares of Common Stock
to be sold in such proposed transfer. For purposes of this Section 21(a),
each participating holder of Common Stock shall be deemed to hold all shares
of Common Stock acquirable pursuant to the exercise of options to purchase
shares of Common Stock granted pursuant to the Company's 1997 Stock Option
Plan ("Options") that are exercisable by the holder thereof on the date of
determination or the conversion of the 8.0% Convertible Subordinated Notes
(the "Notes") then held by such holder. The holders of Common Stock shall
pay a pro rata portion of the transaction expenses associated with such
transfer. This Section 21(a) shall not apply to transfers to Affiliates of
KCSN (provided that such Affiliates shall continue to be bound by the terms
of the Stockholders Agreement).

(b) SALE OF THE COMPANY. If the holders of a majority of the
Stockholders Shares (as defined below) held by KCSN, its Affiliates and their
respective transferees ("Investor Stock") then outstanding approve the sale
of the Company to any person who does not own in excess of 10% of the Common
Stock on a fully-diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of Common Stock and who is not
the spouse, ancestor or descendant (by birth or adoption) of any such 10%
owner of Common Stock, whether by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the outstanding Common Stock
or otherwise (an "Approved Sale"), the holders of Warrants and Warrant Shares
shall consent to and raise no objections against such Approved Sale
(including

<PAGE>

exercising any rights of appraisal) and shall take all necessary and
desirable actions in their capacities as stockholders and warrantholders in
connection with the consummation of such Approved Sale; provided that in
connection with such Approved Sale the holders of Warrants or Warrant Shares
shall not be required to make any representations or warranties about the
Company. If the Approved Sale is structured as a sale of stock, the holders
of Warrants shall agree to exercise all of their Warrants and to sell all of
their Warrant Shares on the terms and conditions approved by the holders of a
majority of the Investor Stock then outstanding. The obligations of the
holders of Warrants and Warrant Shares with respect to any Approved Sale are
subject to the condition that, upon the consummation of such Approved Sale,
all of the holders of Common Stock will receive the same form and amount of
consideration per share of Common Stock, or if any holders are given an
option as to the form and amount of consideration to be received, all holders
will be given the same option.

"Stockholder Shares" means (i) all shares of Common Stock held or
deemed to be held by KCSN, including all shares of Common Stock acquired
pursuant to exercise of Options or conversion of Notes, and (ii) all shares
of Common Stock or other securities issued or issuable directly or indirectly
with respect to the securities referred to in clause (i) by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Stockholder
Shares shall cease to be such when they have been sold (x) pursuant to a
registered public offering under the Securities Act, or (y) to the public
pursuant to Rule 144 under the Securities Act or any successor provision.

SECTION 22. CHANGE OF WARRANT AGENT. If the Warrant Agent shall
become incapable of acting as Warrant Agent or shall resign as provided
below, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such incapacity by the Warrant Agent or by
the registered holders of a majority of Warrants, then the registered holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a successor to the Warrant Agent. Pending appointment
of a successor to such Warrant Agent, either by the Company or by such a
court, the duties of the Warrant Agent after the effective date of its
resignation or after the date it becomes incapable of acting as Warrant Agent
shall be carried out by the Company. After appointment, the successor to the
Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall, conditioned upon
receiving a receipt therefore and a release from the Company of its
obligations hereunder, deliver and transfer to the successor to the Warrant
Agent any property at the time held by it hereunder and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the appointment
of a successor to the Warrant Agent.

The Warrant Agent may resign at any time and be discharged from the
obligations hereby created by so notifying the Company in writing at least 30
days in advance of the proposed effective date of its resignation. If no
successor Warrant Agent accepts the engagement hereunder by such time, the
Company shall act as Warrant Agent and, at such time, the former Warrant
Agent shall, conditioned upon receiving a receipt therefore and a release
from the

<PAGE>

Company of its obligations hereunder, deliver and transfer to the Company any
property at the time held by it hereunder and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.

SECTION 23. NOTICES TO THE COMPANY AND WARRANT AGENT. Any notice
or demand authorized by this Agreement to be given or made by the Warrant
Agent or by the registered holder of any Warrant Certificate to or on the
Company shall be sufficiently given or made when and if deposited in the
mail, registered, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent), as follows:

Color Spot Nurseries, Inc.
3478 Buskirk Avenue
Pleasant Hill, California 94523
Telecopier No.: (510) 935-0799
Attention: Chief Executive Officer

with a copy to:

Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202
Telecopier No.: (303) 623-1956
Attention: Steven S. Siegel, Esq.

Any notice pursuant to this Agreement to be given by the Company or
by the registered holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given when and if deposited in the mail, registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent at the Warrant Agent
Office as follows:

American Stock Transfer and Trust Company
400 Wall Street
New York, New York 10005
Telecopier No.: (718) 331-1852
Attention: Michael Karfunkel

Notice may also be given by facsimile transmission (effective when
receipt is acknowledged) or by overnight delivery service (effective the next
business day).

SECTION 24. SUPPLEMENTS AND AMENDMENTS. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement
without the consent of any holders of Warrant Certificates in order to cure
any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which, in either case, shall not in any way materially adversely affect the
interests of the holders of Warrant Certificates. Any amendment or
supplement to this Agreement that has a material adverse effect on the
interests of holders of the Warrants or, in the case of Section 20, Warrant
Shares shall require the written

<PAGE>

consent of registered holders of a majority of the then outstanding Warrants
or, in the case of Section 20, Warrant Shares (excluding Warrants and Warrant
Shares held by the Company or any of its Affiliates). The consent of each
holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than in
accordance with Section 14, 15 or 16 hereof).

SECTION 25. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder, including, without limitation, any Successor under Section 14(j)
of this Agreement.

SECTION 26. TERMINATION. This Agreement shall terminate on the
earlier of (i) 5:00 p.m., New York, New York time on December 15, 2010 and
(ii) the date on which none of the Warrant Shares are entitled to the
benefits of Section 20.

SECTION 27. GOVERNING LAW; JURISDICTION. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the internal laws of said State.
The parties hereto irrevocably consent to the jurisdiction of the courts of
the State of New York and any federal court located in such state in
connection with any action, suit or proceeding arising out of or relating to
this Agreement. Nothing herein shall affect the right of any holder of
Warrants or Warrant Shares to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction.

SECTION 28. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Company, the Warrant Agent and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Warrant Agent and the registered holders of the Warrant
Certificates.

SECTION 29. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.

SECTION 30. FURTHER ASSURANCES. From time to time on and after
the date hereof, the Company shall deliver or cause to be delivered to the
Warrant Agent such further documents and instruments and shall do and cause
to be done such further acts as the Warrant Agent shall reasonably request
(it being understood that the Warrant Agent shall have no obligation to make
such request) to carry out more effectively the provisions and purposes of
this Agreement, to evidence compliance herewith or to assure itself that it
is protected hereunder.

<PAGE>

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

COLOR SPOT NURSERIES, INC.

By: /s/ Michael F. Vukelich
-----------------------------------
Michael F. Vukelich
Chief Executive Officer

<PAGE>

AMERICAN STOCK TRANSFER AND TRUST COMPANY

BY: /s/ [ILLEGIBLE]
-----------------------------------
AUTHORIZED SIGNATORY

<PAGE>

Form of Initial Warrant Certificate

EXHIBIT A
[Face]

THE COMMON STOCK, PAR VALUE $0.001, OF THE COMPANY (THE "COMMON
STOCK") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT
HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME
UNLESS, AT THE TIME OF EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND
DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT
HAS BEEN ISSUED BY THE SEC OR (II) THE ISSUANCE OF THE WARRANT SHARES IS
PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.

No. _________ Warrant Certificate _________ Warrants

COLOR SPOT NURSERIES, INC.

This Warrant Certificate certifies that _________, or its
registered assigns, is the registered holder of Warrants expiring December
15, 2008 (the "WARRANTS"), to purchase shares of the common stock, par value
$.001 (the "COMMON STOCK"), of Color Spot Nurseries, Inc., a Delaware
corporation (the "COMPANY"). Each Warrant entitles the registered holder upon
exercise at any time until 5:00 p.m. New York, New York time on December 15,
2008, to receive from the Company one fully paid and nonassessable share of
Common Stock (the "WARRANT SHARES") at the initial exercise price (the
"EXERCISE PRICE") of $.01 per share (A) by tendering Warrants having a fair
market value equal to the Exercise Price, (B) in the form of cash or by
certified or official bank check payable to the order of the Company in the
amount of the Exercise Price or (C) by any combination of Warrants and cash,
equal to the exercise price, and upon surrender of this Warrant Certificate
and such payment of the Exercise Price at the office or agency of the Warrant
Agent (as hereinafter defined), but only subject to the conditions set forth
herein and in the Warrant Agreement referred to below. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject
to adjustment upon the occurrence of certain events set forth in the warrant
agreement (the "WARRANT AGREEMENT"), dated as of December 24, 1997, between
the Company and American Stock Transfer and Trust Company, as warrant agent
(the "WARRANT AGENT"). All capitalized terms not defined herein shall have
the meanings assigned to such terms in the Warrant Agreement.

No Warrant may be exercised after 5:00 p.m., New York, New York
Time on December 15, 2008 and to the extent not exercised by such time such
Warrants shall

A-1
<PAGE>

automatically be deemed exercised by the tender of Warrants having a fair
market value equal to the Exercise Price pursuant to the second paragraph of
Section 8 of the Warrant Agreement.

Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the following pages hereof and such further
provisions shall for all purposes have the same effect as though fully set
forth at this place.

This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent.

This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.

A-2

<PAGE>

IN WITNESS WHEREOF, Color Spot Nurseries, Inc. has caused this Warrant
Certificate to be signed by its Secretary.

Dated: December 24, 1997
COLOR SPOT NURSERIES, INC.

By:
---------------------------------
Karla D. Vukelich
Secretary

Countersigned:

AMERICAN STOCK TRANSFER AND TRUST COMPANY,
as Warrant Agent

By:
------------------------------------
Authorized Signatory

A-3
<PAGE>

Form of Warrant Certificate
[Reverse]

[Unless and until it is exchanged in whole or in part for Warrants in
definitive form, this Warrant may not be transferred except as a whole by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or by the depositary or any
such nominee to a successor depositary or a nominee of such successor
depositary. The Depository Trust Company ("DTC") (55 Water Street, New York,
New York) shall act as the depositary until a successor shall be appointed by
the Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.](1)

The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring December 15, 2008 entitling the holder
upon exercise to receive shares of Common Stock of the Company, and are issued
or to be issued pursuant to the Warrant Agreement duly executed and delivered by
the Company to the Warrant Agent, which Warrant Agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "HOLDERS" or "HOLDER" meaning the registered holders or registered holder)
of the Warrants.

Warrants may be exercised at any time until 5:00 p.m., New York, New
York time on December 15, 2008. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon properly completed and
executed, together with payment of the Exercise Price (A) by tendering Warrants
having a fair market value equal to the Exercise Price, (B) in the form of cash
or by certified or official bank check payable to the order of the Company in
the amount of the Exercise Price or (C) by any combination of Warrants and cash,
equal to the Exercise Price, at the office of the Warrant Agent. In the event
that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Common Stock issuable upon exercise of
this Warrant.

The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of

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

(1) This paragraph is to be included only if the Warrant is in global
form.

A-4
<PAGE>

Common Stock will be issued upon the exercise of any Warrant, but the Company
will pay the cash value thereof determined as provided in the Warrant Agreement.

The Warrant Agreement provides that the Company shall be bound by
certain registration obligations with respect to the Common Stock issuable upon
exercise of the Warrants, as set forth in the Warrant Agreement.

Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.

The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.

A-5

<PAGE>

Form of Election to Purchase

(To Be Executed Upon Exercise Of Warrant)

The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ shares of Common
Stock and herewith (check item) tenders payment for such shares to the order of
Color Spot Nurseries, Inc. in the amount of $_______ (the "PURCHASE PRICE") in
accordance with the terms hereof.

/ / Warrants having a fair market value (as defined in the Warrant
Agreement) equal to the Purchase Price.

/ / Cash or certified or official bank check payable to the order of the
Company in an amount equal to the Purchase Price.

/ / (A) Warrants having a fair market value (as defined in the Warrant
Agreement) and (B) cash, in an aggregate amount equal to the Purchase
Price.

The undersigned requests that a certificate for such shares be
registered in the name of ____________________________, whose address is

_____________________________________ and that such shares be delivered to

__________________________ whose address is ______________________________.

If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of ____________________ , whose address is ___________________ , and

that such Warrant Certificate be delivered to ______________ , whose address is

_______________________.

Date:________________________

Your Signature: ______________________
(Sign exactly as your name appears on
the face of this Warrant)
Signature Guarantee:

A-6

<PAGE>

SCHEDULE OF EXCHANGES OF GLOBAL WARRANTS (2)

The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:

Number of Warrants in
Amount of decrease in Amount of increase in this Global Warrant
Number of Warrants in Number of Warrants in following such decrease Signature of authorized
Date of Exchange this Global Warrant this Global Warrant or increase officer of Warrant Agent
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

</TABLE>
- ---------------------------------
(2) This is to be included only if the Warrant is in global form.

A-7

<PAGE>

==============================================================================

COLOR SPOT NURSERIES, INC.

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of December 24, 1997

CREDIT AGRICOLE INDOSUEZ, as Administrative Agent,

IBJ SCHRODER BANK & TRUST COMPANY, as Syndication Agent

and

BANKBOSTON, N.A., as Documentation Agent

==============================================================================

<PAGE>

TABLE OF CONTENTS

Page

SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . 2
1.01. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.02. Minimum Amount of Each Borrowing; Maximum
Number of Borrowings . . . . . . . . . . . . . . . . . . . . . . 6
1.03. Notice of Borrowings . . . . . . . . . . . . . . . . . . . . . . 6
1.04. Disbursement of Funds. . . . . . . . . . . . . . . . . . . . . . 7
1.05. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.06. Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.07. Pro Rata Borrowings. . . . . . . . . . . . . . . . . . . . . . . 11
1.08. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.09. Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . 12
1.10. Special Provisions Governing Reserve Adjusted Eurodollar Loans . 13
1.11. Capital Requirements . . . . . . . . . . . . . . . . . . . . . . 17
1.12. Total Loan Commitments; Limitations on Outstanding Loan Amounts. 18
1.13. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 2. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.01. Voluntary Reduction of Commitments . . . . . . . . . . . . . . . 29
2.02. Adjustments; Termination of Commitments, etc . . . . . . . . . . 29
2.03. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . 30

SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.01. Scheduled Payments . . . . . . . . . . . . . . . . . . . . . . . 30
3.02. Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . . 31
3.03. Mandatory Prepayments; Reduction of Commitments. . . . . . . . . 32
3.04. Application of Mandatory Prepayments . . . . . . . . . . . . . . 36
3.05. Reduction of Total Revolving Loan Commitment, etc. . . . . . . . 37
3.06. Method and Place of Payment. . . . . . . . . . . . . . . . . . . 37
3.07. Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.08. Reserve Account; Prepayment Collateral Account.. . . . . . . . . 40

SECTION 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 41
4.01. Conditions Precedent to Initial Loans. . . . . . . . . . . . . . 41
4.02. Conditions Precedent to All Loans. . . . . . . . . . . . . . . . 47
4.03. Additional Conditions Precedent to Acquisition Term Loans and
Supplemental Term Loans . . . . . . . . . . . . . . . . . . . . . . . . 48

SECTION 5. Representations, Warranties and Agreements . . . . . . . . . . . 52
5.01. Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.02. Power and Authority; Business. . . . . . . . . . . . . . . . . . 53

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<PAGE>

5.03. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.04. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.05. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 54
5.06. Governmental Approvals, etc. . . . . . . . . . . . . . . . . . . 54
5.07. Investment Company Act; Public Utility Holding Company Act . . . 55
5.08. True and Complete Disclosure . . . . . . . . . . . . . . . . . . 55
5.09. Financial Condition; Financial Statements; Projections . . . . . 56
5.10. Security Interests . . . . . . . . . . . . . . . . . . . . . . . 57
5.11. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . 58
5.12. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.13. Capital Stock; Subsidiaries, etc . . . . . . . . . . . . . . . . 58
5.14. Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . 59
5.15. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . 59
5.16. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.17. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.18. Collective Bargaining Agreements; Labor Matters. . . . . . . . . 60
5.19. Indebtedness Outstanding.. . . . . . . . . . . . . . . . . . . . 61
5.20. Environmental Protection . . . . . . . . . . . . . . . . . . . . 61
5.21. Environmental Investigations . . . . . . . . . . . . . . . . . . 63
5.22. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.23. Governmental Regulation. . . . . . . . . . . . . . . . . . . . . 63
5.24. Absence of Events of Default . . . . . . . . . . . . . . . . . . 63
5.25. Performance of Agreements. . . . . . . . . . . . . . . . . . . . 63
5.26. Securities Activities. . . . . . . . . . . . . . . . . . . . . . 64

SECTION 6. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . 64
6.01. Information Covenants. . . . . . . . . . . . . . . . . . . . . . 64
6.02. Books, Records and Inspections . . . . . . . . . . . . . . . . . 69
6.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . 69
6.04. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 70
6.05. Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . 70
6.06. Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . 70
6.07. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.08. Performance of Obligations . . . . . . . . . . . . . . . . . . . 71
6.09. Fiscal Year; Fiscal Quarters. . . . . . . . . . . . . . . . . . 71
6.10. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 72
6.11. Interest Rate Protection . . . . . . . . . . . . . . . . . . . . 72
6.12. No Further Negative Pledges, etc.. . . . . . . . . . . . . . . . 72
6.13. Bank Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.14. Additional Collateral; Further Assurances. . . . . . . . . . . . 73
6.15. Environmental Events.. . . . . . . . . . . . . . . . . . . . . . 74

SECTION 7. Negative Covenants. . . . . . . . . . . . . . . . . . . . . 76

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<PAGE>

7.01. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 76
7.02. Total Interest Coverage Ratio. . . . . . . . . . . . . . . . . . 76
7.03. Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . . . . 78
7.04. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.05. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . 80
7.07. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.08. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.09. Prepayments of Indebtedness. . . . . . . . . . . . . . . . . . . 85
7.10. Dividends, etc . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.11. Disposition of Assets. . . . . . . . . . . . . . . . . . . . . . 86
7.12. Contingent Obligations . . . . . . . . . . . . . . . . . . . . . 87
7.13. Merger and Consolidations. . . . . . . . . . . . . . . . . . . . 87
7.14. Amendments to Organizational Documents . . . . . . . . . . . . . 88
7.15. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.16. No Non-Wholly Owned Subsidiaries . . . . . . . . . . . . . . . . 88
7.17. Changes in Business. . . . . . . . . . . . . . . . . . . . . . . 88
7.18. Amendments or Waivers of Certain Documents . . . . . . . . . . . 88
7.19. Transactions with Affiliates . . . . . . . . . . . . . . . . . . 88
7.20. Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . 89
7.21. Sale and Lease-Backs . . . . . . . . . . . . . . . . . . . . . . 89
7.22. Clean-down Period. . . . . . . . . . . . . . . . . . . . . . . 89
7.23. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . 90

SECTION 8. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 90
8.01. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8.02. Representations, etc.. . . . . . . . . . . . . . . . . . . . . . 90
8.03. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.04. Default Under Other Agreements . . . . . . . . . . . . . . . . . 91
8.05. Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . 91
8.06. Security Documents; Guarantees . . . . . . . . . . . . . . . . . 92
8.07. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.08. Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.09. Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.10. Certain Actions Following an Event of Default. . . . . . . . . . 93

SECTION 9. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 94

SECTION 10. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
10.01. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 127
10.02. Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . 127
10.03. Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . 128
10.04. Reliance by the Agent . . . . . . . . . . . . . . . . . . . . . 128
10.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 128

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<PAGE>

10.06. Non-Reliance on Administrative Agent and Other Banks. . . . . . 129
10.07. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 129
10.08. The Agents in Their Individual Capacities . . . . . . . . . . . 130
10.09. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 130
10.10. Resignation, Transfer by Agent. . . . . . . . . . . . . . . . . 130
10.11. Syndication Agent and Documentation Agent.. . . . . . . . . . . 131

SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 131
11.01. Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . 131
11.02. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . 132
11.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
11.04. Benefit of Agreement. . . . . . . . . . . . . . . . . . . . . . 134
11.05. No Waiver; Remedies Cumulative. . . . . . . . . . . . . . . . . 136
11.06. Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . 137
11.07. Calculations; Computations. . . . . . . . . . . . . . . . . . . 137
11.08. Governing Law; Submission to Jurisdiction; Venue;
Service of Process. . . . . . . . . . . . . . . . . . . . . . . 138
11.09. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 138
11.10. Headings Descriptive. . . . . . . . . . . . . . . . . . . . . . 138
11.11. Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . 139
11.12. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
11.13. Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . 139
11.14. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . 139
11.15. Independence of Covenants . . . . . . . . . . . . . . . . . . . 139
11.16. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . 139

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<PAGE>
SCHEDULES

Schedule A - List of Banks
Schedule 4.01(j) - Financial Statements
Schedule 4.01(l) - Litigation
Schedule 4.01(m) - Restrictions on Borrower's Ability to Grant Liens
Schedule 4.01(p) - Required Consents
Schedule 4.03 - Permitted Business Acquisitions
Schedule 5.10A - Exceptions to Perfected Security Interests
Schedule 5.10B - Prior Liens
Schedule 5.10C - Required Filings and Recordings
Schedule 5.13 - Subsidiaries
Schedule 5.16 - Real Property Owned and Leased
Schedule 5.17 - Capital Stock
Schedule 5.19 - Indebtedness
Schedule 5.20 - Environmental Exceptions
Schedule 5.22 - Insurance
Schedule 11.03 - Bank Addresses

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<PAGE>
EXHIBITS

Exhibit 1.03-1 - Form of Notice of Revolving Loan Borrowing
Exhibit 1.03-2 - Form of Notice of Acquisition Loan Borrowing
Exhibit 1.03-3 - Form of Notice of Supplemental Revolving Loan
Borrowing
Exhibit 1.03-4 - Form of Notice of Supplemental Term Loan Borrowing
Exhibit 1.05(a)(i) - Form of Revolving Note
Exhibit 1.05(a)(ii) - Form of Acquisition Term Note
Exhibit 1.05(a)(iii) - Form of Supplemental Revolving Note
Exhibit 1.05(a)(iv) - Form of Supplemental Term Note
Exhibit 4.01(b) - Form of Officer's Certificate
Exhibit 4.03(b)(iv) - Form of Officer's Certificate -- Permitted
Business Acquisitions
Exhibit 6.01(p) - Form of Borrowing Base Certificate
Exhibit 7.14 - Form of Amended and Restated Certificate of
Incorporation of the Borrower
Exhibit 9A - Form of Security Agreement
Exhibit 9B - Form of Subsidiary Guarantee
Exhibit 9C - Form of Trademark Security Agreement
Exhibit 11.04(c) - Form of Assignment Agreement

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<PAGE>

COLOR SPOT NURSERIES, INC.

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

This Second Amended and Restated Credit Agreement is dated as of
December 24, 1997, and amends and restates, in its entirety, the Credit
Agreement dated as of December 31, 1996 (the "ORIGINAL CREDIT AGREEMENT"), as
amended and restated by the Amended and Restated Credit Agreement dated as of
February 20, 1997 (the "AMENDED CREDIT AGREEMENT") among Color Spot
Nurseries, Inc., a Delaware corporation (the "BORROWER"), Credit Agricole
Indosuez (formerly the New York branch of Banque Indosuez) ("INDOSUEZ"), IBJ
Schroder Bank & Trust Company ("IBJS"), BankBoston, N.A. ("BKOB") and the
other lending institutions listed in Schedule A (each a "BANK"), Indosuez, as
the administrative agent (the "ADMINISTRATIVE AGENT") for itself and the
other Banks, IBJS as the syndication agent (the "SYNDICATION AGENT") for
itself and the other Banks and BKOB as the documentation agent (the
"DOCUMENTATION AGENT") for itself and the other Banks and, together with the
Administrative Agent and the Syndication Agent, the "AGENTS"). Unless
otherwise defined herein, all capitalized terms used herein are as defined in
Section 9.

R E C I T A L S:

WHEREAS, the Original Credit Agreement was entered into on December 31,
1996 (the "EFFECTIVE DATE") in order (a) to finance a recapitalization of CSN,
Inc., a Delaware corporation ("Holdings") pursuant to a Recapitalization and
Stock Purchase Agreement dated as of December 31,1996 (the "RECAPITALIZATION
AGREEMENT") among Holdings, KCSN Acquisition Company, L.P., a Delaware limited
partnership ("KCSN"), Heller Equity Capital Corporation, a Delaware corporation
("HELLER") and certain other shareholders of Holdings, (b) to provide working
capital for the Borrower and its Subsidiaries and (c) with respect to the
Acquisition Term Loans, to provide financing for certain business acquisitions
by the Borrower; and

WHEREAS, in connection with, and immediately following the consummation of,
the Recapitalization (i) substantially all of the assets of Holdings were
assigned to the Borrower, (ii) the Borrower's name was changed from Color Spot
Watsonville, Inc. to its current name of Color Spot Nurseries, Inc. and (iii)
Holdings' name was changed from Color Spot Nurseries, Inc. to its current name
of CSN, Inc.; and

WHEREAS, pursuant to the Original Credit Agreement (i) on the Effective
Date, the Initial Borrowers incurred Term A Loans in the aggregate principal
amount of $18,000,000 (collectively, the "ORIGINAL TERM A LOANS"), Term B Loans
in an aggregate principal amount of $16,250,000 (collectively, the "ORIGINAL
TERM B LOANS") and Revolving Loans in the aggregate principal amount of
$3,000,000; and (ii) thereafter, the Borrower incurred Acquisition Term

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Loans in the aggregate principal amount of $3,200,000 (collectively, the
"ORIGINAL ACQUISITION TERM LOANS"), all of which amounts remain outstanding
as of the date hereof; and

WHEREAS, in connection with the Borrower's acquisition of Lone Star Growers
Co. and certain other companies the Amended Credit Agreement was entered into on
February 20, 1997 and amended on March 20, 1997, July 31, 1997, August 11, 1997
and September 3, 1997, to increase the Banks' commitments under the Original
Credit Agreement and to incur additional Loans from the Banks, and specifically
(i) to replace the Original Term A Loans with the Existing Term A Loans in the
aggregate principal amount of $35,000,000; (ii) to replace the Original Term B
Loans with the Existing Term B Loans in the aggregate principal amount of
$55,000,000; (iii) to replace the Original Total Revolving Loan Commitment with
an increased Existing Revolving Loan Commitment in the amount of $37,500,000;
and

WHEREAS, the Borrower proposes to offer for sale $40,000,000 of its Series
A Preferred Stock and the related warrants to purchase common stock of the
Borrower and $85,000,000 of high yield debt securities (the "PUBLIC FINANCING"),
in connection with which, Holdings will be merged with and into the Borrower and
will cease to have a separate existence; and

WHEREAS, in connection with the foregoing, the Borrower desires to increase
the Banks' commitments under the Amended Credit Agreement and to incur
additional Loans from the Banks, and specifically (i) to repay the Existing Term
A Loans, Existing Term B Loans, Existing Acquisition Term Loans and the
Revolving Loans outstanding on the Closing Date (the "EXISTING REVOLVING LOANS")
with the proceeds of the Public Financing, (ii) to replace the Existing
Revolving Loan Commitment with an increased Revolving Loan Commitment in the
amount of $40,000,000; (iii) to replace the Existing Acquisition Term Loan
Commitment with an Acquisition Term Loan Commitment in the amount of
$75,000,000; and (iv) to replace the Existing Term A Loan Commitment and the
Existing Term B Loan Commitment with a Supplemental Loan Commitment in the
amount of $35,000,000 (which can be drawn down by the Borrower as either
revolving loans or acquisition term loans); and

WHEREAS, the Borrower desires to use the proceeds of the Revolving Loans to
provide working capital for the Borrower and its Subsidiaries; and

WHEREAS, the Banks are willing to make available the additional credit
facilities provided for herein on the terms and conditions set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

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SECTION 1. AMOUNT AND TERMS OF CREDIT.

1.01. COMMITMENTS. Subject to and upon the terms and conditions set
forth herein, each Bank severally agrees, (i) in the case of any Borrowing under
the Revolving Portion at any time and from time to time on and after the Closing
Date and prior to the Revolving Loan Commitment Termination Date, (ii) in the
case of any Borrowings under the Acquisition Portion from time to time on and
after the Closing Date and prior to the Acquisition Term Loan Commitment
Termination Date in connection with Permitted Business Acquisitions, and (iii)
in the case of any Borrowing under the Supplemental Portion from time to time on
and after the Closing Date and prior to the Supplemental Revolving Loan
Commitment Termination Date in connection with working capital needs of the
Borrower or prior to the Supplemental Term Loan Commitment Termination Date in
connection with Permitted Business Acquisitions, as the case may be, to make
Loans to the Borrower, as specified below, which Loans shall be drawn under the
Loan Facility (including the Revolving Portion, the Acquisition Portion and the
Supplemental Portion thereof), as set forth below:

(a) Loans under the Revolving Portion of the Loan Facility (each a
"REVOLVING LOAN") (i) shall be made to the Borrower at any time and from
time to time on and after the Closing Date and prior to the Revolving Loan
Commitment Termination Date; (ii) except as hereinafter provided, shall
initially be made as Base Rate Loans until 30 days after the Closing Date
or such earlier time as (x) Indosuez shall have completed any intended
syndication of its interest in the Loans (as to which the Administrative
Agent shall promptly notify the Borrower) or (y) is otherwise assented to
by the Administrative Agent, and thereafter, at the Borrower's option and
subject to the terms hereof, may be Base Rate Loans or Reserve Adjusted
Eurodollar Loans; PROVIDED, HOWEVER, that, notwithstanding anything to the
contrary set forth above, in the event that the Administrative Agent shall
not have notified the Borrower that it has completed any intended
syndication as of the date on which the Borrower becomes entitled to elect
Reserve Adjusted Eurodollar Loans, then for a further period of one month
(or such longer period as the Administrative Agent and the Borrower agree),
the Borrower shall only be entitled to elect Reserve Adjusted Eurodollar
Loans which have an Interest Period which terminates on or before the end
of such one-month period; and PROVIDED, FURTHER, that all Revolving Loans
made by each Bank shall, unless otherwise specifically provided herein, (A)
consist entirely of Loans of the same Type; (B) may be repaid and
reborrowed in accordance with the provisions hereof; and (C) shall not
exceed for any Bank at any time outstanding the Revolving Loan Commitment
of such Bank at such time; and PROVIDED, FURTHER, that all Revolving Loans
made by all Banks pursuant to the same Borrowing shall, unless otherwise
specifically provided herein, not be made pursuant to a particular Notice
of Borrowing if (A) the sum of (x) the aggregate principal amount of
Revolving Loans then outstanding, after giving effect to the Revolving Loan
requested by the relevant Notice of Borrowing, (y) the aggregate principal
amount of Supplemental Revolving Loans then outstanding and (z) the then
outstanding Letters of Credit Usage,

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related to either the Revolving Portion or the Supplemental Portion of the
Loan Facility, would exceed the Borrowing Base as then calculated pursuant
to Section 6.01(m) or (B) the sum of (x) the aggregate principal amount
of Revolving Loans then outstanding, after giving effect to the Revolving
Loan requested by the relevant Notice of Borrowing, and (y) the then
outstanding Letters of Credit Usage related to the Revolving Portion of
the Credit Facility, would exceed the Total Revolving Loan Commitment.

(b) Loans under the Acquisition Portion of the Loan Facility
(together with the Outstanding Acquisition Term Loans, each an "ACQUISITION
TERM LOAN") shall be made to the Borrower from time to time on or after the
Closing Date and prior to the Acquisition Term Loan Commitment Termination
Date (the date of each Borrowing of an Acquisition Term Loan an
"ACQUISITION TERM LOAN CLOSING DATE") to effect Permitted Business
Acquisitions; PROVIDED, HOWEVER, if the Borrower shall have executed a
letter of intent with respect to a Permitted Business Acquisition prior to
the Acquisition Term Loan Commitment Termination Date, the Acquisition Term
Loan Commitment shall remain available to finance such proposed Permitted
Business Acquisition until the earlier of (i) the expiration of such letter
of intent by its terms, and (ii) ninety days after the Acquisition Term
Loan Commitment Termination Date. Acquisition Term Loans (i) except as
hereinafter provided, shall initially be made as Base Rate Loans until 30
days after the Closing Date, with respect to the Acquisition Term Loans
made as of the Closing Date, and until 30 days after the applicable
Acquisition Term Loan Closing Date in all other case, or, in each case,
such earlier time as (x) Indosuez shall have completed any intended
syndication of its interest in the Acquisition Term Loan made on such date
(as to which the Administrative Agent shall promptly notify the Borrower)
or (y) is otherwise assented to by the Administrative Agent, and
thereafter, at the Borrower's option and subject to the terms hereof, may
be Base Rate Loans or Reserve Adjusted Eurodollar Loans; PROVIDED, HOWEVER,
that, notwithstanding anything to the contrary set forth above, in the
event that the Administrative Agent shall not have notified the Borrower
that it has completed any intended syndication as of the date on which the
Borrower becomes entitled to elect Reserve Adjusted Eurodollar Loans, then
for a further period of one month (or such longer period as the
Administrative Agent and the Borrower agree), the Borrower shall only be
entitled to elect Reserve Adjusted Eurodollar Loans which have an Interest
Period which terminates on or before the end of such one-month period; and
PROVIDED, FURTHER, that all Acquisition Term Loans made by each Bank shall,
unless otherwise specifically provided herein, (i) consist entirely of
Loans of the same Type; and (ii) shall not exceed for such Bank at any time
outstanding the Acquisition Term Loan Commitment of such Bank at such time;
and PROVIDED, FURTHER, that all Acquisition Term Loans made by all Banks
pursuant to the same Borrowing, shall unless otherwise specifically
provided herein, not be made pursuant to a particular Notice of Borrowing
if the aggregate principal amount of Acquisition Term Loans then
outstanding, after giving effect to the Acquisition Term Loan requested by
the relevant Notice of Borrowing, would exceed the Total Acquisition Term
Loan Commitment.

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(c) Loans under the Supplemental Portion of the Loan Facility may
be made as either term loans (together with the outstanding Supplemental
Term Loans, each a "SUPPLEMENTAL TERM LOAN") or as revolving loans (each a
"Supplemental Revolving Loan").

(d) Supplemental Term Loans shall be made to the Borrower from
time to time after the Closing Date and prior to the Supplemental Term Loan
Commitment Termination Date (the date of each Borrowing of a Supplemental
Term Loan, a "SUPPLEMENTAL TERM LOAN CLOSING DATE") to effect Permitted
Business Acquisitions; PROVIDED, HOWEVER, if the Borrower shall have
executed a letter of intent with respect to a Permitted Business
Acquisition prior to the Supplemental Term Loan Commitment Termination
Date, the Supplemental Term Loan Commitment shall remain available to
finance such proposed Permitted Business Acquisition until the earlier of
(i) the expiration of such letter of intent by its terms, and (ii) ninety
days after the Supplemental Term Loan Commitment Termination Date; and
PROVIDED, FURTHER, that all Supplemental Term Loans made by each Bank
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, (i) consist entirely of Loans of the same Type; and (ii)
together with all Supplemental Revolving Loans made by such Bank, shall not
exceed the Supplemental Loan Commitment of such Bank at such time; and
PROVIDED, FURTHER, that all Supplemental Term Loans made by all Banks
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, shall not be made pursuant to a particular Notice of
Borrowing if (i) the sum of (x) the aggregate principal amount of
Supplemental Term Loans then outstanding, after giving effect to the
Supplemental Term Loan requested by the relevant Notice of Borrowing, (y)
the aggregate principal amount of Supplemental Revolving Loans then
outstanding, and (z) the then outstanding Letters of Credit Usage related
to the Supplemental Portion of the Credit Facility, would exceed the Total
Supplemental Loan Commitment or (ii) if there is any Unutilized Acquisition
Commitment then outstanding which has not been terminated.

(e) Supplemental Revolving Loans shall be made to the Borrower at
any time and from time to time after the Closing Date and prior to the
Supplemental Revolving Loan Commitment Termination Date; PROVIDED, HOWEVER,
that all Supplemental Revolving Loans made by each Bank pursuant to the
same Borrowing shall, unless otherwise specifically provided herein, (i)
consist entirely of Loans of the same Type; (ii) may be repaid and
reborrowed in accordance with the provisions hereof; (iii) together with
all Supplemental Term Loans made by such Bank, shall not exceed the
Supplemental Loan Commitment of such Bank at such time; and PROVIDED,
FURTHER, that all Supplemental Revolving Loans made by all Banks pursuant
to the same Borrowing shall, unless otherwise specifically provided herein,
not be made pursuant to a particular Notice of Borrowing (i) if the sum of
(x) the aggregate principal amount of Supplemental Revolving Loans then
outstanding, (y) the aggregate principal amount of Supplemental Terms Loans
then outstanding and (z) the then outstanding Letters of Credit Usage
related to the Supplemental Portion of the Credit Facility, after giving
effect to the

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Supplemental Revolving Loan requested by the relevant Notice of Borrowing,
would exceed the Supplemental Loan Commitment, (ii) if the sum of (x) the
aggregate principal amount of Supplemental Revolving Loans then
outstanding, after giving effect to the Supplemental Revolving Loan
requested by the relevant Notice of Borrowing, (y) the aggregate principal
amount of Revolving Loans then outstanding and (z) the then outstanding
Letters of Credit Usage related to either the Revolving Portion or the
Supplemental Portion of the Credit Facility, would exceed the Borrowing
Base as then calculated pursuant to Section 6.01(m) or (iii) if there is
any Unutilized Revolver Commitment then outstanding.

1.02. MINIMUM AMOUNT OF EACH BORROWING; MAXIMUM NUMBER OF BORROWINGS.
The minimum aggregate principal amount of any Loan shall be the Minimum
Borrowing Amount (other than a Borrowing of Revolving Loans or of Supplemental
Revolving Loans consisting entirely of Base Rate Loans such that the total
amount of Revolving Loans or Supplemental Revolving Loans, as the case may be,
to be outstanding after giving effect to such Borrowing shall be equal to the
Total Revolving Loan Commitment or the Total Supplemental Revolving Loan
Commitment, as the case may be), and Borrowings in excess thereof shall be in
integral multiples of $100,000; PROVIDED, HOWEVER, that (i) the Banks'
Acquisition Term Loan Commitments shall terminate, on a pro rata basis, with
respect to any portion of the Total Acquisition Term Loan Commitments not
utilized by the Borrower on or before the Acquisition Term Loan Commitment
Termination Date and (ii) the Banks' Supplemental Term Loan Commitments shall
terminate, on a pro rata basis, with respect to any portion of the Total
Acquisition Term Loan Commitments not used by the Borrower on or before the
Supplemental Term Loan Commitment Termination Date. More than one Borrowing may
be incurred on any date; PROVIDED, HOWEVER, that at no time shall there be more
than eight Borrowings of Reserve Adjusted Eurodollar Loans outstanding.

1.03. NOTICE OF BORROWINGS. Subject to Sections 1.01(a), (b), (d) and
(e), after the Closing Date, whenever the Borrower desires that the Banks
make Reserve Adjusted Eurodollar Loans under any of the Revolving Portion,
the Acquisition Portion or the Supplemental Portion of the Loan Facility it
shall give the Administrative Agent at the Agent's Office at least three
Business Days' prior written notice (or telephonic notice promptly confirmed
in writing) of each such Borrowing of Reserve Adjusted Eurodollar Loans;
PROVIDED that notice given later than 1:00 P.M. (New York time) shall be
deemed to have been given on the following Business Day. Whenever the
Borrower desires that the Banks make Base Rate Loans under any of the
Revolving Portion, the Acquisition Portion or the Supplemental Portion of the
Loan Facility it shall give the Administrative Agent at the Agent's office
not later than 1:00 P.M. (New York time) on the date of such Borrowing
written notice (or telephonic notice promptly confirmed in writing) of each
such Borrowing of Base Rate Loans. Each such notice, which, in the case of
either a Loan under the Revolving Portion or a Supplemental Revolving Loan
under the Supplemental Portion of the Loan Facility, shall be substantially
in the form of Exhibit 1.03-1 (each a "NOTICE OF REVOLVING LOAN BORROWING"),
in the case of a Loan under the Acquisition Portion of the Loan Facility
shall be substantially in the form of Exhibit 1.03-2 (each a "NOTICE OF

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ACQUISITION LOAN BORROWING", in the case of a Supplemental Revolving Loan
under the Supplemental Portion of the Loan Facility shall be substantially in
the form of Exhibit 1.03-03 (each a "NOTICE OF SUPPLEMENTAL REVOLVING LOAN
BORROWING") and, in the case of a Supplemental Term Loan under the
Supplemental Portion of the Loan Facility shall be substantially in the form
of Exhibit 1.03-4 (each a "NOTICE OF SUPPLEMENTAL TERM LOAN BORROWING") and,
together with a Notice of Revolving Loan Borrowing, a Notice of Acquisition
Loan Borrowing and a Notice of Supplemental Revolving Loan Borrowing, each a
"NOTICE OF BORROWING"), shall be irrevocable, shall be deemed a
representation by the Borrower that all conditions precedent to such
Borrowing set forth in Section 4.02 and, in the case of a Loan under the
Acquisition Portion or a Supplemental Term Loan under the Supplemental
Portion that all conditions set forth in Section 4.03, have been satisfied
and shall specify (i) the aggregate principal amount in Dollars of the Loans
to be made pursuant to such Borrowing, (ii) the date of Borrowing (which
shall be a Business Day), (iii) whether the respective Borrowing shall
consist of Base Rate Loans or Reserve Adjusted Eurodollar Loans and, if
Reserve Adjusted Eurodollar Loans, the Interest Period to be initially
applicable thereto and (iv) the account to which funds advanced under such
Borrowing shall be deposited. The Administrative Agent shall as promptly as
practicable give each Bank written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such Bank's
proportionate share thereof and of the other matters covered by the Notice of
Borrowing.

1.04. DISBURSEMENT OF FUNDS.

(a) No later than 2:00 P.M. (New York time) on the date specified
in each Notice of Borrowing, each Bank will make available to the
Administrative Agent in New York its pro rata portion of each Borrowing
requested to be made on such date in the manner provided below.

(b) Each Bank shall make available all amounts it is to fund under
any Borrowing on or after the Closing Date in immediately available funds
to the Administrative Agent to the account specified therefor by the
Administrative Agent (or, if no account is so specified at the Agent's
Office), and the Administrative Agent will make such funds available to the
Borrower no later than 4:00 P.M. (New York time) on the date specified in
the Notice of Borrowing by depositing to the account specified therefor by
the Borrower (or, if no account is so specified to its account at the
Agent's Office) the aggregate of the amounts so made available in the type
of funds received. Unless the Administrative Agent shall have been
notified by any Bank prior to the date of any such Borrowing that such Bank
does not intend to make available to the Administrative Agent its portion
of the Borrowing or Borrowings to be made on such date, the Administrative
Agent may assume that such Bank has made such amount available to the
Administrative Agent on such date of Borrowing, and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and
without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Bank and the Administrative

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Agent has made available such corresponding amount to the Borrower, the
Administrative Agent shall be entitled to recover such corresponding amount
from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent shall promptly notify the Borrower, and the Borrower
shall on such Business Day pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to
recover from such Bank or the Borrower, as the case may be, interest on
such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, (i) if paid by such Bank, at a rate per annum equal
to the overnight Federal Funds Rate or (ii) if paid by the Borrower (and/or
any other Credit Party), at a rate per annum equal to the then applicable
rate of interest, calculated in accordance with Section 1.08, for the
respective Loans. The Administrative Agent shall also be entitled to
recover from any Bank an amount equal to any other losses incurred by the
Administrative Agent as a result of the failure of such Bank to provide any
amount as provided in this Agreement.

(c) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its Commitments hereunder or to prejudice any rights
which the Borrower or any other Credit Party may have against any Bank as a
result of any default by such Bank hereunder.

1.05. NOTES.

(a) The Borrower's obligation to pay the principal of and interest
on all the Loans made to it by each Bank are or shall be evidenced, as the
case may be, (i) in the case of Revolving Loans, by a promissory note
(each, a "REVOLVING NOTE"), substantially in the form of
Exhibit 1.05(a)(i), duly executed and delivered by the Borrower, with
blanks appropriately completed in conformity herewith; (ii) in the case of
Acquisition Term Loans, by a promissory note (each, an "ACQUISITION TERM
NOTE"), substantially in the form of Exhibit 1.05(a)(ii), duly executed and
delivered by the Borrower with blanks appropriately completed in conformity
herewith; (iii) in the case of Supplemental Revolving Loans, by a
promissory note (each, a "SUPPLEMENTAL REVOLVING NOTE"), substantially in
the form of Exhibit 1.05(a)(iii), duly executed and delivered by the
Borrower, with blanks appropriately completed in conformity herewith; and
(iv) in the case of Supplemental Term Loans, by a promissory note (each, a
"SUPPLEMENTAL TERM NOTE"), substantially in the form of
Exhibit 1.05(a)(iv), duly executed and delivered by the Borrower, with
blanks appropriately completed in conformity herewith.

(b) The Revolving Notes issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to the order of such Bank, (iii) be dated
the Closing Date, (iv) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank, and be payable in the aggregate
principal amount of the outstanding Revolving Loans

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evidenced thereby, (v) mature, with respect to each Revolving Loan
evidenced thereby, on the Revolving Loan Maturity Date, (vi) be subject
to mandatory prepayment as provided in Section 3.03, (vii) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and the Reserve Adjusted Eurodollar Loans, as the case
may be, evidenced thereby, and (viii) be entitled to the benefits of this
Agreement and the other applicable Credit Documents. On the Closing Date,
upon delivery of the Revolving Notes, the Existing Revolving Notes shall
be returned to the Borrower marked "Canceled".

(c) The Acquisition Term Note of the Borrower issued to each Bank
shall (i) be executed by the Borrower, (ii) be payable to the order of such
Bank, (iii) be dated the Closing Date, (iv) be in a stated principal amount
equal to the Acquisition Term Loan Commitment of such Bank and be payable
in the aggregate principal amount of the outstanding Acquisition Term Loans
evidenced thereby, (v) mature, with respect to each Acquisition Term Loan
evidenced thereby, on the Acquisition Term Loan Maturity Date, (vi) be
subject to mandatory prepayment as provided in Section 3.03, (vii) bear
interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and the Reserve Adjusted Eurodollar Loans, as the
case may be, evidenced thereby, and (viii) be entitled to the benefits of
this Agreement and the other applicable Credit Documents. On the Closing
Date, upon delivery of the Acquisition Term Notes, the Existing Acquisition
Term Notes shall be returned to the Borrower marked "Canceled". At any
time after the Acquisition Term Loan Commitment Termination Date, at the
Borrower's option or at the request of the Administrative Agent, each
Acquisition Term Note shall be exchanged for a note in the form of Exhibit
1.05(a)(iv) and meeting the above requirements, except that such
replacement note should be in a stated principal amount equal to the
aggregate principal amount of the Acquisition Term Loans made by such Bank
(or its assignor).

(d) The Supplemental Revolving Notes issued to each Bank shall (i)
be executed by the Borrower, (ii) be payable to the order of such Bank,
(iii) be dated the Closing Date, (iv) be in a stated principal amount equal
to the Supplemental Loan Commitment of such Banks, and be payable in the
aggregate principal amount of the Supplemental Revolving Loans evidenced
thereby, (v) mature, with respect to each Supplemental Revolving Loan
evidenced thereby, on the Supplemental Revolving Loan Maturity Date, (vi)
be subject to mandatory prepayment as provided in Section 3.03, (vii) bear
interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and the Reserve Adjusted Eurodollar Loans, as the
case may be, evidenced thereby, and (viii) be entitled to the benefits of
this Agreement and other applicable Credit Documents. At any time after
the Supplemental Term Loan Commitment Termination Date, at the Borrower's
option or at the request of the Administrative Agent, each Supplemental
Revolving Note shall be exchanged for a note in the form of Exhibit
1.05(a)(iii) and meeting the above requirements, except that such
replacement note should be in a stated principal amount

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equal to the Supplemental Revolving Loan Commitment of such Bank on the
Supplemental Term Loan Commitment Termination Date.

(e) The Supplemental Term Notes issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank,
(iii) be dated the Closing Date, (iv) be in a stated principal amount equal
to the Supplemental Loan Commitment of such Bank, and be payable in the
aggregate principal amount of the Supplemental Term Loans evidenced
thereby, (v) mature, with respect to each Supplemental Term Loan evidenced
thereby, on the Supplemental Term Loan Maturity Date, (vi) be subject to
mandatory prepayment as provided in Section 3.03, (vii) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and the Reserve Adjusted Eurodollar Loans, as the case may be,
evidenced thereby, and (viii) be entitled to the benefits of this Agreement
and other applicable Credit Documents. At any time after the Supplemental
Term Loan Commitment Termination Date, at the Borrower's option or at the
request of the Administrative Agent, each Supplemental Term Note shall be
exchanged for a note in the form of Exhibit 1.05(a)(iv) and meeting the
above requirements, except that such replacement note should be in a stated
principal amount equal to the aggregate principal amount of the
Supplemental Term Loans made by such Bank (or its assignor).

(f) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of the Loans evidenced thereby. Failure to
make any such notation shall not affect the obligations of the Borrower or
any other Credit Party hereunder or under any other applicable Credit
Document in respect of such Loans.

1.06. CONVERSIONS; CONTINUATIONS. The Borrower shall have the option to
convert on any Business Day commencing 30 days after the Closing Date or such
earlier date as Indosuez shall have completed any intended syndication of its
interest in the Loans (as to which the Administrative Agent shall promptly
notify the Borrower), all or a portion (which portion shall not be less than the
Minimum Borrowing Amount) of the outstanding Loans owing by the Borrower
pursuant to a single Portion of the Loan Facility into a Borrowing or Borrowings
pursuant to such Portion of another Type of Loan, or to continue all or a
portion of such Borrowings as the same Type of Loan; PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary set forth above, in the event that the
Administrative Agent shall not have notified the Borrower that it has completed
any intended syndication as of the date on which the Borrower becomes entitled
to elect Reserve Adjusted Eurodollar Loans, then for a further period of one
month, the Borrower shall only be entitled to elect Reserve Adjusted Eurodollar
Loans which have an Interest Period which terminates on or before the end of
such one-month period; and PROVIDED, FURTHER, that (a) except as otherwise
provided in Section 1.10(b), Reserve Adjusted Eurodollar Loans may be converted
into Base Rate Loans or continued as Reserve Adjusted Eurodollar Loans only on
the last day of an Interest Period applicable to such Reserve Adjusted

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Eurodollar Loans, (b) no such partial conversion of Reserve Adjusted Eurodollar
Loans shall reduce the outstanding principal amount of Reserve Adjusted
Eurodollar Loans under the Loan Facility (or portion thereof) made pursuant to a
single Borrowing to less than the Minimum Borrowing Amount, (c) a Loan may only
be converted into or continued as Reserve Adjusted Eurodollar Loans if no
Default or Event of Default is in existence on the date of the conversion or
continuation, (d) Borrowings resulting from conversions or continuations
pursuant to this Section 1.06 shall be limited in amount and number as provided
in Section 1.02 and (e) all or a portion of the outstanding principal amount of
Base Rate Loans may not be converted into Reserve Adjusted Eurodollar Loans if
such Base Rate Loans or portion thereof will mature within one month of such
proposed conversion. Each such conversion/continuation shall be effected by the
Borrower by giving the Administrative Agent at the Agent's Office prior to 1:00
P.M. (New York time) at least three Business Days' (or on the same Business Day
in the case of a conversion into Base Rate Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each a "NOTICE OF
CONVERSION/CONTINUATION"), specifying the Loans to be so converted or continued,
the Type of Loans into which such Loans will be converted or continued, the
proposed conversion/continuation date, and, if to be converted into or continued
as Reserve Adjusted Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall give each Bank notice as
promptly as practicable of any such proposed conversion or continuation
affecting any of its Loans. Notwithstanding the foregoing or the provisions of
Section 1.09, if a Default or Event of Default is in existence at the time any
Interest Period in respect of any Borrowing of Reserve Adjusted Eurodollar Loans
is to expire, such Loans may not be continued as Reserve Adjusted Eurodollar
Loans but instead shall be automatically converted on the last day of such
Interest Period into Base Rate Loans, unless the Administrative Agent shall
otherwise elect. If no Notice of Conversion/Continuation has been duly
delivered with respect to a Reserve Adjusted Eurodollar Loan on or before the
third Business Day prior to the last day of the Interest Period applicable
thereto, such Reserve Adjusted Eurodollar Loan shall be automatically converted
into a Base Rate Loan.

1.07. PRO RATA BORROWINGS. All Borrowings under this Agreement shall be
loaned by the Banks pro rata on the basis of their Revolving Loan Commitments,
their Acquisition Term Loan Commitments or their Supplemental Loan Commitments,
as the case may be. No Bank shall be responsible for any default by any other
Bank in its obligation to make Loans hereunder, and each Bank shall be obligated
to make the Loans provided to be made by it hereunder, regardless of the failure
of any other Bank to fulfill its commitments hereunder.

1.08. INTEREST.

(a) The unpaid principal amount of each Base Rate Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise), or unless sooner converted into a Reserve
Adjusted Eurodollar Loan, at a rate per annum equal to the sum of (i) the
Base Rate in effect from time to time PLUS (ii) the Base Rate Margin.

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(b) The unpaid principal amount of each Reserve Adjusted
Eurodollar Loan shall bear interest from the date of the Borrowing thereof
until maturity (whether by acceleration or otherwise), or unless sooner
converted into a Base Rate Loan, at a rate per annum equal to the sum of
(i) the relevant Eurodollar Rate PLUS (ii) the Eurodollar Rate Margin.

(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan shall bear interest (A) in the
case of Base Rate Loans, at a rate per annum equal to the sum of (1) the
Base Rate in effect from time to time PLUS (2) the Base Rate Margin PLUS
(3) 2% per annum, and (B) in the case of Reserve Adjusted Eurodollar
Loans, at a rate per annum equal to the sum of (1) the relevant Eurodollar
Rate PLUS (2) the Eurodollar Rate Margin PLUS (3) 2% per annum.

(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the
last Business Day of each March, June, September and December commencing
March 31, 1998; (ii) in respect of each Reserve Adjusted Eurodollar Loan,
in arrears on the last day of each Interest Period applicable thereto and,
in the case of an Interest Period in excess of three months, on each date
occurring at three-month intervals after the first day of such Interest
Period; and (iii) in respect of each Loan, on any prepayment (on the
amounts prepaid), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand.

(e) All computations of interest hereunder shall be made in
accordance with Section 11.07.

(f) The Administrative Agent, upon determining the interest rate
for any Borrowing of Reserve Adjusted Eurodollar Loans for any Interest
Period, shall promptly notify the Borrower and the Banks thereof. Such
determination shall, absent manifest error, be final, conclusive and
binding upon all parties hereto.

1.09. INTEREST PERIODS. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion/Continuation in respect of the making of,
conversion into, or continuation of, a Borrowing of Reserve Adjusted Eurodollar
Loans, it shall have the right to elect, by giving the Administrative Agent
written notice (or telephonic notice promptly confirmed in writing), the
Interest Period applicable to such Borrowing, which Interest Period shall, at
the option of the Borrower, be a period of one, two, three or six months.
Notwithstanding anything to the contrary contained above:

(a) the initial Interest Period for any Borrowing of Reserve
Adjusted Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate Loans)
and each Interest Period occurring

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thereafter (including continuations thereof) in respect of such Borrowing
shall commence on the date on which the next preceding Interest Period
expires;

(b) if any Interest Period relating to a Borrowing of Reserve
Adjusted Eurodollar Loans begins on a date for which there is no
numerically corresponding date in the calendar month in which such Interest
Period ends, such Interest Period shall end on the last Business Day of
such calendar month;

(c) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, HOWEVER, that if any Interest Period in
respect of a Reserve Adjusted Eurodollar Loan would otherwise expire on a
day which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;

(d) no Interest Period shall extend beyond, as applicable, the
Revolving Loan Maturity Date (in the case of Revolving Loans), the
Acquisition Term Loan Maturity Date (in the case of Acquisition Term
Loans), Supplemental Revolving Loan Maturity Date (in the case of
Supplemental Revolving Loans) or Supplemental Term Loan Maturity Date (in
the case of Supplemental Term Loans); and

(e) no Interest Period with respect to any Borrowing of Reserve
Adjusted Eurodollar Loans shall extend beyond any date upon which the
Borrower is required to make a scheduled payment of principal with respect
to the Acquisition Term Loans or the Supplemental Term Loans, as the case
may be, if, after giving effect to the selection of such Interest Period,
the aggregate principal amount of Acquisition Term Loans or Supplemental
Term Loans, as the case may be, maintained as Reserve Adjusted Eurodollar
Loans with Interest Periods ending after such date of scheduled payment of
principal would exceed the amount of Acquisition Term Loans or Supplemental
Term Loans, as the case may be, permitted to be outstanding after such
scheduled payment of principal.

1.10. SPECIAL PROVISIONS GOVERNING RESERVE ADJUSTED EURODOLLAR LOANS.
Notwithstanding other provisions of this Agreement, the following provisions
shall govern with respect to Reserve Adjusted Eurodollar Loans as to the matters
covered:

(a) On an Interest Rate Determination Date, the Administrative
Agent shall determine (which determination shall, absent demonstrable
error, be final, conclusive and binding upon all parties hereto) the
interest rate which shall apply to the Reserve Adjusted Eurodollar Loans
for which an interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in writing or by
telephone promptly confirmed in writing) to the Borrower and to each Bank.

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(b) In the event that (i) in the case of clause (A) below, the
Administrative Agent or (ii) in the case of clause (B) or (C) below, any
Bank shall have determined (which determination shall, absent demonstrable
error, be final, conclusive and binding upon all parties hereto):

(A) on any date for determining the Eurodollar Rate
for any Interest Period that, by reason of any changes arising
on or after the Closing Date affecting the interbank
Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis
provided for in the definition of Eurodollar Rate;

(B) at any time that such Bank shall incur increased
costs or reductions in the amounts received or receivable
hereunder with respect to any Reserve Adjusted Eurodollar
Loans or its obligation to make Reserve Adjusted Eurodollar
Loans because of any change since the Closing Date (including
any changes proposed or published prior to the Closing Date,
except that any such proposed or published changes as to which
the Administrative Agent had actual knowledge prior to the
Closing Date shall only be included if the Administrative
Agent has notified the Borrower of such proposed or published
changes in writing on or before the Closing Date) in any
applicable law, governmental rule, regulation, guideline,
request or order (or in the interpretation or administration
thereof and including the introduction of any new law or
governmental rule, regulation, guideline, request or order)
(such as, for example, but not limited to a change in official
reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the
computation of the Eurodollar Rate) and excluding any change
in the basis of taxation of payments to any Bank of the
principal or interest on the Notes or any other amounts
payable hereunder, such changes being provided for exclusively
by Section 3.07; or

(C) at any time that the making or continuance of any
Reserve Adjusted Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any applicable law,
governmental rule, regulation, guideline, request or order (or
would conflict with any such applicable law, governmental
rule, regulation, guideline, request or order, whether or not
having the force of law and even though the failure to comply
therewith would not be unlawful);

then, and in any such event, the Administrative Agent in the case of clause
(A) above or such Bank in the case of clause (B) or (C) above shall on such
date give notice (by telephone confirmed in writing) in accordance with
Section 1.10(h) to the Borrower of the Loan affected and, in the case of
clause (B) or (C) to the Administrative Agent, of such determination (which
notice the Administrative Agent shall promptly transmit to each of the
other Banks). Thereafter (1) in the case of clause (A) above, Reserve
Adjusted Eurodollar Loans shall no longer be available until such time as
the Administrative Agent

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notifies the Borrower and the Banks that the circumstances giving rise
to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion/Continuation given by the
Borrower with respect to the borrowing of or conversion into (including
continuance of) Reserve Adjusted Eurodollar Loans which have not yet
been incurred shall be deemed rescinded by the Borrower, (2) in the case
of clause (B) above, the Borrower shall pay to such Bank, within 10
Business Days of written demand therefor, such additional amounts as
shall be required to compensate such Bank for such increased costs or
reductions in amounts receivable hereunder (a written notice pursuant to
Section 1.10(h) as to the additional amounts owed to such Bank, showing
the basis for the calculation thereof, submitted to the Borrower by such
Bank shall, absent demonstrable error, be final, conclusive and binding
upon all parties hereto) and (3) in the case of clause (C) above, the
Borrower shall take one of the actions specified in Section 1.10(d) as
promptly as possible and, in any event, within the time period required
by law.

(c) At any time that any Reserve Adjusted Eurodollar Loan is
affected by the circumstances described in Section 1.10(b)(B), the Borrower
may either (i) if a Notice of Borrowing or Notice of
Conversion/Continuation has been given with respect to the affected Reserve
Adjusted Eurodollar Loan, cancel such Notice of Borrowing or Notice of
Conversion/Continuation by giving the Administrative Agent telephonic
notice (promptly confirmed in writing) thereof on the same date (if the
Borrower has been notified by not later than 3:00 P.M. (New York time) or
the next Business Day if otherwise) that the Borrower was notified by a
Bank pursuant to Section 1.10(b)(B) or (C), or (ii) if the affected Reserve
Adjusted Eurodollar Loan is then outstanding, upon at least one Business
Day's notice to the Administrative Agent, either require the affected Bank
to convert each such Reserve Adjusted Eurodollar Loan into a Base Rate
Loan, or prepay such Reserve Adjusted Eurodollar Loan; PROVIDED, HOWEVER,
that if more than one Bank is affected at any time, then all affected Banks
must be treated the same pursuant to this Section 1.10(c); and PROVIDED,
FURTHER, that the Borrower shall compensate any such affected Banks as set
forth in Section 1.10(f).

(d) At any time that any Reserve Adjusted Eurodollar Loan is
affected by the circumstances described in Section 1.10(b)(C), the Borrower
shall either (i) if a Notice of Borrowing or Notice of
Conversion/Continuation has been given with respect to the affected Reserve
Adjusted Eurodollar Loan, be deemed to have canceled said Notice of
Borrowing or Notice of Conversion/Continuation or (ii) if the affected
Reserve Adjusted Eurodollar Loan is then outstanding, either permit the
affected Bank to convert each such Reserve Adjusted Eurodollar Loan into a
Base Rate Loan, or prepay such Reserve Adjusted Eurodollar Loan; PROVIDED,
HOWEVER, that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(d);
and PROVIDED, FURTHER, that the Borrower shall compensate any such affected
Banks as set forth in Section 1.10(f).

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<PAGE>

(e) Each Bank agrees that, as promptly as practicable after it has
actual knowledge of the occurrence of any event or the existence of a
condition that would cause it to be an affected Bank under Section
1.10(b)(B) or (C), it will, to the extent not inconsistent with such Bank's
internal policies or any legal or regulatory restrictions, use reasonable
efforts to make, fund or maintain the affected Reserve Adjusted Eurodollar
Loans of such Bank through another lending office of such Bank if as a
result thereof the additional moneys which would otherwise be required to
be paid in respect of such Loans pursuant to Section 1.10(b)(B) would be
materially reduced or the illegality or other adverse circumstances which
would otherwise require conversion or prepayment of such Loans pursuant to
Section 1.10(b)(C) would cease to exist, and if, as determined by such
Bank, in its reasonable discretion, the making, funding or maintaining of
such Loans through such other lending office would not otherwise adversely
affect such Loans or such Bank. The Borrower hereby agrees to pay all
reasonable out-of-pocket expenses incurred by any Bank in utilizing another
lending office of such Bank pursuant to this Section 1.10(e).

(f) The Borrower shall compensate each Bank, within 10 Business
Days after a written request by such Bank (which request shall be
accompanied by a written notice pursuant to Section 1.10(h) setting forth
in reasonable detail the calculation of such amounts), for all reasonable
out-of-pocket losses, expenses and liabilities (including, without
limitation, such factors as any interest paid by such Bank to lenders of
funds borrowed by it to make or carry its Reserve Adjusted Eurodollar Loans
and any loss sustained by such Bank in connection with re-employment of
such funds (based upon the difference between the amount earned in
connection with the re-employment of such funds and the amount payable by
the Borrower if such funds had been borrowed or remained outstanding))
("BREAKAGE COSTS") which such Bank may sustain with respect to the
Borrower's Reserve Adjusted Eurodollar Loans: (i) if for any reason (other
than a default or error by such Bank) a Borrowing of any Reserve Adjusted
Eurodollar Loan does not occur on a date specified therefor in a Notice of
Borrowing or a Notice of Conversion/Continuation or in a telephonic request
for borrowing or conversion or continuation, or a successive Interest
Period in respect of any such Reserve Adjusted Eurodollar Loan does not
commence after notice therefor is given pursuant to Section 1.06; or (ii)
subject to Section 3.08, if any payment, prepayment or conversion (as
required by Section 3.01, 3.02 or 3.03(a) through (e), inclusive, or
3.03(h) or (i), by acceleration or otherwise) of any of such Bank's Reserve
Adjusted Eurodollar Loans occurs on a date which is not the last day of the
Interest Period applicable to that Loan; or (iii) if any prepayment of any
such Bank's Reserve Adjusted Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of any other failure by the Borrower to repay such Bank's
Reserve Adjusted Eurodollar Loans when required by the terms of this
Agreement.

(g) Any Bank claiming any additional amounts payable pursuant to
this Section 1.10 agrees to use reasonable efforts (consistent with such
Bank's internal

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policies and with legal and regulatory restrictions) to designate a
different lending office if the making of such a designation would avoid
the need for, or reduce the amount of, any such additional amounts and
would not, in the reasonable judgment of such Bank, be in any way
otherwise disadvantageous to such Bank.

(h) Each Bank shall notify the Borrower of any event occurring
after the date hereof entitling such Bank to compensation under this
Sections 1.10(a) through (g) as promptly as practicable, but in any event
within 90 days after such Bank obtains actual knowledge thereof; PROVIDED,
HOWEVER, that if any Bank fails to give such notice within 90 days after it
obtains actual knowledge of such an event, such Bank shall, with respect to
compensation payable pursuant to this Section 1.10 in respect of any costs
or other amounts resulting from or relating to such event, only be entitled
to payment under this Section 1.10 for such costs or other amounts from and
after the date 90 days prior to the date that such Bank does give such
notice. Each Bank will furnish to the Borrower a certificate setting forth
in reasonable detail the basis and amount of each request by such Bank for
compensation under this Section 1.10. Determinations by any Bank for
purposes of this Section 1.10, including of the effect of any regulatory
change pursuant to Section 1.10(b)(B) on its costs of maintaining Loans or
its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate such Bank under this
Section 1.10, shall be made on a reasonable basis.

1.11. CAPITAL REQUIREMENTS.

(a) If any Bank shall have determined in good faith that the
adoption or effectiveness after the Closing Date of any applicable law,
governmental rule, regulation, guideline, request or order regarding
capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank or such Bank's parent
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency has or would have the effect of reducing the rate of return on the
capital or assets of such Bank or such Bank's parent as a consequence of
such Bank's obligations hereunder to a level below that which such Bank or
such Bank's parent could have achieved but for such adoption, effectiveness
or change or as a consequence of an increase in the amount of capital
required to be maintained by such Bank as a consequence of such Bank's
obligations hereunder (including in each case, without limitation, with
respect to any of such Bank's Commitments or any Loan), then from time to
time, within 15 Business Days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank or such Bank's parent, as
the case may be, for such reduction.

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(b) Each Bank, upon determining in good faith that any additional
amounts will be payable pursuant to Section 1.11(a), will give prompt
written notice thereof to the Borrower, but in any event within 90 days
after such Bank obtains actual knowledge of an event described in Section
1.11(a) pursuant to which additional amounts will be payable thereunder;
PROVIDED, HOWEVER, that if any Bank fails to give such notice within 90
days after it obtains actual knowledge of such an event, such Bank shall,
with respect to compensation payable pursuant to this Section 1.11 in
respect of any costs or other amounts resulting from or relating to such
event, be entitled to payment under this Section 1.11 only for such costs
or other amounts from and after the date 90 days prior to the date that
such Bank does give such notice. Each Bank will furnish to the Borrower a
certificate setting forth in reasonable detail the basis and amount of each
request by such Bank for compensation under this Section 1.11.
Determinations by any Bank for purposes of this Section 1.11, including of
the effect of any regulatory change pursuant to Section 1.11(a) on its rate
of return or in the amount of capital required to be maintained by it, and
of the amounts required to compensate such Bank under this Section 1.11,
shall be made on a reasonable basis.

1.12. TOTAL LOAN COMMITMENTS; LIMITATIONS ON OUTSTANDING LOAN AMOUNTS.
As of the Closing Date, the amount of (a) the Total Commitment is $150,000,000,
(b) the Total Revolving Loan Commitment is $40,000,000, (c) the Total
Acquisition Term Loan Commitment is $75,000,000, and (d) the Total Supplemental
Loan Commitment is $35,000,000. Anything contained in this Agreement to the
contrary notwithstanding, (i) in no event shall the sum of the aggregate
principal amount of all outstanding Revolving Loans, Acquisition Term Loans,
Supplemental Revolving Loans and Supplemental Term Loans of any Bank at any time
exceed such Bank's portion of the Total Commitment, (ii) in no event shall the
sum of the aggregate principal amount of all Revolving Loans, Acquisition Term
Loans, Supplemental Revolving Loans and Supplemental Term Loans from all Banks
at any time exceed the Total Commitment, (iii) in no event shall the Total
Revolver Utilization exceed the Total Revolving Loan Commitment, (iv) in no
event shall the Total Acquisition Utilization exceed the Total Acquisition Term
Loan Commitment, and (v) in no event shall the Total Supplemental Utilization
exceed the Total Supplemental Loan Commitment.

1.13. LETTERS OF CREDIT

(a) LETTERS OF CREDIT; PARTICIPATION; ADDITIONAL COLLATERAL UPON
DEFAULT.

(i) Subject to the terms and conditions of this Agreement,
so long as no Default or Event of Default exists hereunder, and in
reliance upon the representations and warranties of the Borrower
set forth herein and in the other Credit Documents, in addition to
requesting that the Banks make Revolving Loans or Supplemental
Revolving Loans pursuant to Section 1.03, the Borrower may request,
from time to time, in accordance with the provisions of this
Section 1.13, that one or more Issuing Banks issue Letters of
Credit for the account of the Borrower; PROVIDED, THAT:

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(w) the Borrower shall specify in such request whether
such Letter of Credit is to be issued under the
Revolving Portion or the Supplemental Portion of the
Loan Facility; and

(x) the Borrower shall not request that any Bank issue
any Letter of Credit and a Bank shall not be
required to issue any Letter of Credit, if after
giving effect to such issuance the sum of (a) the
Letters of Credit Usage on the date of such
issuance, after giving effect to the issuance of all
Letters of Credit subject to outstanding requests
for issuance of a Letter of Credit, plus (b) the
aggregate principal amount of Revolving Loans or
Supplemental Revolving Loans, as the case may be,
then outstanding, after giving effect to the making
of all Revolving Loans or Supplemental Revolving
Loans, as the case may be, then requested by all
outstanding but unfunded Notices of Borrowing, would
exceed the lesser of (x) the Borrowing Base as shown
in the Borrowing Base Certificate that was last
required to be delivered pursuant to Section 6.01 or
(y) the Total Revolving Loan Commitment or the Total
Supplemental Revolving Loan Commitment, as the case
may be; and

(y) In no event shall any Issuing Bank issue any Letter
of Credit having an expiration date which is (x)
later than thirty (30) Business Days prior to the
Revolving Loan Maturity Date or Supplemental
Revolving Loan Maturity Date, as the case may be,
after giving effect to any possible renewal of such
Letter of Credit, or (y) more than one year after
its date of issuance; PROVIDED that, subject to the
foregoing clause (ii)(x), this clause (ii)(y) shall
not prevent any Issuing Bank from issuing a Letter
of Credit which is subject to renewal for periods
not exceeding one year per renewal; and

(z) In no event shall any Issuing Bank issue any Letter
of Credit if, after giving effect to such issuance
and the issuance of all other requested Letters of
Credit, the then outstanding Letters of Credit Usage
in respect of all Letters of Credit would exceed
$5,000,000.

(ii) Upon the issuance of any Letter of Credit, a
participation therein, in an amount equal to each Bank's PRO RATA
share (determined on the basis of such Bank's Revolving Loan
Commitment or Supplemental Revolving Loan Commitment, as the case
may be) (such participation of each Bank in each Letter of Credit
being hereinafter referred to as its "Letter of Credit
Participation"), shall

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automatically be deemed granted by the Issuing Bank to each Bank
on the date of such issuance and the Banks shall automatically be
obligated, as set forth in Section 1.13(e), to reimburse the
Issuing Bank to the extent of such pro rata share for all
obligations incurred by the Issuing Bank to third parties in
respect of such Letter of Credit not reimbursed by the Borrower.
The Issuing Bank will send to each Bank (and the Administrative
Agent if the Issuing Bank is not the Administrative Agent) a
confirmation regarding the participation in Letters of Credit
outstanding during such month.

(iii) Notwithstanding the foregoing, upon the occurrence
and during the continuation of any Event of Default hereunder, the
Administrative Agent or the Required Banks may, by notice to the
Borrower, require that any outstanding Letters of Credit be cash
collateralized, and upon receipt of such notice, the Borrower
shall, within five Business Days of such notice, deliver to the
Administrative Agent an amount equal to the sum of (x) the maximum
aggregate amount that is or at any time thereafter may become
available to be drawn under any such outstanding Letters of Credit
and (y) the aggregate amount of all drawings under such Letters of
Credit which have been honored by Issuing Banks with respect
thereto and not theretofore reimbursed by the Borrower; PROVIDED,
that any such cash collateralized Letters of Credit shall be
excluded from the calculation of Letters of Credit Usage for
purposes of determining the availability of Letters of Credit under
Section 1.13(a)(x) and for purposes of Section 3.03(a) or (b).

(iv) The Administrative Agent is hereby authorized and
directed in the event of such Event of Default and requirement of
cash collateral to create a segregated cash collateral account
bearing interest payable to the Borrower at a rate per annum equal
to the Federal Funds Rate (a "LETTER OF CREDIT CASH COLLATERAL
ACCOUNT"), and to deposit in such account any amounts received from
the Borrower pursuant to the foregoing. Funds on deposit from time
to time in any Letter of Credit Cash Collateral Account (the
"LETTER OF CREDIT CASH COLLATERAL") shall be held by the
Administrative Agent for the benefit of the Banks hereunder,
including Issuing Banks, in respect of their participation in
Letters of Credit and as Banks hereunder and as security for the
payment and performance of the Obligations in accordance with the
Security Documents, including the Borrower's obligations under
Section 1.13(d), shall be subject to the sole dominion and control
of the Administrative Agent and the Borrower shall have no right of
withdrawal from the Letter of Credit Cash Collateral Account.
Notwithstanding any provision in this Agreement or in any Security
Document, after payment of any costs of collection and reasonable
expenses of the Administrative Agent in connection with the
establishment of the Letter of Credit Cash Collateral Account,
Letter of Credit Cash Collateral shall be applied by the
Administrative Agent as follows: FIRST, to reimburse any Banks
(including any

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Issuing Banks) for any drawings (or participation in such) on
such Letters of Credit which have not been repaid by the
Borrower, such reimbursement to be made from time to time until
no Letters of Credit are outstanding; SECOND, only after no
Letters of Credit remain outstanding and any unreimbursed
drawings (or participations in such) of any Bank (including any
Issuing Bank) have been fully repaid and all fees payable under
this Section 1.13 have been paid, to the payment, in accordance
with the Security Documents, of any of the remaining Obligations
then due and payable; and FINALLY, after its application in
accordance with the foregoing, returned to the Borrower.

(b) REQUEST FOR ISSUANCE Whenever the Borrower desires the
issuance of a Letter of Credit it shall deliver to the Administrative
Agent, at the Agent's Office, an application requesting issuance of a
Letter of Credit no later than 1:00 P.M. (New York time) at least three
Business Days, or such shorter period as may be agreed to by any Issuing
Bank in any particular instance, in advance of the proposed date of
issuance. The request for issuance with respect to any Letter of Credit
shall specify (i) the proposed date of issuance (which shall be a business
day under the laws of the jurisdiction of the Issuing Bank) of such Letter
of Credit, (ii) the face amount of such Letter of Credit, (iii) the
expiration date of such Letter of Credit and (iv) the name and address of
the beneficiary of such Letter of Credit. As soon as practicable after
delivery of such request for issuance of a Letter of Credit, the Issuing
Bank for such Letter of Credit shall be determined as provided in Section
1.13(c). Prior to the date of issuance, the Borrower shall specify a
precise description of the documents and the verbatim text of any
certificate to be presented by the beneficiary of such Letter of Credit
which, if presented by such beneficiary prior to the expiration date of the
Letter of Credit, would require the Issuing Bank to make payment under the
Letter of Credit; PROVIDED that the Issuing Bank, in its sole judgment, may
require such changes in any such documents and certificates as it
reasonably believes to be necessary to comply with laws, customs or
practices or to achieve clarity; and PROVIDED, FURTHER, that no Letter of
Credit shall require payment against a conforming draft to be made
thereunder earlier than 1:00 P.M. in the time zone of the Issuing Bank on
the Business Day (which shall be a business day under the laws of the
jurisdiction of the Issuing Bank) next succeeding the Business Day (which
shall be a business day under the laws of the jurisdiction of the Issuing
Bank) that such draft is presented. In determining whether to pay under
the Letter of Credit, the Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered
under the Letter of Credit have been delivered and that they comply on
their face with the requirements of that Letter of Credit. Without
limiting the foregoing, the determination of whether a demand has been made
prior to the expiration of a Letter of Credit and whether a demand is in
proper and sufficient form for compliance with the Letter of Credit shall
be made by the Issuing Bank in accordance with Section 1.13(k). The
Issuing Bank is authorized without reference to or approval by the Borrower
to set forth the terms appearing on the relevant application for the Letter
of Credit in the Letter of Credit and to modify or alter such terms in such
language as the Issuing Bank may

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deem appropriate, with such variations from such terms as such Bank may,
in accordance with Section 1.13(k), determine are necessary to comply
with laws, customs or practices or to achieve clarity and are not
materially inconsistent with such terms. Promptly after receipt of a
request for issuance of a Letter of Credit and the determination of the
Issuing Bank thereof, the Administrative Agent shall notify each Bank of
the proposed issuance, the identity of the Issuing Bank and the amount
of each other Bank's respective participation therein, determined in
accordance with Section 1.13(a)(ii).

(c) DETERMINATION OF ISSUING BANK. Upon receipt by the
Administrative Agent of a request for issuance pursuant to Section 1.13(b)
with respect to a Letter of Credit, in the event that Indosuez elects to
issue such Letter of Credit, the Administrative Agent shall so notify the
Borrower, and Indosuez shall be the Issuing Bank with respect thereto. In
the event that Indosuez, in its sole discretion, elects not to issue such
Letter of Credit, the Administrative Agent shall promptly so notify the
Borrower, and the Borrower may request any other Bank to issue such Letter
of Credit. Each such Bank so requested to issue such Letter of Credit
shall promptly notify the Borrower and the Administrative Agent whether or
not, in its sole discretion, it has elected to issue such Letter of Credit
and any such Bank that so elects to issue such Letter of Credit shall be
the Issuing Bank with respect thereto. In the event that all other Banks
shall have declined to issue such Letter of Credit, notwithstanding the
prior election of Indosuez not to issue such Letter of Credit, Indosuez
shall be obligated to issue the Letter of Credit requested by the Borrower
and shall be the Issuing Bank with respect to such Letter of Credit;
PROVIDED that Indosuez shall not be obligated to issue any Letter of Credit
for which the initial stated amount is less than $5,000. No Issuing Bank
shall issue any Letter of Credit denominated in a currency other than
Dollars.

(d) PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In the
event of any request for drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Bank shall notify the Borrower and the
Administrative Agent on or before the date on which such Issuing Bank
intends to honor such drawing, and the Borrower shall reimburse such
Issuing Bank on the day on which such drawing is honored in an amount in
same day funds equal to the amount of such drawing: PROVIDED that,
anything contained in this Agreement to the contrary notwithstanding, (i)
unless the Borrower shall have notified the Administrative Agent and such
Issuing Bank prior to 1:00 p.m. (New York time) on the Business Day of the
date of such drawing that the Borrower intends to reimburse such Issuing
Bank for the amount of such drawing with funds other than the proceeds of
Revolving Loans, the Borrower shall be deemed to have timely given a Notice
of Borrowing to the Administrative Agent requesting the Banks to make
Revolving Loans or Supplemental Revolving Loans, as the case may be, that
are Base Rate Loans on the date on which such drawing is honored in an
amount equal to the amount of such drawing, and (ii) subject to
availability under the Borrowing Base, the Banks shall, on the date of such
drawing, make Revolving Loans or Supplemental Revolving Loans, as the case
may be, that are Base Rate Loans in the amount of such

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<PAGE>

drawing, the proceeds of which shall be applied directly by the
Administrative Agent to reimburse such Issuing Bank for the amount of
such drawing; and PROVIDED FURTHER that if for any reason, Revolving
Loans or Supplemental Revolving Loans, as the case may be, are not made
to so reimburse such Issuing Bank in an amount equal to the amount of
such drawing, the Borrower shall reimburse such Issuing Bank, within one
Business Day (which shall be a business day under the laws of
jurisdiction of such Issuing Bank) following the receipt of notice from
the Administrative Agent that such Revolving Loans or Supplemental
Revolving Loans, as the case may be, have not been made, in an amount in
same day funds equal to the excess of the amount of such drawing over
the amount of such Revolving Loans or Supplemental Revolving Loans, as
the case may be, if any, that are so received, plus accrued interest on
such amount at the rate set forth in Section 1.13(f)(i)(A).

(e) PAYMENT BY BANKS. In the event that (i) the Borrower shall
fail to reimburse an Issuing Bank as provided in Section 1.13(d) in an
amount equal to the amount of any drawing honored by such Issuing Bank
under a Letter of Credit issued by it, and (ii) the Revolving Loans are not
made in payment of such reimbursement obligation as provided in Section
1.13(d), such Issuing Bank shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective
participation therein. Each Bank shall make available to such Issuing Bank
an amount equal to its respective participation in same day funds, at the
office of such Issuing Bank specified in such notice, not later than 1:00
P.M. (New York time) on the Business Day (which shall be a business day
under the laws of the jurisdiction of such Issuing Bank) after the date
notified by such Issuing Bank. In the event that any Bank fails to make
available to such Issuing Bank the amount of such Bank's participation in
such Letter of Credit as provided in this Section 1.13(e), such Issuing
Bank shall be entitled to recover such amount on demand from such Bank
together with interest at the customary rate set by the Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. Each Issuing Bank shall distribute to each
other Bank which has paid all amounts payable by it under this Section
1.13(e) with respect to any Letter of Credit issued by such Issuing Bank
such other Bank's PRO RATA share of all payments received by such Issuing
Bank from the Borrower in reimbursement of drawings honored by such Issuing
Bank under such Letter of Credit when such payments are received. Nothing
in this Section 1.13(e) shall be deemed to relieve any Bank of its
obligation to pay all amounts payable by it under this Section 1.13(e) with
respect to any Letter of Credit issued by an Issuing Bank or to prejudice
any rights that the Borrower or any other Bank may have against a Bank as a
result of any default by such Bank hereunder and no Bank shall be
responsible for the failure of any other Bank to pay its PRO RATA share
payable under this Section 1.13(e).

(f) COMPENSATION.

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(i) the Borrower agrees to pay the following amounts with
respect to all Letters of Credit:

(A) with respect to drawings made under any
Letter of Credit, interest, payable on demand, on the amount
paid by such Issuing Bank in respect of each such drawing
from and including the date of the drawing through the date
such amount is reimbursed by the Borrower (including any
such reimbursement out of the proceeds of Revolving Loans or
Supplemental Revolving Loans, as the case may be, pursuant
to Section 1.13(d)) at a rate which is equal to the interest
rate then applicable to Revolving Loans or Supplemental
Revolving Loans, as the case may be, that are Base Rate
Loans for the period from the date of such drawing to and
including the first Business Day after the date of such
drawing and thereafter at a rate equal to 2% PER ANNUM in
excess of the rate of interest otherwise payable under this
Agreement for Revolving Loans or Supplemental Revolving
Loans, as the case may be, that are Base Rate Loans during
such period; and

(B) with respect to the amendment or transfer of
each Letter of Credit and each drawing made thereunder,
documentary and processing charges in accordance with such
Issuing Bank's standard schedule for such charges in effect
at the time of such amendment, transfer or drawing, as the
case may be.

(ii) the Borrower agrees to pay to the Administrative
Agent for distribution to each Bank in respect of all Letters of
Credit outstanding such Bank's PRO RATA share of a commission equal
to 2% PER ANNUM of the maximum amount available from time to time
to be drawn under such outstanding Letters of Credit, payable in
arrears on and through the last Business Day of each March, June,
September and December commencing March 31, 1997 and calculated on
the basis of a 365-day year and the actual number of days elapsed.
Upon the happening and during the continuance of an Event of
Default described in Section 8.01, the commission referred to in
the preceding sentence shall be 4% PER ANNUM.

(iii) the Borrower agrees to pay to each Issuing Bank in
respect of each Letter of Credit issued by each such Issuing Bank
on the date of issuance an amount equal to the greater of (A) 1/2
of 1% of the maximum amount available at any time to be drawn under
such Letter of Credit or (B) $1,500.

Amounts payable under clauses (i) (A) and (ii) of this Section
1.13(f) shall be paid to the Administrative Agent for the benefit of
the Banks. The Administrative Agent shall promptly distribute to each
Bank its PRO RATA share of such amount. Amounts payable under clauses
(i) (B) and (iii) of this Section

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1.13(f) shall be paid to the Administrative Agent, and thereupon paid
over to the Issuing Bank.

(g) OBLIGATIONS ABSOLUTE. The obligation of the Borrower to
reimburse each Issuing Bank for drawings made under the Letters of Credit
issued by it and the obligations of the Banks under Section 1.13(e) shall
be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including, without
limitation, the following circumstances:

(i) any lack of validity or enforceability of any Letter
of Credit;

(ii) the existence of any claim, set off, defense or other
right that the Borrower or any other Person may have at any time
against a beneficiary or any transferee of any Letter of Credit (or
any persons or entities for whom any such beneficiary or transferee
may be acting), such Issuing Bank, any Bank or any other Person,
whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction;

(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect, if not apparent
from the documents presented;

(iv) payment by such Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or
other document that does not comply with the terms of such Letter
of Credit unless such Issuing Bank shall have acted in bad faith or
with willful misconduct or gross negligence in issuing such
payment;

(v) any other circumstance or happening whatsoever that
is similar to any of the foregoing; or

(vi) the fact that a Default or Event of Default shall
have occurred and be continuing.

(h) ADDITIONAL PAYMENTS. If by reason of (a) any change after the
Effective Date in applicable law, regulation, rule, decree or regulatory
requirement or any change in the interpretation or application by an
judicial or regulatory authority of any law, regulation, rule, decree or
regulatory requirement or (b) compliance by an Issuing Bank or any Bank
with any direction, request or requirement (whether or not having the force
of law) of any Governmental Authority or monetary authority including,
without limitation, Regulation D, any reserve, deposit or similar
requirement is or shall be applicable, imposed or modified in respect of
any Letter of Credit issued by such Issuing Bank or participation

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therein purchased by any Bank and the result of the foregoing is to
increase the cost to such Issuing Bank or any Bank of issuing, making or
maintaining any Letter of Credit or of purchasing or maintaining any
participation therein, or to reduce the amount receivable in respect
thereof by such Issuing Bank or any Bank, then and in any such case such
Issuing Bank or such Bank shall, after the additional cost is incurred
or the amount received is reduced, notify the Borrower and the Borrower
shall pay within 10 Business Days after demand such amounts as such
Issuing Bank or such Bank may specify to be necessary to compensate such
Issuing Bank or such Bank for such additional cost or reduced receipt,
together with interest on such amount from the date demanded until
payment in full thereof at a rate PER ANNUM equal at all times to the
rate applicable to Revolving Loans or Supplemental Revolving Loans that
are Base Rate Loans then in effect; PROVIDED that if any Bank fails to
give such notice within 90 days after it obtains actual knowledge of
such an event, such Bank shall, with respect to compensation payable
pursuant to this Section 1.13(h) in respect of any costs or other
amounts resulting from or relating to such event, only be entitled to
payment under this Section 1.13(h) for such costs or other amounts
incurred from and after the date 90 days prior to the date that such
Bank does give such notice; and PROVIDED, FURTHER, that each Bank agrees
that, as promptly as practicable after it becomes aware of the existence
of the foregoing conditions, it will, to the extent not inconsistent
with such Bank's internal policies or any legal or regulatory
restrictions, use reasonable efforts to issue, make or maintain the
affected Letter of Credit or purchase or maintain any participation
therein through another lending office of such Bank if as a result
thereof the additional moneys which would otherwise be required to be
paid to compensate for such additional cost or reduced receipt with
respect to such Letter of Credit pursuant to this Section 1.13(h) would
be reduced and if, as determined by such Bank, in its reasonable
discretion, the issuance, making or maintaining of such Letter of Credit
or the purchasing or maintaining of any participation therein through
such other lending office would not otherwise materially adversely
affect such Letter of Credit or such Bank. Each Bank will furnish to
the Borrower a certificate setting forth in reasonable detail the basis
and amount of each request by such Bank for compensation under this
Section 1.13(h). Determinations by any Bank for purposes of this
Section 1.13(h), including of the effect of any regulatory change
pursuant to Section 1.13(h) on its costs of making or maintaining
Letters of Credit (or purchasing or maintaining participation therein),
or on amounts receivable by it in respect of Letters of Credit, and of
the amounts required to compensate such Bank under this Section 1.13(h),
shall be made on a reasonable basis. A certificate in reasonable detail
as to the amount of such increased cost or reduced receipt, submitted to
the Borrower and the Administrative Agent by the Issuing Bank or any
Bank, as the case may be, shall, except for demonstrable error, be
final, conclusive and binding for all purposes.

(i) INDEMNIFICATION; NATURE OF ISSUING BANK'S DUTIES. In addition
to amounts payable as elsewhere provided in this Section 1.13, without
duplication, the Borrower hereby agrees to protect, indemnify, pay and save
each Issuing Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and

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expenses (including reasonable attorneys' fees and allocated costs of
internal counsel) which such Issuing Bank may incur or be subject to as
a consequence, direct or indirect, of (i) the issuance of the Letters of
Credit or (ii) the failure of such Issuing Bank to honor a drawing under
any Letter of Credit, in each case as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de
facto Governmental Authority.

As between the Borrower and each Issuing Bank, the Borrower assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit
issued by such Issuing Bank by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing,
such Issuing Bank shall not be responsible: (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effects of any document
submitted by any party in connection with the application for and issuance
of any such Letter of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in part,
that may prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such Letter of Credit to comply fully
with conditions required in order to draw upon such Letter of Credit; (iv)
for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or
not they are in cipher; (v) for errors in the translation or interpretation
of technical terms; (vi) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
such Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of Credit of the
proceeds of any drawing under such Letter of Credit; (viii) for any
consequences arising from causes beyond the control of such Issuing Bank or
its correspondents, including, without limitation, any act or omission of
any Governmental Authority; and (ix) for any error, neglect, default,
suspension or insolvency of any Issuing Bank's correspondents or any
consequence thereof, PROVIDED, in each case, that the Issuing Bank acts in
good faith. None of the above shall affect, impair, or prevent the vesting
of any of such Issuing Bank's rights or powers hereunder. Any Issuing Bank
shall have the right to transmit the terms of the Letter of Credit without
translating them. If the Letter of Credit provides that payment is to be
made by the Issuing Bank's correspondent, neither the Issuing Bank nor such
correspondent shall be responsible for the failure of any document
specified in the Letter of Credit to come into the Issuing Bank's hands or
for any delay in connection therewith, and the Borrower's obligation to
reimburse the Issuing Bank for payments made or obligations incurred shall
not be affected by such failure or delay in the receipt by the Issuing Bank
of any or all of such documents whether sent to such Bank in one or
multiple mailings. No Issuing Bank shall be liable for any failure by such
Bank or anyone else to pay or accept any draft or other demands for payment
or acceptance under the Letter of Credit resulting from any censorship,
law, control or restriction rightfully or wrongfully exercised by any de
facto or de jure Governmental Authority or from any

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<PAGE>

other cause beyond such Bank's control or the control of such Bank's
correspondents, agents or sub-agents or for any loss or damage to the
Borrower or anyone else resulting from any such failure to pay or
accept, all such risks being expressly assumed by the Borrower.

In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any
Issuing Bank in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith, shall not result
in such Issuing Bank incurring any liability to the Borrower. Without
limiting the generality of the foregoing, the Issuing Bank and its
correspondents may, without incurring any responsibility or liability, (i)
act in reliance upon any oral, telephonic, telegraphic, telex, telecopier,
electronic or written request, application (including an application for
issuance of a Letter of Credit) or notice believed in good faith to have
been authorized by the Borrower, whether or not given or signed by an
authorized person, and (ii) receive, accept and pay any drafts or other
documents and instruments (otherwise in order) signed by, or issued to, the
receiver, executor, administrator, liquidator, guardian or conservator of
anyone named in the Letter of Credit as the person by whom drafts and other
documents and instruments are to be made or issued.

Notwithstanding anything to the contrary contained in this Section
1.13(i), the Borrower shall have no obligation to indemnify any Issuing
Bank or any Bank in respect of any liability incurred by such Issuing Bank
or such Bank arising out of the gross negligence, bad faith or willful
misconduct of such Issuing Bank or such Bank or out of the wrongful
dishonor by such Issuing Bank or such Bank of a proper demand for payment
under the Letters of Credit issued by it.

(j) COMPUTATION OF INTEREST. Interest payable pursuant to this
Section 1.13 shall be computed on the basis of a 360 day year and the
actual number of days elapsed.

(k) UNIFORM CUSTOMS AND PRACTICE. This Section 1.13 shall be
subject to the Uniform Customs and Practice for Documentary Credits of the
International Chamber of Commerce as in force on the date of issuance of
each Letter of Credit ("UCP") and the UCP shall in all respects be deemed a
part hereof as fully as if incorporated herein. The provisions of this
Section 1.13 shall, where possible, be construed so as to be consistent
with the UCP; PROVIDED that to the extent the provisions of the UCP are not
consistent with the provisions of this Section 1.13 the provisions of the
UCP shall control. Notwithstanding the provisions of Section 11.08 hereof,
in the event of any conflict between the UCP and Article 5 of the UCC, the
UCP shall govern as to the provisions of this Section 1.13.

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SECTION 2. COMMITMENTS.

2.01. VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least one Business
Day's prior written notice (or telephonic notice promptly confirmed in writing)
to the Administrative Agent at the Agent's Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, without premium or penalty, to terminate irrevocably the
unutilized portion of any or all of (i) the Total Revolving Loan Commitments,
(ii) the Total Acquisition Term Loan Commitments, and (iii) the Total
Supplemental Loan Commitments, in each case, in part or in whole; PROVIDED,
HOWEVER, that (a) any such termination shall proportionately and permanently
reduce the Revolving Loan Commitment, Acquisition Term Loan Commitment, or
Supplemental Loan Commitment, as applicable, of each of the Banks and (b) any
partial reduction of the Total Revolving Loan Commitments, the Total Acquisition
Term Loan Commitments or the Total Supplemental Loan Commitments pursuant to
this Section 2.01 shall, in each case, be in the amount of at least $500,000 and
integral multiples of $100,000 in excess of that amount; PROVIDED, FURTHER, that
(A) the Total Revolving Loan Commitment shall not be reduced to an amount less
than the sum of (x) the aggregate Revolving Loans then outstanding and (y) the
aggregate Letters of Credit Usage related to the Revolving Portion of the Credit
Facility, (B) the Total Acquisition Term Loan Commitment shall not be reduced to
an amount less than the aggregate Acquisition Term Loans then outstanding, and
(C) the Total Supplemental Loan Commitment shall not be reduced to an amount
less than the sum of (I) the aggregate Supplemental Revolving Loans then
outstanding, (II) the aggregate Letters of Credit Usage related to the
Supplemental Portion of the Credit Facility, and (III) the aggregate
Supplemental Term Loans then outstanding.

2.02. ADJUSTMENTS; TERMINATION OF COMMITMENTS, ETC.

(a) The Total Revolving Loan Commitment shall terminate on the
earlier of (i) the Revolving Loan Commitment Termination Date and (ii) the
voluntary reduction by the Borrower pursuant to Section 2.01 of the
Revolving Loan Commitment to zero.

(b) The Total Acquisition Term Loan Commitment shall terminate on
the earlier of (i) on the Acquisition Term Loan Commitment Termination Date
and (ii) the voluntary reduction by the Borrower pursuant to Section 2.01
of the Acquisition Term Loan Commitment to zero and any amounts not
borrowed with respect to the Acquisition Term Loan on or before such date
shall cease to be available.

(c) The Total Supplemental Revolving Loan Commitment shall
terminate on the earlier of (i) the Supplemental Revolving Loan Commitment
Termination Date, and (ii) the voluntary reduction by the Borrower pursuant
to Section 2.01 of the Total Supplemental Commitments.

(d) The Total Supplemental Term Loan Commitments shall terminate
on the earlier of (i) the Supplemental Term Loan Commitment Termination
Date, and (ii) the

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voluntary reduction by the Borrower pursuant to Section 2.01 of the Total
Supplemental Term Loan Commitments to zero.

(e) Each reduction to or termination of the Total Revolving Loan
Commitment, the Total Acquisition Term Loan Commitment, the Total
Supplemental Revolving Loan Commitment or the Total Supplemental Term Loan
Commitment pursuant to this Section 2.02 shall apply proportionately to the
Revolving Loan Commitment, the Acquisition Term Loan Commitment, the
Supplemental Revolving Loan Commitment or the Supplemental Term Loan
Commitment, as the case may be, of each Bank.

2.03. COMMITMENT FEE. The Borrower agrees to pay the Administrative
Agent a commitment fee (the "COMMITMENT FEE") for the account of each Bank for
the period from and including the Closing Date to but not including the date on
which each of the Total Revolving Loan Commitment, the Total Acquisition Term
Loan Commitment, and the Total Supplemental Loan Commitment have been
terminated, computed at a rate equal to .35% per annum on the daily average
Unutilized Revolver Commitment of such Bank, .35% per annum on the daily average
Unutilized Acquisition Commitment of such Bank, .25% per annum on the daily
average Unutilized Supplemental Commitment of such Bank (for the periods to and
including the last Business Day in December, 1998) and, .50% per annum on the
daily average Unutilized Supplemental Commitment of such Bank (for the periods
from and after January 1, 1999). The Commitment Fee shall be due and payable in
arrears on the last Business Day of each March, June, September and December
commencing March 31, 1998 (for the period from the Closing Date through March
31, 1998), and on the earlier of (x) the Revolving Loan Commitment Termination
Date or (y) the date on which each of the Total Revolving Loan Commitment, the
Total Acquisition Term Loan Commitment and the Total Supplemental Loan
Commitments have been terminated pursuant to the terms of this Agreement (for
the period from the date through which the Commitment Fee has been paid in full
in accordance with this Section 2.03 to and including the Revolving Loan
Commitment Termination Date or the date of such earlier termination, as the case
may be). The calculation of Commitment Fees shall be based on the actual number
of days elapsed over a year of 360 days.

SECTION 3. PAYMENTS.

3.01. SCHEDULED PAYMENTS.

(a) The Borrower shall cause to be paid Scheduled Supplemental
Term Loan Principal Payments on the Supplemental Term Loan in the amounts
and at the times specified in the definition of Scheduled Supplemental Term
Loan Principal Payments set forth in Section 9 until the Supplemental Term
Loan is paid in full. Principal amounts repaid in respect of the
Supplemental Term Loan shall reduce any outstanding Supplemental Term Loan
Commitments and shall not be available for reborrowing.

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(b) The Borrower shall cause to be paid Scheduled Acquisition Term
Loan Principal Payments on the Acquisition Term Loans in the amounts and at
the times specified in the definition of Scheduled Acquisition Term Loan
Principal Payments set forth in Section 9 until the Acquisition Term Loan
are paid in full. Principal amounts repaid in respect of the Acquisition
Term Loans shall reduce any outstanding Acquisition Term Loan Commitments
and shall not be available for reborrowing.

(c) Except for earlier maturity of any Loan due to acceleration
pursuant to the terms of this Agreement, the entire remaining principal
balance, and accrued interest thereon, together with any other amounts then
due and payable hereunder, shall be paid in full (i) with respect to the
Revolving Loans, on the Revolving Loan Maturity Date, (ii) with respect to
the Acquisition Term Loans, on the Acquisition Term Loan Maturity Date,
(iii) with respect to the Supplemental Revolving Loans, on the Supplemental
Revolving Loan Maturity Date and (iv) with respect to Supplemental Term
Loans, on the Supplemental Term Loan Maturity Date.

(d) If, in order to comply with Section 3.01(a), (b) or (c), the
Borrower is required to repay Reserve Adjusted Eurodollar Loans prior to
the end of any applicable Interest Period, the Borrower shall compensate
each Bank for all losses, expenses and liabilities incurred by such Bank in
connection with each such repayment in accordance with Section 1.10(f).

3.02. VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay
the Revolving Loans, the Acquisition Term Loans, the Supplemental Revolving
Loans or the Supplemental Term Loans, in whole or in part from time to time,
without premium or penalty, on the following terms and conditions: (a) the
Borrower shall give the Administrative Agent at the Agent's Office written
notice (or telephonic notice promptly confirmed in writing) of its intent to
prepay the Loans, the amount of such prepayment and whether such prepayment is
in respect of the Revolving Loans or Supplemental Revolving Loans, in the case
of Reserve Adjusted Eurodollar Loans, the specific Borrowing or Borrowings
pursuant to which such Reserve Adjusted Eurodollar Loans were made, which notice
shall be given by the Borrower at least one Business Day prior to the date of
such prepayment and which notice shall promptly be transmitted by the
Administrative Agent to each of the Banks; (b) each partial prepayment of a
Borrowing shall be in an aggregate principal amount of at least $100,000 and in
integral multiples of $100,000 in excess of that amount (or, if less, in an
amount equal to the entire remaining principal balance of the Loan or the
Borrowing so repaid); PROVIDED, HOWEVER, that no partial prepayment of Reserve
Adjusted Eurodollar Loans made pursuant to a single Borrowing under the Loan
Facility (or portion thereof) shall reduce the outstanding Loans made pursuant
to such Borrowing to an amount less than the Minimum Borrowing Amount (other
than $0); and (c) Reserve Adjusted Eurodollar Loans may only be prepaid pursuant
to this Section 3.02 on the last day of an Interest Period applicable thereto.
Voluntary prepayments of Loans other than prepayments of the Revolving Loans or
Supplemental Revolving Loans shall be applied pro rata (i) first, to the
outstanding principal amount of each of the Acquisition Term Loans to reduce all
remaining

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<PAGE>

Scheduled Acquisition Term Loan Principal Payments, in each case in order of
maturity, (ii) second, to the then outstanding principal amount of the
Supplemental Term Loans if any, in each case in order of maturity; PROVIDED
that any amount so prepaid pursuant to this subclause (ii) shall permanently
reduce the Supplemental Loan Commitments and any amounts so prepaid shall not
be available for reborrowing, (iii) third, to reduce the outstanding
principal amount of the Revolving Loans, and (iv) fourth, to reduce the
outstanding principal amount of the Supplemental Revolving Loans.

3.03. MANDATORY PREPAYMENTS; REDUCTION OF COMMITMENTS.

(a) The Borrower shall prepay the outstanding principal amount of
(x) the Revolving Loans on any date on which the sum of the aggregate
outstanding principal amount of such Loans (after giving effect to any
other repayments or prepayments on such date) and the then outstanding
Letters of Credit Usage related to the Revolving Portion exceeds the Total
Revolving Loan Commitment, in an amount equal to the amount of such excess,
(y) the Acquisition Term Loans on any date on which the aggregate
outstanding principal amount of such Loans (after giving effect to any
other repayments or prepayments on such date) exceeds the Total Acquisition
Term Loan Commitment, in an amount equal to the amount of such excess or
(z) the Supplemental Term Loans and the Supplemental Revolving Loans, on a
pro rata basis and in order of maturity, on any date on which the aggregate
outstanding principal amount of such Loans (after giving effect to any
other repayments or prepayments on such date), and the then outstanding
Letters of Credit Usage related to the Revolving Portion exceeds the Total
Supplemental Commitment.

(b) If the sum of (x) the aggregate principal amount of
outstanding Revolving Loans plus (y) the aggregate principal amount of
outstanding Supplemental Revolving Loans, plus (z) the then outstanding
Letters of Credit Usage exceeds the Borrowing Base as set forth in the
Borrower's most recent Borrowing Base Certificate required to be delivered
pursuant to Section 6.01(m) (such amount is referred to as the "EXCESS"),
then the Borrower shall prepay first the Supplemental Revolving Loans on a
pro rata basis, and second, the Revolving Loans, on a pro rata basis in a
principal amount equal to the Excess no later than two Business Days after
the Borrower has delivered, or was required to deliver, such Borrowing Base
Certificate to the Administrative Agent and the Banks.

(i) As promptly as practicable, but in any event within
five Business Days of the date of receipt by the Borrower and/or
any of its Subsidiaries, of Net Cash Proceeds (PROVIDED, HOWEVER,
that with respect to any Net Cash Proceeds of the sale of equity
securities of Borrower or any of its Subsidiaries, Section 3.03(e)
will govern and that with respect to any Net Cash Proceeds from any
damage to, or loss, destruction or condemnation of Assets, Section
3.03(f) will govern), the

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Borrower shall remit to the Administrative Agent an amount equal
to 100% of such Net Cash Proceeds, specifying any portion of
such proceeds (such portion, the "REPLACEMENT ASSET AMOUNT")
intended by the Borrower to be used within 120 days of receipt
(or such longer period as may be consented to by the
Administrative Agent) for replacing productive assets of a kind
then used or usable in the business of the Borrower and its
Subsidiaries (in each case, to the extent permitted by the
Security Documents); PROVIDED, HOWEVER, that if the property
sold constituted Collateral, any such replacement property shall
be made subject to the Lien of the Security Documents.

(ii) The Replacement Asset Amount of such Net Cash Proceeds
shall be deposited in the Reserve Account and the remaining
portion, if any, of such Net Cash Proceeds shall be applied by the
Administrative Agent as provided in Section 3.04(a). During a
period of 120 days from the date such Replacement Asset Amount is
deposited in the Reserve Account, the Administrative Agent shall
release amounts in such Reserve Account from time to time as the
Borrower provides evidence to the Administrative Agent of the
purchase of such replacement assets (whether or not purchased with
proceeds of Revolving Loans or Supplemental Revolving Loans), and
after the end of such 120-day period or upon the occurrence of an
Event of Default of the type specified in Section 8.01 or 8.05 or
the taking by the Administrative Agent of any of the actions set
forth in Section 8.10, the Administrative Agent shall apply all
amounts remaining in such Reserve Account relating to such
Replacement Asset Amount, to the prepayment of the Loans in the
manner provided in Section 3.04(a).

(d) Subject to the provisions of Section 3.04, as promptly as
practicable, but in any event within five Business Days of the date of
receipt by the Borrower and/or any of its Subsidiaries of Net Financing
Proceeds after the Effective Date (excluding the proceeds of the Initial
Loans), the Borrower shall prepay the Loans in an amount equal to 100% of
such Net Financing Proceeds, to be applied as provided in Section 3.04(a).

(e) Subject to the provisions of Section 3.04, as promptly as
practicable, but in any event within five Business Days of the date of
receipt by The Borrower and/or any of its Subsidiaries of Net Cash Proceeds
from the sale after the Closing Date of equity securities of the Borrower
or any of its Subsidiaries (other than proceeds from the issuance of
capital stock (i) of the Borrower pursuant to any pension, stock option,
profit sharing or other employee benefit plan or agreement of the Borrower
and/or any of its Subsidiaries in the ordinary course of business or (ii)
by a Subsidiary of the Borrower to another Subsidiary of the Borrower or to
the Borrower), the Borrower shall prepay the Loans in an amount equal to
100% of such proceeds (net of underwriting discounts and commissions and
other costs and expenses directly associated therewith), to be applied as
provided in Section 3.04(a); provided, however, that the Borrower may apply
up to 75%

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of the proceeds of an initial public offering of the common stock of the
Borrower to redeem the Series A Preferred Stock.

(f) Subject to the provisions of Section 3.04:

(i) As promptly as practicable, but in any event within
five Business Days of the date of receipt by the Borrower and/or
any of its Subsidiaries of any proceeds due to damage to, or loss,
destruction or condemnation of Assets (collectively, "LOSS
PROCEEDS"), the Borrower shall remit to the Administrative Agent an
amount equal to 100% of such Loss Proceeds, specifying any portion
of such proceeds (such portion, the "ASSET RESTORATION AMOUNT")
intended by the Borrower to be used within 180 days of receipt of
such Loss Proceeds (or such longer period as may be consented to by
the Agent) for rebuilding, repairing or replacing productive assets
of a kind then used or usable in the business of Holdings and its
Subsidiaries (in the case of the Borrower, to the extent permitted
by the Security Documents); PROVIDED, HOWEVER, that if the property
sold constituted Collateral, any such replacement property shall be
made subject to the Lien of the Security Documents.

(ii) The Asset Restoration Amount of such Loss Proceeds shall
be deposited in the Reserve Account and the remaining portion, if
any, of such Loss Proceeds shall be applied by the Administrative
Agent as provided in Section 3.04(a). During a period of 180 days
(or such longer period as has been consented to by the
Administrative Agent) from the date such Asset Restoration Amount
is deposited in the Reserve Account, the Administrative Agent shall
release amounts in such Reserve Account from time to time as the
Borrower provides evidence to the Administrative Agent of the
repair, restoration or purchase of such replacement assets, which
evidence may consist of a purchase order or other irrevocable
commitment to purchase such replacement assets, (whether or not
purchased with proceeds of Revolving Loans), and after the end of
such 180-day period or upon the occurrence of an Event of Default
of the type specified in Section 8.01 or 8.05 or the taking by the
Administrative Agent of any of the actions set forth in Section
8.10, the Administrative Agent shall apply all amounts remaining in
the Reserve Account relating to such Asset Restoration Amount, if
any, in the manner provided in Section 3.04(a).

(g) Subject to the provisions of Section 3.04, as promptly as
practicable, but in any event within five Business Days of the date of
receipt by the Borrower and/or any of its Subsidiaries of any surplus
assets of any Pension Plan returned to the Borrower and/or any of its
Subsidiaries, the Borrower shall prepay the Loans in an amount equal to
100% of such surplus assets, to be applied as provided in Section 3.04(a).

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<PAGE>

(h) Subject to the provisions of Section 3.04, as promptly as
practicable, but in any event within five Business Days of the date of
receipt by the Borrower and/or any of its Subsidiaries of any tax refund
which is not promptly applied by the Borrower and/or any of its
Subsidiaries to the payment of future tax liabilities, the Borrower shall
prepay the Loans in an amount equal to 100% of such tax refund, to be
applied as provided in Section 3.04(a).

(i) Subject to the provisions of Section 3.04, as promptly as
practicable, but in any event within 100 days after the last day of each
fiscal year of the Borrower, commencing with the fiscal year ending on or
about June 30, 1998, the Borrower shall prepay the Loans in an amount equal
to 50% of Excess Cash Flow for such fiscal year, to be applied as provided
in Section 3.04(a); PROVIDED, HOWEVER, the Borrower shall prepay the Loans
in an amount equal to 33% of Excess Cash Flow for such year if the Leverage
Ratio on the last day of such fiscal year is no greater than 4.5 and no
less than 4.0; PROVIDED, FURTHER, the Borrower shall have no repayment
obligation under this Section 3.03(i) for any fiscal year where the
Leverage Ratio on the last day of such fiscal year is less than 4.0.

(j) Subject to the provisions of Section 3.04, simultaneous with
the effectiveness of any designation of an Unrestricted Subsidiary which
was previously a Restricted Subsidiary, the Borrower shall prepay the Loans
in the amount determined in the sole discretion of the Administrative
Agent, as provided in the definition of "Unrestricted Subsidiary."

(k) Notwithstanding anything to the contrary contained in
paragraphs (c) through (i) above, in the event that any prepayment
otherwise required under such paragraphs would aggregate less than $100,000
at any time, such prepayment shall not be required hereunder but shall be
deferred until a date not later than the fifth Business Day following the
date when all such prepayments required under such paragraphs aggregate
$100,000 or more.

(l) If, in order to comply with any of Sections 3.03(a) through
(f), (h) or (i) (including as deferred pursuant to 3.03(j) except where the
amount which causes all prepayments to aggregate $100,000 or more are not
prepayments required under any of such Sections 3.03(a) through (e), (h) or
(i)), the Borrower is required to repay Reserve Adjusted Eurodollar Loans
prior to the end of any applicable Interest Period, (x) if there is no
Default or Event of Default then in existence, the Administrative Agent
shall, immediately upon receipt of funds required to be remitted to the
Administrative Agent pursuant to any such Sections, deposit such funds into
the Prepayment Collateral Account (as defined in Section 3.08 hereof), and
shall immediately notify the Borrower that repayments would be made prior
to the end of an Interest Period and that Breakage Costs would be payable
by the Borrower pursuant to this Agreement in connection therewith and the
Borrower, upon the receipt of any such notice from the Agent, shall
immediately

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deliver written instructions to the Administrative Agent which shall
direct the Administrative Agent either (i) to, at the end of the
earliest to expire Interest Period, apply the entire balance of the
Prepayment Collateral Account to the repayment of the Loans in accordance
with Section 3.04(a) or (ii) to proceed with such repayment, in which event
the Borrower shall compensate each Bank for all Breakage Costs incurred by
such Bank in connection with each such repayment in accordance with Section
1.10(f) or (y) if there is then pending a Default or Event of Default, any
such prepayment shall be immediately applied to the repayment of the Loans
and the Borrower shall compensate each Bank for all Breakage Costs incurred
by such Bank in connection with each such repayment in accordance with
Section 1.10(f).

3.04. APPLICATION OF MANDATORY PREPAYMENTS.

(a) Prepayments under Section 3.03 (other than Section 3.03(a) or
(b)) shall be applied without penalty or premium (other than Breakage
Costs, if any, and if so provided in Section 3.03), in the following
manner: (i) first, to the outstanding principal amount of each of the
Acquisition Term Loans to reduce the remaining Scheduled Acquisition Term
Loan Principal Payments in inverse order of maturity, (ii) second, to the
outstanding principal amount of the Supplemental Term Loans, in inverse
order of maturity (provided that any amount so prepaid shall permanently
reduce the Supplemental Loan Commitments and shall not be available for
reborrowing) (iii) third, to repay the Revolving Loans, and (iv) fourth, to
repay the Supplemental Revolving Loans; PROVIDED, HOWEVER, that prepayments
required by Sections 3.03(a) shall be applied solely to repay Revolving
Loans, Acquisition Term Loans, Supplemental Term Loans or Supplemental
Revolving Loans, as applicable, and prepayments required by Section 3.03(b)
shall be applied solely to repay Revolving Loans and Supplemental Revolving
Loans.

(b) With respect to each prepayment of Loans required by Section
3.03 (other than Sections 3.03(a) and (b)), the Borrower shall give the
Administrative Agent one Business Day's notice and may designate the Types
of Loans and the specific Borrowing or Borrowings which are to be prepaid;
PROVIDED, HOWEVER, that (i) if any prepayment of Reserve Adjusted
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount less than
the Minimum Borrowing Amount, such Borrowing shall immediately be converted
into Base Rate Loans; and (ii) each prepayment of any Loans made pursuant
to a single Borrowing shall be applied to the prepayment of such Loans on a
pro rata basis. In the absence of a designation by the Borrower, the
Administrative Agent shall, subject to the above, make such designation in
its sole discretion. All prepayments shall include payment of accrued
interest on the principal amount so prepaid, shall be applied to the
payment of interest before application to principal and shall include
amounts payable, if any, and if provided for in Section 3.03(m), under
Section 1.10(f).

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<PAGE>

(c) Notwithstanding Sections 3.04(a) and (b), (i) in the absence
of a specific designation from the Borrower, all prepayments to be applied
pursuant to Section 3.04(a) shall be applied first to the prepayment in
full of that portion of any Loan constituting Base Rate Loans before
application of any of such prepayments to the prepayment of Reserve
Adjusted Eurodollar Loans; (ii) if (A) Breakage Costs would otherwise be
imposed by applying such prepayments to any portion of the Acquisition Term
Loan or the Supplemental Term Loan constituting Reserve Adjusted Eurodollar
Rate Loans, and (B) Revolving Loans or Supplemental Revolving Loans
constituting Base Rate Loans in an amount not less than the required
prepayment are then outstanding, such prepayments shall be applied instead
to the prepayment of Revolving Loans and Supplemental Revolving Loans
constituting Base Rate Loans, and the prepayment of Reserve Adjusted
Eurodollar Rate Loans otherwise required under Section 3.04(a) shall be
deferred until the last day of the applicable Interest Period with respect
to each of such Reserve Adjusted Eurodollar Loans; and (iii) the
Administrative Agent may, in its discretion, establish reserves against the
amount of Revolving Loans or Supplemental Revolving Loans, which the
Borrower is otherwise entitled to borrow hereunder in an amount equal to
the amount of any such deferred prepayment and in the event that the
Borrower does not otherwise make such prepayment on the last day of such
Interest Period as provided herein, may cause Revolving Loans or
Supplemental Revolving Loans to be made on the Borrower's behalf and apply
the proceeds thereof to such prepayment.

3.05. REDUCTION OF TOTAL REVOLVING LOAN COMMITMENT, ETC. Each prepayment
made pursuant to Section 3.03 with respect to (i) the Revolving Loans, (ii) if
prior to the Acquisition Term Loan Commitment Termination Date, the Acquisition
Term Loans (iii) if prior to the Supplemental Term Loan Commitment Termination
Date, the Supplemental Term Loans, or (iv) if prior to the Supplemental
Revolving Loan Commitment Termination Date, the Supplemental Revolving Loan, (in
each case, other than any prepayment made pursuant to Section 3.03(a), (b) or
(i)) shall permanently reduce the Total Revolving Loan Commitment, Total
Acquisition Term Loan Commitment or Total Supplemental Loan Commitment, as
applicable, and shall, on a pro rata basis, reduce the applicable Revolving Loan
Commitment, Acquisition Term Loan Commitment or Supplemental Loan Commitment of
each Bank. Principal amounts repaid in respect of the Acquisition Term Loans or
the Supplemental Term Loans shall not be available for reborrowing.

3.06. METHOD AND PLACE OF PAYMENT.

(a) Except as otherwise specifically provided herein, all payments
under this Agreement shall be made to the Agent, for the ratable account of
the Banks entitled thereto, not later than 2:00 P.M. (New York time) on the
date when due and shall be made in immediately available funds in lawful
money of the United States of America to the account specified therefor by
the Administrative Agent or if no account has been so specified at the
Administrative Agent's Office, it being understood that written notice by
the Borrower to the Administrative Agent to make a payment from the funds
in the

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Borrower's account at the Administrative Agent's Office shall constitute
the making of such payment to the extent of such funds held in such
account. The Administrative Agent will thereafter cause to be distributed
on the same day (if payment is actually received by the Administrative
Agent in New York City prior to 2:00 P.M. (New York time) on such day)
funds relating to the payment of principal or interest or fees ratably to
the Banks entitled to receive any such payment in accordance with the
terms of this Agreement. If and to the extent that any such distribution
shall not be so made by the Administrative Agent in full on the same day
(if payment is actually received by the Administrative Agent prior to
2:00 P.M. (New York time) on such day), the Administrative Agent shall pay
to each Bank its ratable amount thereof and each such Bank shall be
entitled to receive from the Agent, upon demand, interest on such amount
at the Federal Funds Rate for each day from the date such amount is paid to
the Administrative Agent until the date the Administrative Agent pays such
amount to such Bank.

(b) Any payments under this Agreement which are made by the
Borrower later than 2:00 P.M. (New York time) shall be deemed to have been
made on the next succeeding Business Day. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day
and, with respect to payments of principal, interest shall be payable
during such extension at the applicable rate in effect immediately prior to
such extension, except that with respect to Reserve Adjusted Eurodollar
Loans, if such next succeeding applicable Business Day is not in the same
month as the date on which such payment would otherwise be due hereunder or
under any Note, the due date with respect thereto shall be the next
preceding applicable Business Day.

3.07. NET PAYMENTS.

(a) Except as provided in Section 3.07(d), all payments by the
Borrower under this Agreement or under any Credit Documents shall be made
without setoff or counterclaim and in such amounts as may be necessary in
order that all such payments (after deduction or withholding for or on
account of any present or future Taxes), shall not be less than the amounts
otherwise specified to be paid under this Agreement and/or any other Credit
Documents. A certificate as to the calculation of any additional amounts
payable to a Bank under this Section 3.07 submitted to the Borrower by such
Bank shall, absent demonstrable error, be final, conclusive and binding for
all purposes upon all parties hereto. With respect to each deduction or
withholding for or on account of any Taxes, the Borrower shall, within 30
days after it is required by law to remit such deduction or withholding to
any relevant taxing authority, furnish to each Bank such certificates,
receipts and other documents as may be required (in the reasonable judgment
of such Bank) to establish any tax credit to which such Bank may be
entitled.

(b) Without prejudice to (but without duplication of the benefits
of) the provisions of Section 3.07(a), and except as provided in Section
3.07(d), if any Bank, or

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the Administrative Agent on its behalf, is required by law to make any
payment on account of Taxes on or in relation to any sum received or
receivable under this Agreement and/or any other Credit Documents by such
Bank, or the Administrative Agent on its behalf, or any liability for
Taxes in respect of any such payment is imposed, levied or assessed
against any Bank, or the Administrative Agent on its behalf, the Borrower
will promptly indemnify such person against such Tax payment or liability,
together with any interest, penalties and reasonable expenses (including
counsel fees and expenses) payable or incurred in connection therewith,
including any Taxes of any Bank arising by virtue of payments under this
Section 3.07(b), computed in a manner consistent with Section 3.07(a).
A certificate by such Bank, or the Administrative Agent on its behalf, as
to the calculation and amount of such payments shall, absent demonstrable
error, be final, conclusive and binding upon all parties hereto for all
purposes, provided that such certificate is delivered to the Borrower no
later than 90 days after the earlier of the date on which such Bank or the
Administrative Agent makes payment of such Taxes or the date on which the
applicable Governmental Authority makes written demand for payment of such
Taxes.

(c) (i) Each Bank that is organized under the laws of any
jurisdiction other than the United States or any State thereof (including
the District of Columbia) (a "FOREIGN BANK") agrees to furnish to the
Borrower and the Administrative Agent, prior to the date it receives any
payment under this Agreement or other Credit Documents, two signed copies
of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 or any successor form thereto (wherein such Foreign Bank
validly claims entitlement to a complete exemption from U.S. federal
withholding tax on interest paid by Borrower hereunder). Each Foreign Bank
that is not a bank described in Section 881(c)(3)(A) of the Code and cannot
deliver U.S. Internal Revenue Service Form 1001 entitling it to a complete
exemption from withholding tax or U.S. Internal Revenue Service Form 4224
pursuant to this Section 3.07(c)(i) agrees to furnish to the Borrower and
the Administrative Agent two copies of U.S. Internal Revenue Service Form
W-8, or successor form (wherein such Foreign Bank makes the certifications
necessary to entitle it to a complete exemption from United States
withholding tax on interest paid by the Borrower hereunder).

(ii) In addition, each Foreign Bank that delivers forms pursuant
to Section 3.07(c) agrees to provide subsequently to the Borrower and the
Administrative Agent additional signed copies of such forms, or any
successor forms thereto (wherein such Bank claims entitlement to a complete
exemption from or reduced rate of U.S. federal withholding tax on interest
paid by the Borrower hereunder), as may be reasonably requested in writing
by the Borrower or the Agent. A Foreign Bank shall be required to furnish
a form under this Section 3.07(c)(ii) only if it is entitled to claim an
exemption from or a reduced rate of withholding tax under applicable law.
A Bank that is not entitled to claim an exemption from or a reduced rate of
withholding under applicable law at the time that a request to

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provide forms is received from the Borrower or the Agent, shall so inform
the Borrower and the Administrative Agent in writing.

(d) The Borrower shall not be required to pay any increased amount
on account of Taxes pursuant to Section 3.07(a) or (b) to any Bank or
Administrative Agent (i) to the extent that such Taxes would not have been
payable if the Bank had furnished a form (properly and accurately completed
in all material respects) which it was otherwise required to furnish in
accordance with Section 3.07(c), (ii) if the Bank was not able to furnish a
form (properly and accurately completed in all material respects) which it
was required to furnish in accordance with Section 3.07(c)(i), or (iii) if
the Bank failed to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of such Bank if
such compliance is required by statute or regulation of the United States
as a precondition to relief or exemption from such Taxes.

(e) With respect to any Taxes imposed on a Bank which are paid or
reimbursed by Borrower in accordance with the provisions of this Section
3.07, each Bank receiving the benefit of such payments of Taxes hereby
agrees to pay to the Borrower any amounts refunded to such Bank (including
any interest thereon) which such Bank reasonably determines to be a refund
in respect of such Taxes.

(f) If any Bank shall be entitled to payments under this Section
3.07, such Bank shall, within a reasonable time after becoming entitled to
such payments, (unless otherwise required by a Governmental Authority or as
a result of any law, rule, regulation, order or similar directive
applicable to such Bank), designate a different lending office from that
initially selected by such Bank to which payments are to be made under this
Agreement or under any other Credit Document, if such designation would
avoid the need for (or materially reduce the amount of) such payments and
would not, in the reasonable opinion of such Bank, be otherwise
disadvantageous to such Bank.

3.08. RESERVE ACCOUNT; PREPAYMENT COLLATERAL ACCOUNT.

(a) The Administrative Agent shall establish and maintain a
special reserve account (the "RESERVE ACCOUNT") for the deposit of amounts
constituting the Replacement Asset Amount of Net Cash Proceeds pursuant to
Section 3.03(c)(ii) and the Asset Restoration Amount of Loss Proceeds
pursuant to Section 3.03(f)(ii), and such Reserve Account shall be subject
to the sole dominion and control of the Administrative Agent and the
Borrower shall have no right of withdrawal from the Reserve Account. Funds
in the Reserve Account shall be invested in Cash Equivalents and interest
earned on such investments shall be remitted to the Borrower not less
frequently than once a month; PROVIDED, HOWEVER, that upon the occurrence
of an Event of Default and the declaration by the Administrative Agent in
accordance with Section 8 that the Loans are immediately due and payable,
the Administrative Agent shall apply all amounts then on deposit in the

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Reserve Account towards the payment of the Obligations in such order and in
such manner as it shall in its discretion determine, and any excess amount
remaining after such payment shall be remitted to the Borrower.

(b) The Administrative Agent shall establish in its own name as
Administrative Agent and maintain for the benefit of the Banks a special
purpose collateral account (the "PREPAYMENT COLLATERAL ACCOUNT"). The
Administrative Agent shall deposit in the Prepayment Collateral Account
funds which the Borrower shall have requested to be so deposited pursuant
to Section 3.03(k). All funds from time to time on deposit in the
Prepayment Collateral Account shall be under the exclusive control of the
Administrative Agent and shall be invested in Cash Equivalents, and such
Prepayment Collateral Account shall be subject to the sole dominion and
control of the Administrative Agent and the Borrower shall have no right of
withdrawal from the Prepayment Collateral Account. The funds (including
all interest earned from the investment thereof) in the Prepayment
Collateral Account shall be subject to withdrawal solely by the
Administrative Agent (i) for the purpose of effecting payments required
pursuant to Section 3.03 and (ii) upon the occurrence of an Event of
Default and the declaration by the Administrative Agent in accordance with
Section 8 that the Loans are immediately due and payable, for application
to the payment of the Obligations in such order and in such manner as the
Administrative Agent in its discretion shall determine. The Borrower shall
have no legal, equitable or beneficial interest in the Prepayment
Collateral Account, except for its right to ensure that the funds in such
account shall be applied to the prepayment of the Loans as required by this
Agreement.

SECTION 4. CONDITIONS PRECEDENT.

4.01. CONDITIONS PRECEDENT TO INITIAL LOANS. The obligations of the
Banks to make the Initial Loans are subject, at the time of the making of such
Loans (except as otherwise hereinafter indicated), to the satisfaction of the
following conditions:

(a) CREDIT DOCUMENTS.

(i) This Agreement and each other Credit Document (to the
extent not previously executed and delivered) shall (A) have been,
on or before the Closing Date, duly authorized, executed and
delivered by each of the parties signatory thereto and (B)
constitute the legal, valid and binding obligation of each Credit
Party, enforceable in accordance with its terms (subject to
bankruptcy and principles of equity).

(ii) There shall have been delivered to the Administrative
Agent for the account of each of the Banks the Revolving Notes, the
Acquisition Term Notes the Supplemental Term Notes and the
Supplemental Revolving Notes, each duly

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executed by the Borrower in the amount and maturity and as
otherwise provided herein.

(b) OFFICERS' CERTIFICATE. The Agents shall have received a
certificate dated the Closing Date signed by the appropriate officer(s) of
the Borrower on behalf of the Borrower in substantially the form of Exhibit
4.01(b) stating that (i) all of the applicable conditions set forth in this
Section 4.01 (in each case disregarding any reference therein that such
condition be deemed satisfactory by the Agents, the Administrative Agent
and/or the Required Banks) have been either satisfied or waived in writing
by the Agents, and the Required Banks as of such date, (ii) immediately
before and after giving effect to the Initial Loans, all representations
and warranties contained herein or in any other Credit Document (except as
expressly amended hereunder or under another Credit Document) shall be true
and correct in all material respects, (iii) no Default or Event of Default
has occurred or will have occurred after giving effect to the Initial Loans
and (iv) since June 30, 1997 no material adverse change in the business,
assets, prospects, properties or condition (financial or otherwise) of the
Borrower and its Subsidiaries shall have occurred.

(c) OPINIONS OF COUNSEL. The Administrative Agent shall have
received an opinion dated the Closing Date addressed to each of the Banks
from Brownstein Hyatt Farber & Strickland, P.C., counsel to the Credit
Parties in form and substance reasonably acceptable to the Administrative
Agent.

(d) CORPORATE PROCEEDINGS. All corporate and legal proceedings
and all instruments and agreements in connection with the Public Financing,
the execution of this Agreement and the other Credit Documents and all
related transactions shall be reasonably satisfactory in form and substance
to the Agents, and the Administrative Agent shall have received all
information and copies of all certificates, documents and papers, including
records of corporate proceedings and governmental approvals, if any, which
the Agents may have reasonably requested from the Credit Parties or in
connection therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities. Without
limiting the foregoing, the Administrative Agent shall have received from
each Credit Party:

(i) resolutions of the board of directors (or of the board
of directors of the general partner) of each such Person which
shall include, without limitation, (1) resolutions approving such
documents and actions as are contemplated by this Agreement, the
Public Financing and any related transactions to the extent such
Person is a party thereto and (2) resolutions as to the due
authorization, execution and delivery of this Agreement, to the
extent such Person is a party thereto, all such resolutions to be
in form and substance reasonably satisfactory to the Agents; and

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(ii) signature and incumbency certificates of each officer
of each such Credit Party executing instruments, documents or
agreements required to be executed in connection with the
transactions contemplated by this Agreement and the Public
Financing.

(e) PUBLIC FINANCING DOCUMENTS. Full, complete and accurate
copies of each of the material Public Financing Documents executed or in
effect as of the Closing Date (including all schedules and exhibits
thereto) shall have been provided to the Administrative Agent. The Public
Financing Documents and any amendments thereto, shall be in form and
substance satisfactory to the Agents; and on the Closing Date all of the
conditions to the Public Financing shall have been satisfied in all
material respects (or waived in writing, such waiver to be reasonably
satisfactory to the Agents) to the reasonable satisfaction of the Agents.

(f) CAPITAL CONTRIBUTION; CAPITALIZATION. As of the Closing Date,
the Borrower (i) shall have received (in connection with the Public
Financing) gross cash proceeds in an aggregate amount of at least
$40,000,000 from the public offering of its Series A Preferred Stock and
the related warrants to purchase Common Stock of the Borrower and gross
cash proceeds in an aggregate amount of at least $85,000,000 from the
issuance of high yield debt, (including capitalized interest), (ii) shall
have a retained investment in the form of the Heller Subordinated Note in
the amount of not less than $7,500,000, and (iii) shall use the proceeds of
the Public Financing to retire the Existing Term A Loans, the Existing Term
B Loans, the Existing Acquisition Term Loans and the Existing Revolving
Loans.

(g) CAPITAL STRUCTURE. On the Closing Date, after giving effect
to the Public Financing, (i) Holdings shall have been merged with and into
the Borrower and shall have ceased to exist as a separate entity and (ii)
all of the Capital Stock of each of the Borrower's Restricted Subsidiaries
shall have been assigned and pledged to the Administrative Agent, for the
benefit of the Banks and certificates evidencing such Capital Stock shall
have been delivered to the Administrative Agent, together with executed
stock powers.

(h) ORGANIZATIONAL DOCUMENTATION, ETC. On or prior to the Closing
Date, the Administrative Agent shall have received a true and complete
certified copy of the following documents of each of the Borrower and each
of its Restricted Subsidiaries the provisions of which shall be reasonably
satisfactory to the Agents:

(i) Copies of its certificate of incorporation, or
certificate of limited partnership, as the case may be, which (A)
shall be certified by, and accompanied by a good standing
certificate from, the Secretary of State or similar official of the
jurisdiction of its organization and (B) shall be accompanied by
good standing certificates from each jurisdiction in which it is
required to be qualified to do

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<PAGE>

business as a foreign corporation, each to be dated a recent date
prior to the Closing Date;

(ii) Copies of its by-laws or limited partnership
agreement as the case may be, certified as of a recent date prior
to the Closing Date by its corporate secretary or other person
serving in a similar capacity.

(i) CERTAIN FEES; INTEREST ON OUTSTANDING LOANS. All fees and
reasonable costs and expenses (including, without limitation, reasonable
legal fees and expenses) and other compensation payable to the Agents or
the Banks by the Borrower shall have been paid in full, and there shall
have been paid in full all accrued interest and all accrued commitment fees
on the Outstanding Loans and all other fees and expenses (including,
without limitation, reasonable legal fees and expenses) of the Agents or
the Banks, in each case to the extent due and payable and, with respect to
costs and expenses, invoiced or presented on or before the Closing Date.

(j) FINANCIAL STATEMENTS, ETC. On or before the Closing Date, the
Agents shall have received: (i) audited consolidated financial statements
of Holdings and its Subsidiaries for Holdings' fiscal years ended on or
about June 30, 1996 and June 30, 1997; (ii) unaudited income statements,
cash flows and balance sheets for Holdings and its Subsidiaries for the
period July 1, 1997 through October 31, 1997; (iii) a pro forma balance
sheet for the Borrower and its Subsidiaries, as of the Closing Date after
giving effect to the Public Financing and the Initial Loans; and (iv) a
revised annual plan, giving effect to the Public Financing, (by month for
the calendar year commencing on or about June 30, 1997) for each of the
Borrower's and its Subsidiaries' five calendar years commencing on or about
June 30, 1997, in each case, accompanied by a statement by the Borrower
that such projections are based on estimates and assumptions believed by
the Borrower in good faith to be reasonable in light of the conditions
which existed at the time of their preparation as to the future financial
performance of the Borrower, each in form, scope and substance satisfactory
to the Administrative Agent, prepared in accordance with the Borrower's
normal accounting procedures applied on a consistent basis, including (A)
forecasted balance sheets and statements of operations, stockholders'
equity and cash flows of the Borrower and its Subsidiaries for such
periods, (B) the amount of forecasted capital expenditures (including the
amount of such costs to be capitalized, if any) for such periods, and (C)
the Borrower and its Subsidiaries' forecasted compliance with Sections 7.01
through 7.05. Each of the items delivered pursuant to this Section
4.01(j), which are attached as Schedule 4.01(j), shall be satisfactory to
the Agents in their reasonable discretion. Since the time of the
preparation of such financial projections, no fact or facts have come to
the attention of any Credit Party to cause such Person to believe that any
of the estimates and assumptions on which such projections are based are
not reasonable.

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<PAGE>

(k) INSURANCE. The insurance coverage set forth on Schedule 5.22
shall be in full force and effect with respect to the Borrower and its
Restricted Subsidiaries and their respective properties.

(l) LITIGATION. Except as set forth on Schedule 4.01(l), there
shall be no litigation pending or threatened by any entity (private or
governmental) involving any Credit Party or any of the properties or assets
of any such Person that could reasonably be expected to restrain, enjoin or
result in the obtaining of a judgment for substantial damages with respect
to the Public Financing or the consummation of the transactions
contemplated by the Public Financing, and there shall be no pending or
threatened litigation involving any Credit Party or any of the properties
or assets of any such Person that could reasonably be expected to have a
material adverse effect on the operations or properties of Borrower or any
of its Subsidiaries or the ability of the Credit Parties to operate the
same or that could, in the Agents' reasonable judgment, reasonably be
expected to have a Material Adverse Effect.

(m) INDEBTEDNESS, ETC. (i) Except as set forth on Schedule
4.01(m), on or before the Closing Date, each Credit Party shall have
received all necessary consents or waivers or shall have amended,
supplemented or otherwise modified, repaid or defeased its outstanding
Indebtedness in a manner and on terms satisfactory to the Agents such that
there exists no default or potential default (as a result of the
consummation of the Public Financing) with respect to such Indebtedness or
under any note, evidence of indebtedness, capital lease, mortgage, deed of
trust, security document or other agreement relating to such Indebtedness
and such indentures, notes, evidences of indebtedness, capital lease
mortgages, deeds of trust or other agreements relating to such Indebtedness
shall not contain (i) any restriction on the ability of the Borrower or any
of its Restricted Subsidiaries to grant any Lien in favor of the Banks
(other than in the case of Capital Leases, or purchase money debt
(excluding Real Property leases), a Lien on the property financed thereby)
or any financial covenants or tests applicable to the Borrower or any of
its Restricted Subsidiaries.

(ii) The terms and conditions of any Indebtedness of the
Borrower and its Restricted Subsidiaries as of the Closing Date
which remains outstanding after giving effect to the Public
Financing and the making of the Initial Loans, shall, in each case,
be reasonably acceptable to the Agents. The Administrative Agent
shall have received evidence satisfactory to it that the
Indebtedness reflected on Schedule 5.19 as being paid as of the
Closing Date is being paid with the proceeds of the Initial Loans
or the Public Financing.

(n) SECURITY DOCUMENTS. In each case, to the extent the same
shall not have been previously delivered to the Administrative Agent, the
Security Documents shall have been duly executed and delivered by each of
the Credit Parties party thereto and there shall have been delivered to the
Administrative Agent: (i) a certificate or certificates

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<PAGE>

representing all Capital Stock of each of the Borrower's Restricted
Subsidiaries, together with executed and undated stock powers and/or
assignments in blank; (ii) certified copies of Requests for Information
(Form UCC-11 or the equivalent), or equivalent reports or lien search
reports listing all effective financing statements which name the
Borrower and its Restricted Subsidiaries and which are filed in any
jurisdiction in which any of such Collateral is located and the
jurisdiction in which such Person's principal place of business is located
(none of which shall cover the Collateral covered, or purported to be
covered, by the Security Documents other than Prior Liens and Permitted
Encumbrances); and (iii) evidence of the completion of all recordings and
filings (or of the making of arrangements to file contemporaneously with
the making of the Initial Loans) of each such Security Document and
delivery of such other security and other documents as may be necessary
or, in the opinion of the Administrative Agent, desirable to perfect the
Liens created, or purported or intended to be created, by the Security
Documents.

(o) LEASES. All Capital Leases and Operating Leases of the
Borrower and its Restricted Subsidiaries outstanding immediately prior to
the Closing Date shall remain outstanding after giving effect to the Public
Financing and the making of the Initial Loans hereunder.

(p) CONSENTS, ETC. All necessary or required governmental and
third party approvals and consents (including, without limitation, all
approvals and consents required in connection with any Environmental Laws),
in connection with the Public Financing or the transactions contemplated by
this Agreement and the Public Financing Documents and otherwise referred
to herein or therein to be completed on or before the Closing Date are set
forth on Schedule 4.01(p) and shall have been obtained and remain in
effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents or
imposes, in the reasonable judgment of the Agents, material adverse
conditions upon the consummation of the Public Financing. There shall not
exist any judgment or order enjoining or otherwise restraining the making
of the Loans hereunder or the consummation of the Public Financing.

(q) BORROWING BASE; BORROWING BASE CERTIFICATE. The
Administrative Agent and the Banks shall have received and the Required
Banks shall be satisfied in all reasonable respects with a Borrowing Base
Certificate which shall be substantially in the form of Exhibit 6.01(m) and
shall be prepared as of a date prior to the Closing Date that is reasonably
satisfactory to the Agents. Such Borrowing Base Certificate shall indicate
that the Borrowing Base on the Closing Date (before and after giving effect
to the Public Financing) exceeds the amount of the Revolving Loans to be
outstanding as of such date by not less than $7,000,000.

(r) NO MATERIAL ADVERSE CHANGE. Since June 30, 1997 nothing shall
have occurred or become known to any Credit Party which the Agents shall
have determined has or could reasonably be expected to have a Material
Adverse Effect or a material

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<PAGE>

adverse effect on the business or operations of the Borrower and its
Subsidiaries or has resulted or could result in a material adverse
change in the business, assets, prospects, properties or condition
(financial or otherwise) of any Credit Party, in the industry in which
the Borrower competes or in the ability of the Borrower or any of its
Subsidiaries (after giving effect to the Public Financing) as of the
Closing Date to conduct its operations in accordance with the revised
projections furnished to the Agents pursuant to Section 4.01(j). As of the
Closing Date, there shall not have occurred and be continuing a material
disruption of, or material adverse change in, United States financial,
banking or capital markets, as reasonably determined by the Agents in their
sole discretion.

(s) The Administrative Agent shall have received the Final
Prospectuses for the Public Financing accompanied by a certificate dated
the Closing Date signed by the President, Chief Financial Officer or
Secretary of the Borrower stating that the Registration Statements and the
Prospectuses related to the Public Financing, as amended and in the form in
which they became effective (including all of the financial statements and
schedules included therein), contain all information which is required to
be stated therein in accordance with the Securities Act of 1933, as
amended, and the instructions, rules and regulations thereunder and conform
in all material respects to the requirements thereof; said financial
statements and schedules were prepared in accordance with generally
accepted accounting principles, consistently applied as to the corporations
covered thereby throughout the periods involved, are correct and complete
and present fairly the financial condition of the corporations stated to be
covered thereby at the dates thereof and the results of their operations
for the stated periods covered thereby; and the Registration Statements and
Prospectuses do not include any untrue statement of a material fact or omit
to state a material fact which (in the case of the Registration Statements)
is required to be stated therein or is necessary to make the statements
therein not misleading or which (in the case of the Prospectuses) is
necessary to make the statements therein in the light of the circumstances
under which they are made not misleading.

The acceptance of the proceeds of each Borrowing of Initial Loans shall
constitute a representation and warranty by the Borrower to each of the Banks
that all of the applicable conditions specified above have been satisfied or
waived as of that time. All of the certificates, legal opinions and other
documents and papers referred to in this Section 4.01, unless otherwise
specified, shall be delivered to the Administrative Agent at the Agent's Office
(or such other location as may be specified by the Agents) for the account of
each of the Banks and in sufficient counterparts for each of the Banks and shall
be reasonably satisfactory in form and substance to the Agents.

4.02. CONDITIONS PRECEDENT TO ALL LOANS. The obligations of the Banks to
make all Loans (which term shall not include a conversion or continuation of a
Loan), including the Initial Loans, are subject, at the time of the making of
each such Loan, to the satisfaction of the following conditions:

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(a) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of
the making of each Loan and also after giving effect thereto (and in the
case of the Initial Loans, after giving effect to the Public Financing; and
in the case of any Acquisition Term Loans, after giving effect to the
transactions contemplated to be effected with the proceeds of such Loan)
(i) there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein and in each of the other
Credit Documents in effect at such time shall be true and correct with the
same effect as though such representations and warranties had been made on
and as of the date of the making of such Loan, unless such representation
and warranty expressly indicates that it is being made as of any other
specific date in which case it shall be true and correct on and as of such
other date.

(b) NO MATERIAL ADVERSE CHANGE, ETC.

(i) Since June 30, 1997, nothing shall have occurred or
become known to any Credit Party which the Required Banks or the
Administrative Agent shall have determined has or could reasonably
be expected to have a Material Adverse Effect.

(ii) There shall not have been issued or filed any
judgment or order which remains outstanding enjoining or otherwise
restraining the making of any Loans hereunder.

(c) MARGIN RULES. On the date of each Borrowing of Loans, neither
the making of any Loan nor the use of the proceeds thereof will violate the
provisions of Regulation G, U or X of the Board of Governors of the Federal
Reserve System.

(d) BORROWING BASE CERTIFICATE. The Administrative Agent and the
Required Banks shall have received, and the Required Banks shall be
reasonably satisfied (both as to form and substance) with, the Borrowing
Base Certificate last delivered to the Banks.

The acceptance of the proceeds of each Borrowing of Loans, including the
Initial Loans, shall constitute a representation and warranty by each Credit
Party to each of the Banks that all of the applicable conditions specified in
this Section 4.02 have been satisfied or waived (in each case disregarding any
reference therein that such condition be deemed satisfactory by the
Administrative Agent and/or the Required Banks). All of the certificates,
documents and papers referred to in this Section 4.02, unless otherwise
specified, shall be delivered to the Administrative Agent at the Agent's Office
(or such other location as may be specified by the Administrative Agent) for the
account of each of the Banks and in sufficient counterparts for each of the
Banks and shall be reasonably satisfactory in form and substance to the
Administrative Agent.

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4.03. ADDITIONAL CONDITIONS PRECEDENT TO ACQUISITION TERM LOANS AND
SUPPLEMENTAL TERM LOANS. The obligations of the Banks to make Acquisition Term
Loans and Supplemental Term Loans (which shall not include a conversion or
continuation of any such Loan) are subject to the satisfaction of the following
additional conditions:

(a) Any such Acquisition Term Loan or Supplemental Term Loan shall
be made solely to effect one or more Permitted Business Acquisitions;

(b) No later than ten Business Days prior to the applicable
Acquisition Term Loan Closing Date or Supplemental Term Loan Closing Date
(except to the extent the Administrative Agent agrees to a shorter period),
the Administrative Agent shall have received (with sufficient copies for
each Bank) each of the following with respect to the consummation of the
Permitted Business Acquisition to be financed with the proceeds of any such
Acquisition Term Loan or Supplemental Term Loan:

(i) audited financial statements of the acquired company
for such company's two most recently completed fiscal years (or if
audited financial statements are unavailable for any such period,
unaudited financial statements for such period not so available
which are accompanied by a report on such financial statements by
Arthur Anderson or another "Big Six" accounting firm acceptable to
the Administrative Agent);

(ii) a pro forma balance sheet and pro forma consolidated
statements of income and cash flows of the Borrower and its
Restricted Subsidiaries, after giving effect to the consummation of
the proposed Permitted Business Acquisition, as at the end of the
calendar quarter in which such Permitted Business Acquisition is to
be consummated;

(iii) a revised consolidated plan, substantially in the
form of the consolidated plan provided pursuant to Section
4.01(j)(iv) or otherwise in a form acceptable to the Administrative
Agent, for the then current calendar year and the next four
succeeding calendar years, in each case, giving effect to such
Permitted Business Acquisition, prepared in accordance with the
Borrower's normal accounting procedures (and which will represent
management's reasonable estimate of the projected performance of
the Borrower and its Restricted Subsidiaries during such periods)
applied on a consistent basis, including, without limitation
(i) forecasted consolidated balance sheets, consolidated statements
of operations, of stockholders' equity and of cash flows of the
Borrower and its Restricted Subsidiaries on a consolidated basis
for such periods, (ii) the amount of forecasted capital
expenditures for such periods, and (iii) forecasted compliance with
Sections 7.01 through 7.05; PROVIDED, HOWEVER, that if any such
forecast projects a potential failure to comply with any provision
of this Agreement at some future date, such forecast shall not
constitute a Default or Event of Default

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or anticipatory or other breach hereof.

(iv) a certificate of the president or chief financial
officer of the Borrower which is substantially in the form of
Exhibit 4.03(b)(iv),

(x) certifying to the preparation of the pro forma
financial statements and budgets referenced in
subclauses (i) and (ii) and certifying that, after
giving effect to such Permitted Business
Acquisition, no Default or Event of Default shall
exist, and that, on a pro forma basis, the Borrower
and its Restricted Subsidiaries (including any
Subsidiary of the Borrower to be acquired in the
contemplated Permitted Business Acquisition), will
be in compliance with the covenants set forth in
Sections 7.01 through 7.05, inclusive, as of the
end of the calendar quarter in which such
Acquisition is to be consummated and setting forth
the calculations required to establish such pro
forma compliance and appending a spreadsheet
showing any adjustments to the actual EBITDA of the
Permitted Business Acquisition made in the
preparation of such pro forma financial statements
and calculations;

(y) setting forth, to the reasonable satisfaction of the
Administrative Agent, the material terms and
conditions of such Acquisition; and

(z) certifying that the conditions set forth in each of
Sections 4.02 and 4.03 (other than the completion of
filings and recordings to be performed upon the
applicable Acquisition Term Loan Closing Date or
Supplemental Term Loan Closing Date, as the case may
be) have been satisfied with respect to such proposed
Acquisition Term Loan Borrowing or Supplemental Term
Loan Borrower, as the case may be.

(c) Since June 30, 1997, nothing shall have occurred or become
known to any Credit Party which the Required Banks or the Administrative
Agent shall have determined has or could reasonably be expected to have a
Material Adverse Effect or has or could reasonably be expected to result in
a material adverse change in the industry in which the Borrower competes.

(d) The terms and conditions of such Acquisition and the related
documents shall be reasonably acceptable to the Administrative Agent;

(e) On or before the applicable Acquisition Term Loan Closing Date
or Supplemental Term Loan Closing Date, as the case may be, the Borrower
shall have complied, in all material respects, with the provisions of
Section 6.14 as to any property

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acquired or to be acquired in connection with any such Permitted Business
Acquisition, except for any such provisions with which compliance is
waived by the Administrative Agent, including, without limitation, that
the Borrower and its Restricted Subsidiaries (including any Subsidiary so
acquired) shall execute and deliver to the Administrative Agent any
Additional Security Documents (or Subsidiary Guarantees) required to
provide the Administrative Agent for the benefit of the Banks with a
valid, perfected security interest in any Collateral to be acquired in
such Permitted Business Acquisition; and

(f) Without limiting the foregoing clause (d), with respect to any
Real Property (whether fee title or leasehold) in which an interest is
acquired in connection with any such Permitted Business Acquisition
(including any such interest held by any Subsidiary of the Borrower
acquired in such acquisition), the applicable conditions described below
shall be satisfied on or before the Acquisition Term Loan Closing Date or
Supplemental Term Loan Closing Date, as the case may be, provided, however,
that the following requirements shall not apply to (i) any Permitted
Business acquisition which includes Real Property in which the Borrower's
or any Restricted Subsidiary's interest individually is, in the
Administrative Agent's reasonable opinion, worth less than $300,000 and in
the aggregate worth less than $1,000,000 or (ii) to any acquisition of a
company involved solely in the business of growing, harvesting and selling
Christmas trees, so long as the amount of Borrowings related to such
acquisitions of Christmas tree companies consummated after the Closing Date
do not exceed $5,000,000 in the aggregate:

(x) with respect to Permitted Business Acquisitions which
include Real Property which, in the Administrative Agent's reasonable
opinion, individually is worth less than $300,000 but in the aggregate
is worth $1,000,000 or more (but less than $3,000,000), the
Administrative Agent may require that Real Property interests be
subject to the requirements of subclauses (i), (ii) and (iv) of
clause (z) below;

(y) with respect to Permitted Business Acquisitions which
include Real Property which individually is worth $300,000 or more,
for each such parcel the Borrower's or any Restricted Subsidiary's
interest is worth less than $600,000, the requirements set forth in
subclauses (i)-(iv) of clause (z) below must be fulfilled (provided
that no as-built survey or related title insurance policy endorsements
dependent thereon will be required) and, for each parcel of Real
Property the Borrower's or any Restricted Subsidiary's interest is
worth $600,000 or more, all the requirements set forth in clause (z)
below must be fulfilled; and

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(z) with respect to acquisitions which include Real Property
which individually the Borrower's or any Restricted Subsidiary's
interest is worth less than $300,000 but in the aggregate the
Borrower's or any Restricted Subsidiary's interest is worth
$3,000,000 or more, the Administrative Agent may require that Real
Property interests be subject to some or all of the requirements
described below:

(i) The Administrative Agent, for the benefit of the
Banks, shall be granted a first mortgage or deed of
trust (or leasehold mortgage or deed of trust) on
all of the interests in such Real Property by the
Person holding such acquired interest, subject to no
prior Liens except for Permitted Encumbrances.

(ii) Any leasehold mortgages or deeds of trust granted
pursuant to the foregoing subclause (i) must be
consented to by any owners of such Real Property
pursuant to an estoppel and consent agreement in
form and substance satisfactory to the
Administrative Agent.

(iii) There shall be issued a lender's title insurance
policy as to each mortgage or deed of trust granted
pursuant to the foregoing subclause (i), with no
exceptions (including fee mortgages encumbering
leasehold interests in Real Property) which are not
reasonably acceptable to the Administrative Agent,
and, unless the Administrative Agent shall otherwise
elect, as-built surveys sufficient to remove the
survey exception from all title insurance policies
shall be delivered to the Administrative Agent.

(iv) A Phase I environmental report with respect to each
parcel of such Real Property satisfactory to the
Administrative Agent (and upon which the Banks shall
be entitled to rely) shall be delivered to the
Administrative Agent.

(v) Evidence reasonably acceptable to the Administrative
Agent shall be presented that the intended use by
the Borrower and its Subsidiaries of each of such
Real Properties complies with all zoning and land
use laws, and that all necessary permits and
approvals for the operation of such properties in
such manner have been obtained and are in full force
and effect.

(g) There shall be delivered to the Administrative Agent (in each
case, with sufficient copies for each Bank) copies of the following
documents related to any Permitted Business Acquisition to be consummated
with the proceeds of an Acquisition

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Term Loan, (i) the term sheet for such Acquisition, upon execution thereof
by the parties thereto, and (ii) upon consummation of such Acquisition, a
complete set of the documents effecting such Acquisition, together with
all schedules and exhibits (including, without limitation the acquisition
agreement and any Seller Notes issued in connection therewith).

(h) The Administrative Agent shall have received, if so requested
by the Administrative Agent, an opinion dated the applicable Acquisition
Term Loan Closing Date or Supplemental Term Loan Closing Date, as the case
may be, addressed to each of the Banks from Brownstein Hyatt Farber &
Strickland, P.C., in form and substance reasonably acceptable to the
Administrative Agent.

(i) Any fees or expenses of the Agents or the Banks which are then
due and payable, whether due in connection with such Acquisition Term Loan
Borrowing or otherwise, shall have been paid in full prior to, or
simultaneously with, the applicable Acquisition Term Loan Closing.

SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce
the Agents and the Banks to enter into this Agreement and to make the Loans
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Agents and the Banks, all of which shall
survive the execution and delivery of this Agreement and the making of the Loans
(with the execution and delivery of this Agreement and the making of each Loan
thereafter being deemed to constitute a representation and warranty that the
matters specified in this Section 5 are true and correct in all material
respects both before and after giving effect to the Public Financing and the
related transactions and as of the date of each such Loan unless such
representation and warranty expressly indicates that it is being made as of any
specific date).

5.01. STATUS. Each Credit Party is a duly organized and validly existing
corporation or limited partnership, as the case may be, in good standing under
the laws of the jurisdiction of its organization. After giving effect to the
Public Financing, Holdings shall have merged with and into the Borrower, and all
of its right, title and interest in any assets as of such date shall thereupon
be held directly by the Borrower. Each Credit Party has all corporate power and
authority, and has obtained all requisite governmental licenses, authorizations,
consents and approvals (including, without limitation, those required by
Environmental Laws), to own and operate its property and assets and to transact
the business in which it is engaged and presently proposes to engage, except for
those governmental licenses, authorizations, consents or approvals the failure
of which to be so obtained would not have a Material Adverse Effect; and is duly
qualified and authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except where the failure
to be so qualified could not reasonably be expected to have a Material Adverse
Effect.

5.02. POWER AND AUTHORITY; BUSINESS. Each Credit Party had or has, as
applicable, the requisite corporate power and authority to execute, deliver and
carry out the terms and provisions

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of the Transaction Documents and Public Financing Documents to which it is a
party and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Transaction Documents and Public
Financing Documents to which it is a party. Each Credit Party has duly
executed and delivered each Transaction Document and each Public Financing
Documents to which it is a party and each such Document constitutes the
legal, valid and binding obligation of such Credit Party and is enforceable
against such Credit Party in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter in
effect relating to the rights of creditors generally or by general principles
of equity or the discretion of the court before which any proceeding therefor
may be brought.

5.03. NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof nor the consummation of the transactions
contemplated therein (a) will contravene any applicable provision (or any
provision to be applicable following the Public Financing) of any law, statute,
rule, regulation, order, writ, injunction or decree of any court or Governmental
Authority; (b) conflicts or will conflict or be inconsistent with, or results or
will result in any breach or violation of any of the terms, covenants,
conditions or provisions of, or constitutes or will constitute a default under,
or (other than pursuant to the Security Documents) results or will result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of any Credit Party pursuant to the terms of, any
indenture, mortgage, deed of trust or other material instrument or agreement to
which any Credit Party is a party or by which it or any of its property or
assets is bound (or will be bound after giving effect to the Public Financing)
or to which it may be subject or any law, statute, rule, regulation, order,
writ, injunction or decree of any court or Governmental Authority referred to in
clause (a) above; or (c) will violate any provision of the certificate of
incorporation, certificate of formation, certificate of limited partnership,
by-laws, limited liability company agreement of any Credit Party, except in
the case of any of the foregoing clauses (a) through (c) where such
contravention, conflict, inconsistency, breach, default, creation,
imposition, obligation or violation does not have a Material Adverse Effect.
Neither the execution, delivery or performance of any Document, nor the
consummation of the Public Financing nor the terms of the financing in
connection therewith conflicted, conflicts or will conflict or be
inconsistent with, or results or will result in any breach or violation of
any of the terms, covenants, conditions or provisions of, or constitutes or
will constitute a default under, or results or will result in the creation or
imposition of (or the obligation to create or impose) any Lien (except
pursuant to the Security Documents) upon any of the property or assets of any
Credit Party pursuant to the terms of, any indenture, mortgage, deed of
trust, instrument or agreement relating to Indebtedness for borrowed money or
the equivalent thereof or other material agreement to which any Credit Party
is a party or by which it or any of its property or assets is bound or to
which it may be subject or any law, statute, rule, regulation, order, writ,
injunction or decree of any court or Governmental Authority referred to in
clause (a) above, except, in each case, where such conflict, inconsistency,
breach, default, creation, imposition or obligation could not reasonably be
expected to have a Material Adverse Effect.

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5.04. LITIGATION. There are no actions, judgments, suits, investigations
or proceedings by any administrative or other public authority or Governmental
Authority or other Person pending or, to the best knowledge of the Borrower,
threatened with respect to any Credit Party or any of its assets (both before
and after giving effect to the Public Financing) that (a) challenges the
consummation of the Public Financing or the validity of any of the Public
Financing Documents or the transactions contemplated thereby, including the
making of any Loans, or (b) taken individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.

5.05. USE OF PROCEEDS.

(a) Not more than $7,000,000 of the proceeds of the Revolving
Loans shall be used by the Borrower on the Closing Date to pay fees and
expenses related to the Public Financing and the remaining proceeds of the
Revolving Loans and the Supplemental Revolving Loans shall be used to
finance the ongoing capital requirements of the Borrower and its
Subsidiaries and for general corporate purposes.

(b) All of the proceeds of the Acquisition Term Loans and the
Supplemental Term Loans shall be used by the Borrower to provide all or a
portion of the consideration for Permitted Business Acquisitions, to pay
existing Indebtedness encumbering property acquired in such transactions
(including existing Indebtedness of any Restricted Subsidiary of the
Borrower so acquired), and to pay related fees and expenses.

(c) Neither the making of any Loan hereunder nor the use of the
proceeds thereof shall violate or be inconsistent with the provisions of
Regulation G, U or X of the Board of Governors of the Federal Reserve
System.

5.06. GOVERNMENTAL APPROVALS, ETC. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption or other action by or notice to, any third party or any foreign or
domestic, administrative or public body or Governmental Authority, or by any
subdivision thereof (except for (a) such orders, consents, approvals, licenses,
authorizations or validations which, if not obtained or made, would not have a
Material Adverse Effect or which have previously been obtained or made and (b)
filings to perfect security interests granted pursuant to the Security
Documents) is necessary or required to authorize or is required in connection
with (i) the execution, delivery and performance of any Credit Document or the
transactions contemplated thereby or (ii) the legality, validity, binding effect
or enforceability of any Credit Document. As of the Closing Date, there shall
not exist any judgment, order, injunction or other restraint issued or filed
with respect to the transactions contemplated by the Credit Documents or the
Public Financing Documents or Credit Documents, including the making of Loans or
the performance by any Credit Party of its obligations under any Public
Financing Documents or Credit Documents. At the time of the making of the
Initial Loans, there does not exist any judgment, order, injunction or other
restraint issued or filed with respect to the transactions contemplated by the
Public Financing Documents, including the

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consummation of the Public Financing, the making of Loans or the performance
by any Credit Party of its obligations in connection with the Public
Financing.

5.07. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Neither the Borrower nor any of its Restricted Subsidiaries was, prior to the
Closing Date, is, or will be after giving effect to the transactions
contemplated by the Public Financing, (a) an "investment company" or a company
"controlled" by an "investment company," in each case within the meaning of the
Investment Company Act of 1940, as amended; or (b) a "holding company," a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," in each case
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

5.08. TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a
whole) heretofore or contemporaneously furnished in writing by or on behalf of
any Credit Party to any Bank and either (a) contained in any Credit Document or
(b) required to be furnished pursuant to Section 4.01, is, and as of the Closing
Date will be, and all other such factual information (taken as a whole) which
has been or hereafter will be furnished in writing by or on behalf of any Credit
Party to the Administrative Agent or any Bank pursuant to Section 6.01 or 4.03
is or will be, true and accurate in all material respects on the date as of
which such information is dated or certified and is not and will not be
incomplete by omitting to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that it is understood that the
projections and pro forma financial information contained in such materials are
based on good faith estimates and assumptions believed by such Credit Party to
be reasonable at the time made, but that actual results may vary from the
projections.

5.09. FINANCIAL CONDITION; FINANCIAL STATEMENTS; PROJECTIONS.

(a) No Credit Party entered into the arrangements contemplated by
the Original Credit Agreement, the Existing Credit Agreement, the other
Transaction Documents this Agreement or by the Public Financing Documents,
or did intend or intends to make any transfer or incur any obligations
hereunder or thereunder, with actual intent to hinder, delay or defraud
either then existing, present or future creditors. On and as of the
Effective Date, the Closing Date (and as of each Acquisition Term Loan
Closing Date and each Supplemental Term Loan Closing Date), on a pro forma
basis after giving effect to (i) as applicable, the Public Financing (and
the transactions to be consummated with the proceeds of any such
Acquisition Term Loan or Supplemental Term Loan), (ii) the incurrence of
all Indebtedness in connection therewith, (iii) the creation of all Liens
created or to be created in connection therewith and (iv) the granting of
all guarantees granted by any Credit Party in connection therewith, (A) no
Credit Party expected or expects that final judgments against it in actions
for money damages with respect to pending or threatened litigation will be
rendered at a time when, or in an amount such that, it will be unable to
satisfy any such judgments promptly in accordance with their

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terms (taking into account the maximum reasonable amount of such
judgments in any such actions, the earliest reasonable time at which
such judgments might be rendered and the cash available to such Credit
Party, after taking into account all other anticipated uses of the cash
of such Credit Party (including the payments on or in respect of debts
(including its Contingent Obligations)); (B) no Credit Party incurred,
will have incurred or intends to, or believes that it will, incur debts
beyond its ability to pay such debts as such debts mature (taking into
account the timing and amounts of cash to be received by such Credit
Party from any source, and of amounts to be payable on or in respect of
debts of such Credit Party and the amounts referred to in the preceding
clause (A)); (C) each Credit Party, after taking into account all other
anticipated uses of the cash of such Person, anticipates being able to
pay all amounts on or in respect of debts of such Person when such
amounts are required to be paid; and (D) each Credit Party will have
sufficient capital with which to conduct its present and proposed
business and the property of such Credit Party will not constitute
unreasonably small capital with which to conduct its present or proposed
business. For purposes of this Section 5.09, "debt" means any liability
on a claim, and "claim" means a (1) right to payment whether or not such
a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured; or (2) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.

(b) The Borrower has heretofore delivered to the Banks the
financial statements attached hereto as Schedule 4.01(j). All such
financial statements were prepared in accordance with GAAP consistently
applied. Such financial statements (other than the pro forma balance
sheets) present fairly, in all material respects, the financial position of
the Borrower and its Subsidiaries (or where applicable, Holdings and its
Subsidiaries) on a consolidated basis as of the date and for the periods
covered thereby, and such pro forma balance sheet presents fairly, in all
material respects, the pro forma financial position of the Borrower and its
Subsidiaries as of the Closing Date, based on the assumptions stated
therein, and before and after giving effect to the transactions described
therein.

(c) There have heretofore been delivered to the Banks the pro
forma income projections for the Borrower and its Subsidiaries, pro forma
balance sheet projections for the Borrower and its Subsidiaries and pro
forma cash flow projections for the Borrower and its Subsidiaries for the
five calendar years commencing June 30, 1997, inclusive, referred to in
Section 4.01(j) including the financial statements delivered as of the
Closing Date, and, in connection with any Acquisition Term Loan, the
proforma financial statements referred to in Section 4.03 (the "PROJECTED
FINANCIAL STATEMENTS"), which give effect to the applicable Permitted
Business Acquisitions and all Indebtedness and Liens incurred or created in
connection therewith. The Projected Financial Statements are based on
estimates and projections which are believed by the Borrower and its
Restricted

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Subsidiaries to be reasonable in light of the conditions which existed
at the time of their preparation as to the future financial performance
of the Borrower and its Subsidiaries.

(d) As of the Closing Date, except as fully reflected or reserved
against in the financial statements (including the pro forma balance sheet
as of the Closing Date) described in Section 5.09(b), there were not and
will not be any liabilities or obligations with respect to the Borrower and
its Subsidiaries of any nature whatsoever, other than deferred purchase
price payments to be made pursuant to the Asset Purchase Agreement dated as
of July 31, 1997 among Holdings, Color Spot Christmas Trees, Inc. and
Cracon Inc. (whether absolute, accrued, contingent or otherwise and whether
or not due, other than for such as have been incurred by the Borrower and
its Subsidiaries in connection with the Public Financing and other than
trade payables incurred in the ordinary course of business since the
respective dates of such financial statements) which, either individually
or in aggregate, were or will be material to such Persons. No Credit Party
knows of any basis for the assertion against the Borrower or any of its
Subsidiaries of any liability or obligation of any nature whatsoever that
is not fully reflected in the financial statements described in
Section 5.09(b) or the Public Financing Documents or the schedules or
exhibits thereto (other than trade payables incurred in the ordinary course
of business) since the respective dates of such financial statements which,
either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

5.10. SECURITY INTERESTS. With the exception of the parcels of Real
Property at the locations set forth on Schedule 5.10A, upon the execution,
delivery and filing or recording in all appropriate registries or offices of the
Security Documents, the Security Documents create or will create, in favor of
the Administrative Agent for the benefit of the Banks, as security for the
obligations purported to be secured thereby, a valid and enforceable perfected
security interest in and Lien upon all of the Collateral, which security
interest and Lien upon the Collateral shall be superior to and prior to the
rights of all third persons and subject to no Liens except the Prior Liens and
Permitted Encumbrances applicable to such Collateral. Set forth on Schedule
5.10B is a true list of all Liens (other than Liens in favor of the Agent and
Liens included in clause (a), (e) and (f) of the definitions of Permitted
Encumbrances) (i) on the property of the Borrower and its Restricted
Subsidiaries after giving effect to the Public Financing (collectively, the
"PRIOR LIENS"). The respective pledgor or assignor, as the case may be, has
(or, on and after the time it executes the respective Security Document, will
have) good and marketable title to the Collateral covered by such Security
Document, free and clear of all Liens other than Liens permitted under the
applicable Security Document. No filings or recordings are required in order to
perfect the security interests created under any Security Document except for
filings or recordings in the registries and offices set forth in Schedule 5.10C
(including as supplemented from time to time pursuant to Section 6.01(n)).

5.11. TAX RETURNS AND PAYMENTS. Except for the extension, to March 31,
1997, of the filing deadline for the tax returns due September 15, 1996 for the
Borrower's fiscal year ended June 30, 1996, each of the Borrower and its
Subsidiaries has filed all tax returns required to be

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filed by it (which are true and correct in all material respects) and has
paid all taxes and assessments due and payable, other than (a) those not yet
delinquent and (b) those contested in good faith and for which adequate
reserves have been established, except, solely with respect to tax returns
and taxes and assessments required to be filed or paid by or on behalf of any
such Person relating to periods prior to the Closing Date, for any failure
which, individually or in the aggregate, would not have a Material Adverse
Effect. Each of the Borrower and its Subsidiaries has paid, or has provided
adequate reserves (in accordance with GAAP) for the payment of, all federal,
state, local and foreign income taxes (including, without limitation,
franchise taxes based upon income) applicable for all prior fiscal years and
for the current fiscal year to the date hereof except, solely with respect to
tax returns and taxes and assessments required to be filed or paid by or on
behalf of any such Person relating to the period prior to the Closing Date,
for any failures which, individually or in the aggregate, would not have a
Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries
know of any proposed tax assessment against any such Person that could
reasonably be expected to have a Material Adverse Effect which is not being
actively contested in good faith by such Person to the extent affected
thereby in good faith and by appropriate proceedings; PROVIDED, HOWEVER,
that such reserves or other appropriate provisions, if any, as shall be
required in conformity with GAAP shall have been made or provided therefor.

5.12. ERISA. Neither the Borrower nor its Restricted Subsidiaries nor
any ERISA Affiliate of any such Person has, for a period commencing six years
prior to the Closing Date, established, maintained, participated in or been
obligated to contribute to any Plan.

5.13. CAPITAL STOCK; SUBSIDIARIES, ETC.

(a) From and after the consummation of the Public Financing, all
of the outstanding Capital Stock of the Borrower and its Restricted
Subsidiaries shall be validly issued, fully paid and nonassessable. Except
as set forth in the Stockholders Agreement, there are no preemptive rights
on the part of any holder of any class of securities or equity interests of
the Borrower and its Restricted Subsidiaries.

(b) LSGR Holdings, Inc., a direct, Wholly-Owned Subsidiary of
the Borrower, holds 99% of the partnership interests in Lone Star
Growers, L.P., as the sole limited partner, and Lone Star, Inc., a
direct, Wholly-Owned Subsidiary of the Borrower, holds the remaining 1%
of the partnership interests in Lone Star Growers, L.P., as the sole
general partner.

(c) Schedule 5.13 (including as supplemented from time to time
pursuant to Section 6.01(n)) lists each Subsidiary of the Borrower and sets
forth the jurisdiction of incorporation (or of formation) of each such
Subsidiary. There are no Restricted Subsidiaries of the Borrower which are
not directly or indirectly Wholly Owned Subsidiaries. Each Restricted
Subsidiary of the Borrower has guaranteed the Borrower's obligations
hereunder and the Borrower and each such Restricted Subsidiary has pledged

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all of its property to secure the same, pursuant to a Subsidiary Guarantee
and related Security Documents.

5.14. PROPRIETARY RIGHTS. The Borrower and each of its Restricted
Subsidiaries owns or possesses adequate patents, patent applications,
copyrights, licenses, permits, trademarks, trademark applications, service
marks, service mark applications, trade names, trade secrets and know how or
rights thereto (collectively, "INTELLECTUAL PROPERTY"), necessary to conduct its
business as presently conducted and as proposed to be conducted. No claim is
pending or, to the best knowledge of the Borrower and each such Restricted
Subsidiary, threatened to the effect that the Borrower or any of its Restricted
Subsidiaries infringes upon the asserted rights of any other Person under any
Intellectual Property, and to the best knowledge of the Borrower or any of its
Restricted Subsidiaries, there is no basis for any such claim (whether or not
pending or threatened), in each case where such claim could reasonably be
expected to have a Material Adverse Effect. No claim is pending or, to the best
knowledge of the Borrower or any of its Restricted Subsidiaries threatened to
the effect that the rights of the Borrower or any of its Restricted Subsidiaries
with respect to any such Intellectual Property owned by the Borrower or any of
its Restricted Subsidiaries are invalid or unenforceable by such Person, and, to
the best knowledge of the Borrower or any of its Restricted Subsidiaries, there
is no basis for any such claim (whether or not pending or threatened), in each
case where such claim could reasonably be expected to have a Material Adverse
Effect.

5.15. COMPLIANCE WITH LAWS, ETC. The Borrower and its Restricted
Subsidiaries are each in compliance in all material respects with all applicable
laws and regulations, including, without limitation, all laws relating to equal
employment opportunity and employee safety (but excluding, for purposes of this
Section 5.15, Environmental Laws), in all jurisdictions in which it is presently
doing business, and the Borrower will, and will cause its Subsidiaries to,
comply in all material respects with all such laws and regulations which may be
imposed in the future in jurisdictions in which it or any of its Restricted
Subsidiaries may then be doing business, other than such laws and regulations
the noncompliance with which could not reasonably be expected to have a Material
Adverse Effect.

5.16. PROPERTIES. The Borrower and its Restricted Subsidiaries each has
good and marketable title to, and beneficial ownership of, all the properties
owned by it, including, after the Closing Date, all property reflected in the
most recent balance sheet referred to in Section 5.09(b), free and clear of all
Liens, other than Prior Liens and Permitted Encumbrances. Schedule 5.16 lists
the addresses and locations of all Real Property owned and leased by the
Borrower and each such Restricted Subsidiary as of the Closing Date. Except as
set forth on Schedule 5.16 (including as supplemented from time to time pursuant
to Section 6.01(n)) the Borrower and its Restricted Subsidiaries own or lease no
other Real Property. Each of the Borrower and its Restricted Subsidiaries holds
all material licenses, certificates of occupancy or operation, water rights and
similar certificates and clearances of municipal and other authorities necessary
to own and operate its Real Property in the manner and for the purposes
currently operated by such party which if not obtained or maintained would have
a material adverse effect

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upon the value of such Real Property. With respect to the leases of Real
Property reflected on Schedule 5.16, the Borrower or the applicable
Restricted Subsidiary of the Borrower is in compliance with all material
provisions of each such lease. With respect to all leases of Real Property
by each of the Borrower and its Restricted Subsidiaries, no event has
occurred which (with the giving of notice or the passage of time or both),
would impair any right of such Person to exercise and obtain the benefit of
any options contained in any material lease; there is no material default or
basis for acceleration, repossession or termination by the landlord under any
lease, nor has any event occurred which (with the giving of notice or the
passage of time or both) would constitute a default or result in or permit
the repossession, acceleration of any obligation under, or termination of,
any material lease by the landlord.

5.17. SECURITIES.

(a) Except as set forth in Schedule 5.17 (including as
supplemented from time to time pursuant to Section 6.01(n)), there is not
any existing Capital Stock of any Subsidiary of the Borrower.

(b) All Capital Stock of the Borrower's Restricted Subsidiaries is
pledged to the Administrative Agent for the benefit of the Banks, and all
certificates evidencing such Capital Stock has been delivered to the
Administrative Agent. All such Capital Stock is and shall be at all times
duly authorized, validly issued, fully paid and nonassessable.

5.18. COLLECTIVE BARGAINING AGREEMENTS; LABOR MATTERS. None of the
Borrower nor any of its Restricted Subsidiaries is a party to any collective
bargaining or similar agreement. No such Person has experienced any strike,
labor dispute, slowdown or work stoppage due to labor disagreements which could
reasonably be expected to have a Material Adverse Effect, and to the best
knowledge of each such Person, there is no such strike, dispute, slowdown or
work stoppage threatened against any such Person.

5.19. INDEBTEDNESS OUTSTANDING. Schedule 5.19 lists and describes all
Indebtedness of the Borrower and its Restricted Subsidiaries that will be
outstanding immediately after the Closing Date, and all Indebtedness of each
such Person that will be repaid, defeased, transferred or otherwise terminated
on the Closing Date.

5.20. ENVIRONMENTAL PROTECTION. Except as set forth on Schedule 5.20
(including in any of the environmental reports listed on said Schedule), except
to the extent that any items set forth (or in said reports) individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect:

(a) Each of the Borrower and its Restricted Subsidiaries has
obtained all material permits, licenses and other authorizations which are
required with respect to the operation of its business, and the use,
operation and ownership of its properties (including the Real

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Property) and assets under any Environmental Law (collectively, the
"ENVIRONMENTAL AUTHORIZATIONS") and each such Environmental
Authorization is in full force and effect.

(b) Each of the Borrower and its Restricted Subsidiaries, and each
of the properties (including the Real Property) and assets used in its
business, is in compliance in all material respects with all terms and
conditions of the Environmental Authorizations and is also in compliance in
all respects (including, without limitation, compliance in all respects
with standards, schedules and timetables therein) with, and not subject to
liability under, any Environmental Law applicable to it or its business,
assets, operations and Real Property, if any, including without limitation
those arising under the Resource Conservation and Recovery Act of 1976, as
amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("CERCLA"), the Federal Water Pollution Control
Act, as amended, the Federal Clean Air Act, as amended, and the Toxic
Substances Control Act, as amended, and all corresponding equivalent state
laws, and there are no circumstances of a nature which may prevent or
interfere with such material compliance in the future. None of the
Borrower nor its Restricted Subsidiaries has been notified by any
Governmental Authority or has any basis to believe that any such
Environmental Authorizations will be modified, suspended or revoked or
cannot be renewed or otherwise maintained in the ordinary course of
business. In the last five years, to the best knowledge of each such
Person, none of the Borrower nor any of its Restricted Subsidiaries has
received any communication, whether from a Governmental Authority, citizen
group, employee or otherwise, that alleges that the Borrower or any of its
Restricted Subsidiaries or any of the properties or assets used in their
respective businesses (including the Real Properties) is not in compliance
in all material respects with Environmental Laws.

(c) There is no Environmental Notice that (i) is pending or, to
the best knowledge of the Borrower and its Restricted Subsidiaries,
threatened against any such Person or (ii) is pending or, to the best
knowledge of each such Person, threatened against any Person whose
liability for such Environmental Notice may have been retained or assumed
by, or could reasonably be imputed or attributed by law or contract to, any
such Person.

(d) To the best knowledge of each of the Borrower and its
Restricted Subsidiaries, there are no past or present actions, activities,
circumstances, conditions, events or incidents arising out of, based upon,
resulting from or relating to the operation, ownership or use of any
properties or assets (including the Real Properties) currently or formerly
owned, operated, leased or used by any of the Borrower and its Restricted
Subsidiaries (or any predecessor in interest of any of them), including,
without limitation, the emission, discharge, disposal or other release of
any Hazardous Materials in or into the Environment that could reasonably be
expected to form the basis of any Environmental Notice against or with
respect to any such Person, or against any person or

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entity whose liability for any Environmental Notice may have been retained
or assumed by, or could be imputed by law or contract to, any such Person.

(e) None of the Borrower nor any of its Restricted Subsidiaries
(i) has received written notice that it has been identified as a
potentially responsible party under CERCLA or any comparable state, local
or foreign law or (ii) has received any notification that any Hazardous
Materials that it or any of its predecessors in interest has used,
generated, stored, treated, handled, transported or disposed of, or
arranged for transport for disposal or treatment of, or arranged for
disposal or treatment of, has been found at any site at which any
governmental agency or private party is conducting or plans to conduct a
remedial investigation or other action pursuant to any Environmental Law.

(f) Without in any way limiting the generality of the foregoing,
to the best knowledge of each of the Borrower and its Restricted
Subsidiaries, (i) there are, and have been, no underground storage tanks or
related piping located on, at or under property (including the Real
Properties) owned, operated, leased or used by any such Person (or any
predecessor in interest of any of them), (ii) there are, and have been, no
polychlorinated biphenyls used or stored by any such Person located on, at
or under property (including the Real Properties) owned, operated, leased
or used by any such Person (iii) there are, and have been, no properties
(including the Real Properties) owned, operated, managed, leased or used by
any such Person (or any predecessor in interest of any of them) at which
Hazardous Materials generated, used, owned, managed, stored or controlled
by any such Person (or any predecessor in interest of any of them) may have
been disposed or otherwise released into the Environment except such
disposals or other releases which were in compliance with Environmental
Laws and Environmental Authorizations and (iv) there is no friable asbestos
contained in or forming part of any building, building component, structure
or office space owned, operated, leased or used by any such Person.

(g) To the best knowledge of each of the Borrower and its
Restricted Subsidiaries, no Lien has been recorded under any Environmental
Law with respect to any properties, assets or facilities (including the
Real Property) owned, operated, managed, leased, used or controlled by any
such Person.

(h) Each of the Borrower and its Restricted Subsidiaries shall
have made all notifications, registrations and filings in all material
respects in accordance with all applicable State and Local Real Property
Disclosure Requirements, including, without limitation, the use of forms
provided by state or local agencies, where such forms exist, whether to the
Administrative Agent or to, or with, the state or local agency, provided
that where such notification, registration or filing was made to, or with a
state or local agency, a copy of such notification, registration or filing
shall be provided to the Administrative Agent prior to the Closing Date.

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5.21. ENVIRONMENTAL INVESTIGATIONS. All material environmental
investigations, assessments, studies, audits or reviews conducted of which any
of the Borrower and its Restricted Subsidiaries has knowledge in relation to the
current or prior business of any such Person or any Real Property or facility
now or previously owned, operated, used, controlled or leased by any such
Person, including, without limitation, those relating to compliance with or
liability under any Environmental Law, have been delivered to the Administrative
Agent.

5.22. INSURANCE. Schedule 5.22 lists all insurance policies maintained by
each of the Borrower and its Restricted Subsidiaries. All of such insurance is
in full force and effect as of the Closing Date and, at all times after the
Closing Date, such insurance, or renewal or replacement policies substantially
equivalent in coverage and amount, shall be in full force and effect.

5.23. GOVERNMENTAL REGULATION. None of the Borrower nor any of its
Restricted Subsidiaries is subject to any federal or state statute or regulation
limiting its ability to incur indebtedness for money borrowed or guarantee such
indebtedness as contemplated by the Transaction Documents, other than Regulation
X.

5.24. ABSENCE OF EVENTS OF DEFAULT. No Default or Event of Default has
occurred and is continuing.

5.25. PERFORMANCE OF AGREEMENTS. None of the Borrower nor any of its
Restricted Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of such Person which, singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute such a default.

5.26. SECURITIES ACTIVITIES. Neither the Borrower nor any of its
Restricted Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock.

SECTION 6. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that
on the Closing Date and thereafter until (a) this Agreement has ceased to be in
effect, (b) the Commitments have terminated and (c) the Loans, together with
interest, fees and all other Obligations incurred hereunder then due and
payable, have been paid in full (except as otherwise agreed or consented to, or
waived, in writing by the Required Banks):

6.01. INFORMATION COVENANTS. The Borrower will furnish or cause to be
furnished to each Bank:

(a) As soon as available, and in any event within 90 days after
the close of each fiscal year of the Borrower the audited consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
fiscal year and the related audited consolidated

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statements of income, of cash flows and of stockholders' equity for such
fiscal year, setting forth comparative consolidated figures for the
preceding fiscal year and a report on such consolidated balance sheets
and financial statements by Arthur Andersen or another "Big Six"
accounting firm that is reasonably satisfactory to the Administrative
Agent, which report shall not be qualified as to the scope of audit or
as to the status of the Borrower and its Subsidiaries as a going concern
and shall state that such consolidated financial statements present
fairly, in all material respects, the consolidated financial position of
the Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated in conformity with GAAP, and that the examination by such
accountants was conducted in accordance with generally accepted auditing
standards.

(b) As soon as practicable, and in any event within 30 days after
the end of each month, commencing with January 1998, (i) the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such month and (ii) the related unaudited consolidated statements of
income and cash flows of the Borrower and its Subsidiaries, each in the
form customarily prepared by management for such month and for the period
from the beginning of the then current fiscal year to the end of such
month, setting forth in comparative form the corresponding periods of the
prior fiscal year (including a comparison of such monthly financial results
against the budgets required to be submitted pursuant to Section 6.01(f)
(such comparisons of actual results to budget to commence with the
financial results of the month of January 1997), together with a brief
narrative discussion and analysis prepared by management describing the
results of operations of the Borrower and its Subsidiaries for such month.

(c) As soon as available, and in any event within 90 days after
the close of each fiscal year of the any Unrestricted Subsidiary the
audited consolidated and consolidating balance sheets of such Unrestricted
Subsidiary and its Subsidiaries as at the end of such fiscal year and the
related audited consolidated and consolidating statements of income, of
cash flows and of stockholders' equity for such fiscal year, setting forth
comparative consolidated figures for the preceding fiscal year and a report
on such consolidated and consolidating balance sheets and financial
statements by Arthur Andersen or another "Big Six" accounting firm that is
reasonably satisfactory to the Administrative Agent, which report shall not
be qualified as to the scope of audit or as to the status of such
Unrestricted Subsidiary and its Subsidiaries as a going concern and shall
state that such consolidated and consolidating financial statements present
fairly, in all material respects, the consolidated and consolidating
financial position of such Unrestricted Subsidiary and its Subsidiaries as
at the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP, and that the
examination by such accountants was conducted in accordance with generally
accepted auditing standards.

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(d) As soon as practicable, and in any event within 30 days after
the end of each month, commencing with November 1997, (i) unaudited
consolidated balance sheets of any Unrestricted Subsidiaries and its
Subsidiaries as at the end of such month and (ii) the related unaudited
consolidated statements of income and cash flows of such Unrestricted
Subsidiary and its Subsidiaries, each in the form customarily prepared by
management for such month and for the period from the beginning of the then
current fiscal year.

(e) Together with each delivery of consolidated financial
statements of the Borrower and its Subsidiaries pursuant to Section
6.01(a), a written statement by the independent public accountants giving
the report thereon (i) stating that their audit examination has included a
review of the terms of Sections 7.01 through 7.05, inclusive, and the
definitions related thereto as they relate to accounting matters but
without having conducted any special auditing procedures in connection
therewith; (ii) stating whether, in connection with their audit
examination, any condition or event which constitutes a Default or Event of
Default has come to their attention, and if such a condition or event has
come to their attention, specifying the nature and period of existence
thereof; PROVIDED, HOWEVER, that such accountants shall not be liable by
reason of any failure to obtain knowledge of any such Default or Event of
Default that would not be disclosed in the course of their audit
examination; and (iii) stating that based on their audit examination
nothing has come to their attention which causes them to believe that as of
the end of such fiscal year of the Borrower there existed a Default or an
Event of Default related to the breach of any covenant set forth in
Sections 7.01 through 7.05, inclusive, as they relate to accounting matters
and if such a condition or event has come to their attention, specifying
the nature and period of existence thereof and what action the applicable
Credit Party has taken, is taking and proposes to take with respect
thereto.

(f) Prior to the commencement of each fiscal year, annual budgets
of the Borrower and its Subsidiaries in reasonable detail for each month of
such fiscal year, as customarily prepared by management for its internal
use, setting forth, with appropriate discussion, the principal assumptions
upon which such budgets are based.

(g) At the time of the delivery of the financial statements
provided for in Sections 6.01(a) and (b), a certificate of the chief
financial officer, controller, chief accounting officer or other Authorized
Officer of the Borrower to the effect that no Default or Event of Default
exists, or, if any Default or Event of Default does exist, specifying the
nature and extent thereof, which certificate shall, with respect to the
financial statements provided for in Section 6.01(b), at the time of
delivery of such statements for the fiscal months ended nearest to March
31, June 30, September 30 and December 31, beginning with the fiscal month
ended nearest to December 31, 1997, be accompanied by a Compliance
Certificate, in a form reasonably acceptable to the Agent, setting forth
the calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the covenants in this Agreement
(including without limitation the

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covenants set forth in Sections 7.01 through 7.05, inclusive) as at the
end of such fiscal period.

(h) At the time of the delivery of the financial statements
provided for in Sections 6.01(a), (b), (c) and (d), unaudited consolidated
financial statements of the Borrower and its Restricted Subsidiaries
certified by the chief financial officer, controller, chief accounting
officer or other Authorized Officer of the Borrower to the effect that such
financial statements were prepared in accordance with GAAP and fairly
reflect the financial condition of the Borrower and the Restricted
Subsidiaries at the dates thereof and the results of operations for the
periods covered thereby (subject only to normal year-end audit
adjustments).

(i) Promptly upon receipt thereof, a copy of each annual
"management letter" submitted to the Borrower the Borrower by its
independent accountants in connection with any annual audit made by them of
the books of the Borrower or any of its Subsidiaries.

(j) Promptly upon becoming available, copies of all consolidated
financial statements, reports, notices and proxy statements sent or made
available generally by the Borrower or any of its Subsidiaries to the
security holders (other than to the Borrower or another of its
Subsidiaries) of such Person, of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by the Borrower or
any of its Subsidiaries with any securities exchange or with the SEC and of
all press releases and other statements made available generally by the
Borrower or any of its Subsidiaries to the public concerning material
developments in the business of the Borrower and its Subsidiaries.

(k) Promptly upon any Senior Officer obtaining actual knowledge
(i) of any condition or event which constitutes a Default or Event of
Default, or that any Bank has given any written notice or taken any other
action with respect to a claimed Default or Event of Default under this
Agreement, (ii) that any Person has given any written notice to the
Borrower or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
Section 8.04, or (iii) of a material adverse change in the business,
operations, properties, assets, nature of assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole, an Officers' Certificate specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed
Default, Event of Default, event or condition, or material adverse change,
and what action the applicable Credit Party has taken, is taking and
proposes to take with respect thereto.

(l) (i) Promptly upon any Senior Officer obtaining actual
knowledge of the institution of, or written threat of, any action, suit,
proceeding, governmental

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investigation or arbitration against or affecting the Borrower or any of
its Subsidiaries or any property of the Borrower or any of its
Subsidiaries not previously disclosed to the Banks, which action, suit,
proceeding, governmental investigation or arbitration seeks (or in the
case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general
allegations or circumstances which seek) recovery from the Borrower or
any of its Subsidiaries aggregating $1,000,000 or more (exclusive of
claims covered by insurance policies of the Borrower or any of its
Subsidiaries unless the insurers of such claims have disclaimed coverage
or reserved the right to disclaim coverage on such claims), the Borrower
shall give notice thereof to the Banks and provide such other
information as may be reasonably available to enable the Banks and their
counsel to evaluate such matters; (ii) as soon as practicable and in any
event within 45 days after the end of each fiscal quarter, the Borrower
shall provide a report to the Banks covering the institution of, or
written threat of, any action, suit, proceeding, governmental
investigation or arbitration (not previously reported) against or
affecting the Borrower or any of its Subsidiaries or any property of the
Borrower or any of its Subsidiaries not previously disclosed to the
Banks, which action, suit, proceedings, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out of
the same general allegations or circumstances which seek) recovery from
the Borrower or any of its Subsidiaries aggregating $1,000,000 or more
(exclusive of claims covered by insurance policies of the Borrower or
any of its Subsidiaries unless the insurers of such claims have
disclaimed coverage or reserved the right to disclaim coverage on such
claims), and shall provide such other information at such time as may be
reasonably available to enable the Banks and their counsel to evaluate
such matters; (iii) in addition to the requirements set forth in clauses
(i) and (ii) of this Section 6.01(i), the Borrower upon request shall
promptly give notice of the status of any action, suit, proceeding,
governmental investigation or arbitration covered by a report delivered
to the Banks pursuant to clause (i) or (ii) above to the Banks and
provide such other information as may be reasonably available to it to
enable the Banks and their counsel to evaluate such matters; (iv)
promptly upon any officer of the Borrower or any Subsidiary obtaining
actual knowledge of any dispute in respect of or the institution of, or
written threat of, any action, suit, proceeding, governmental
investigation or arbitration in respect of any lease of Real Property or
other material contract of the Borrower or any of its Subsidiaries (in
the case of such other material contract, to the extent that the
dispute, action, suit, proceeding, investigation or arbitration could,
if resolved in a manner unfavorable to the Credit Party thereto,
reasonably be anticipated to have a Material Adverse Effect), such
Person shall give notice thereof to the Banks and shall provide to the
Banks such other information as may be reasonably available to enable
the Banks and their counsel to evaluate such matters; and (v) promptly
upon any Senior Officer obtaining knowledge of, or written threat of,
any action, suit, proceeding, governmental investigation or arbitration
in respect of any lease of Real Property or other material contract of
the Borrower or any of its Subsidiaries (in the case of such other
material contract, to the extent that the action, suit, proceeding,
investigation or arbitration could, if resolved in a manner unfavorable
to the

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Credit Party thereto, reasonably be anticipated to have a Material
Adverse Effect), the Borrower shall give notice thereof to the Banks and
shall provide such other information as may be reasonably available to
enable the Banks and their counsel to evaluate such matters.

(m) Within 90 days of the last day of each calendar year of the
Borrower, a summary report outlining all changes to the material insurance
coverage maintained from the date of the previous such report by the
Borrower or any of its Subsidiaries.

(n) To the extent reasonably requested by the Administrative
Agent, as soon as practicable and in any event within ten Business Days of
the later of such request and the making of any such amendment or waiver,
copies of amendments or waivers with respect to Indebtedness of the
Borrower or any of its Restricted Subsidiaries.

(o) On or prior to the Closing Date and within 90 days after the
commencement of each fiscal year (to the extent there has been a change
since the list provided the prior fiscal year), a complete and accurate
list of the Senior Officers and directors of each Credit Party, which list
shall include any officers authorized to execute any certificates, notices,
reports or other documents provided to the Administrative Agent or the
Banks hereunder or under any other Credit Document, and within 30 days of
any change in personnel affecting the accuracy of such list, a notice
specifying such change in personnel.

(p) Within twenty days after the last Business Day of each fiscal
month, a borrowing base certificate in the form of Exhibit 6.01(p) (each, a
"BORROWING BASE CERTIFICATE") detailing the Borrower's Eligible Accounts
Receivable and Eligible Inventory as of the last day of such fiscal month,
certified as complete and correct on behalf of the Borrower by a Senior
Officer or other Authorized Officer. In addition, each Borrowing Base
Certificate shall have attached to it such additional schedules and/or
other information as the Administrative Agent may reasonably request. If
the Borrower fails to deliver any such Borrowing Base Certificate within
thirty days after the end of any such fiscal month, then the Borrower's
Borrowing Base shall be deemed to be $0 until such time as the Borrower
shall deliver such required Borrowing Base Certificate.

(q) Within 25 days after the last Business Day of each month, or
upon the consummation of any Permitted Business Acquisition, a supplement
to each of Schedules 5.10B, 5.13, 5.16 and 5.17 showing any changes in the
information set forth in such Schedule not previously furnished to the
Banks in writing, and within 25 days after the last Business Day of each
calendar year, an amendment to each such Schedule; PROVIDED that the
Borrower shall only be required to provide a supplement (or amendment) with
respect to any such Schedule where there has been a change in the
information set forth in such Schedule not previously furnished to the
Banks in writing.

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(r) With reasonable promptness, such other information and data
with respect to the Borrower or any of its Subsidiaries or any other
similar entity in which the Borrower or any of its Subsidiaries has an
investment, as from time to time may be reasonably requested by any Bank
and may be reasonably available to the Borrower.

6.02. BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause
each of its Restricted Subsidiaries to, keep true books of records and accounts
in which full and correct entries will be made of all its business transactions,
and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP. The Borrower will, and
will cause each of its Restricted Subsidiaries to, permit, upon reasonable prior
notice to the chief executive officer or chief financial officer of the
Borrower, officers and designated representatives of the Administrative Agent or
any Bank to visit and inspect any of the properties or assets (including the
conduct, at the Borrower's cost, of an annual field audit of the Borrowing Base)
of the Borrower or any of its Restricted Subsidiaries in whosesoever possession,
and to examine the books of account of the Borrower or any of its Restricted
Subsidiaries and discuss the affairs, finances and accounts of the Borrower or
any of its Restricted Subsidiaries with, and be advised as to the same by, its
and their chief executive officer, chief financial officer and independent
accountants (in the presence of such officers), all at such reasonable times
during normal business hours and intervals and to such reasonable extent as the
Administrative Agent or any Bank may reasonably request. Notwithstanding
anything to the contrary contained in this Section 6.02, any field audit
conducted pursuant to this Section 6.02 may be conducted by a third party
auditor commissioned by the Administrative Agent or the Banks.

6.03. MAINTENANCE OF PROPERTY; INSURANCE.

(a) The Borrower will, and will cause each of its Restricted
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition (subject to normal wear and tear) all properties used
in its businesses (including, without limitation, any Real Property,
whether owned or leased) and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof and will
maintain and renew as necessary all licenses, permits and other clearances
necessary to use and occupy such properties of the Borrower and its
Restricted Subsidiaries. The Borrower will, and will cause each of its
Restricted Subsidiaries to, comply with all material provisions of each
lease of Real Property in which any such Person is the lessee.

(b) Subject to the provisions of Section 6.03(c), Borrower and its
Restricted Subsidiaries will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the
same or similar businesses and similarly situated, of such types and in
such amounts as are customarily carried under similar circumstances by such
other corporations to the extent that such types and such amounts of
insurance are available at commercially reasonable rates. The Borrower or
its Restricted Subsidiaries, as applicable, will furnish

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to each Bank, upon reasonable request, information as to the insurance
carried, and will not cancel any such insurance without the consent of
the Required Banks, which consent shall not be unreasonably withheld.

(c) Without limiting Section 6.03(b), the Borrower and its
Restricted Subsidiaries, as applicable, shall maintain, or cause to be
maintained, in full force the insurance coverages specified in the Security
Documents.

6.04. PAYMENT OF TAXES. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien or charge
upon any properties of the Borrower or any of its Subsidiaries or cause a
failure or forfeiture of title thereto; PROVIDED, HOWEVER, that neither the
Borrower nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good faith and by
proper proceedings promptly instituted and diligently conducted if it has
maintained adequate reserves with respect thereto in accordance with GAAP or if
the same shall have been bonded.

6.05. CORPORATE FRANCHISES. The Borrower will do or cause to be done,
and will cause each of its Subsidiaries to do or cause to be done, all things
necessary to preserve and keep in full force and effect its corporate existence,
rights and authority, EXCEPT that any Wholly Owned Subsidiary of the Borrower
that is a Restricted Subsidiary may merge with and into the Borrower or into
another Wholly Owned Subsidiary of the Borrower that is a Restricted Subsidiary.

6.06. COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause
each of its Restricted Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
Governmental Authorities, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including all applicable laws),
except where such noncompliance would not have a Material Adverse Effect.

6.07. ERISA. The Borrower will furnish to the Administrative Agent, who
will distribute to each of the Banks:

(a) promptly upon any Credit Party's knowing or having reason to
know of the occurrence of any (i) Termination Event, or (ii) "prohibited
transaction," within the meaning of Section 406 of ERISA or Section 4975 of
the Code, in connection with any Pension Plan or any trust created
thereunder, which in the case of all such events described in clause (i) or
(ii) results or could reasonably be expected to result in a liability of
any Credit Party or its ERISA Affiliates in the aggregate in excess of
$250,000, a written notice specifying the nature thereof, what action such
Credit Party or its ERISA Affiliates have taken, are taking or propose to
take with respect thereto, and, when

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known, any action taken or threatened by the Internal Revenue Service,
Department of Labor, PBGC or Multiemployer Plan with respect thereto.

(b) with reasonable promptness, copies of (i) all notices received
by any Credit Party or any of its ERISA Affiliates of PBGC's intent to
terminate any Title IV Plan or to have a trustee appointed to administer
any Title IV Plan, the notice of which event is required pursuant to
Section 6.07(a); (ii) upon the request of the Administrative Agent, each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by any Credit Party or any of its ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan for which Schedule B is
required; (iii) upon the request of the Administrative Agent, the most
recent actuarial valuation report for each Title IV Plan; and (iv) all
notices received by any Credit Party or any of its ERISA Affiliates from a
Multiemployer Plan concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA, the notice of which event is
required pursuant to Section 6.07(a).

6.08. PERFORMANCE OF OBLIGATIONS. The Borrower will, and will cause each
of its Restricted Subsidiaries to, perform in all material respects all of its
obligations under the terms of each mortgage, indenture, security agreement,
other debt instrument and material contract by which it is bound or to which it
is a party, except where such nonperformance could not reasonably be expected to
have a Material Adverse Effect.

6.09. FISCAL YEAR; FISCAL QUARTERS. Each of The Borrower and its
Subsidiaries as of the Closing Date will, for financial reporting purposes have
(a) its fiscal year end on or about June 30, and (b) its fiscal quarters end on
or about September 30, December 31, March 31 and June 30. Neither the Borrower
nor any of its Subsidiaries shall change their respective fiscal years from that
set forth above, with respect to the Borrower and such Subsidiaries, and from
that currently maintained by any Subsidiary subsequently acquired by the
Borrower without the prior written consent of the Required Banks, except that
any such subsequently acquired Subsidiary may change its fiscal year to end on
or about June 30, with fiscal quarters to end on or about September 30, December
31, March 31 and June 30, without such prior written consent.

6.10. USE OF PROCEEDS. All proceeds of the Loans shall be used as
provided in Section 5.05.

6.11. INTEREST RATE PROTECTION.

(a) The Borrower shall, commencing no later than 30 days after the
first to occur of (x) the date on which the outstanding principal balance
of the Acquisition Term Loans equals $25 million or (y) the Acquisition
Term Loan Commitment Termination Date, enter into Interest Rate Agreements
reasonably acceptable to the Administrative Agent for a term ending no
earlier than three years after the Acquisition Term Loan Commitment

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Termination Date, in respect of no less than 50% of the Acquisition Term
Loans outstanding from time to time.

(b) The Borrower shall, commencing no later than 30 days after
the first to occur of (x) the date on which the outstanding principal
balance of the Supplemental Term Loans equals $15 million or (y) the
Supplemental Term Loan Commitment Termination Date, enter into Interest
Rate Agreements reasonably acceptable to the Administrative Agent for a
term ending no earlier than three years after the Supplemental Term Loan
Termination Date, in respect of no less than 50% of the Supplemental Term
Loans outstanding from time to time.

6.12. NO FURTHER NEGATIVE PLEDGES, ETC. Except with respect to
prohibitions against other encumbrances on specific property encumbered to
secure payment of particular Indebtedness permitted hereunder (which
Indebtedness relates solely to the acquisition or improvement of such specific
property), neither the Borrower nor any of its Restricted Subsidiaries shall
enter into any agreement prohibiting or restricting, in any manner (directly or
indirectly and including by way of covenant, representation or warranty or event
of default), the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired (other than in connection with
the Security Documents). Neither the Borrower nor any of its Restricted
Subsidiaries shall create, or permit to be created, any restriction in the
charter or bylaws of any Restricted Subsidiary of the Borrower restricting the
payment of dividends to the Borrower or any Wholly Owned Subsidiary of the
Borrower.

6.13. BANK MEETING. The Borrower will participate in a meeting of the
Banks once during each calendar year (the first such meeting to take place prior
to June 30, 1998) to be held at a location and a time selected by the
Administrative Agent and reasonably acceptable to the Borrower, unless the
Required Banks determine in their sole discretion that such meeting is
unnecessary and so inform the Administrative Agent and the Borrower.

6.14. ADDITIONAL COLLATERAL; FURTHER ASSURANCES.

(a) Promptly, and in any event within 30 days after the Borrower
or any of its Restricted Subsidiaries acquires any asset or property,
including any Real Property, which is not covered by the existing Security
Documents, including, without limitation, any Capital Stock of any
Restricted Subsidiary (the "ADDITIONAL COLLATERAL"), the Borrower will
cause any newly acquired Restricted Subsidiary to execute a Subsidiary
Guaranty, and the Borrower will, and will cause each of its Restricted
Subsidiaries to, grant to the Administrative Agent, for the benefit of the
Banks, security interests and mortgages in such asset or property, EXCEPT
that, with respect to any asset or property acquired in a Permitted
Business Acquisition, including any Restricted Subsidiary so acquired, such
actions shall be required to be performed on or before the applicable
Permitted Business Acquisition Closing Date (except as otherwise assented
to by the Administrative Agent). Such security interests and mortgages
shall be granted pursuant to documentation

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substantially the same as the Security Documents (the "ADDITIONAL
SECURITY DOCUMENTS") reasonably satisfactory in form and substance to
the Administrative Agent, including, without limitation, and if deemed
desirable by the Administrative Agent, opinions of local counsel in any
jurisdictions in which such asset or property is located, and shall
constitute valid and enforceable perfected security interests superior
to and prior to the rights of all third Persons and subject to no other
Liens except Permitted Encumbrances at the time of perfection thereof.
The Additional Security Documents or other instruments related thereto
shall be duly recorded or filed in such manner and in such places as are
required by law to establish, perfect, preserve and protect the Liens in
favor of the Administrative Agent for the benefit of the Banks required
to be granted pursuant to the Additional Security Documents and all
taxes, fees and other charges payable in connection therewith shall have
been paid in full.

(b) The Borrower will, and will cause each of its Restricted
Subsidiaries to, at its own expense, make, execute, endorse, acknowledge,
file and/or deliver to the Administrative Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, powers of attorney,
certificates, real property surveys, reports and other assurances or
instruments and take such further steps relating to the Collateral covered
by any of the Security Documents or the Additional Security Documents as
the Administrative Agent may reasonably require. Furthermore, the Borrower
shall cause to be delivered to the Administrative Agent such opinions of
counsel, title insurance and other related documents as may be requested by
the Administrative Agent to assure themselves that this Section 6.14 has
been compiled with.

(c) At the request of the Administrative Agent or the Required
Banks, the Borrower shall provide to the Administrative Agent appraisals
satisfying applicable requirements of FIRREA in respect of the Real
Property of the Borrower and its Restricted Subsidiaries, if any,
constituting Collateral, from time to time, in form and substance
reasonably satisfactory to the Administrative Agent.

(d) The Borrower agrees that each action required by this Section
6.14 shall be completed as soon as possible, but if such Collateral has
been newly acquired by the Borrower or its Restricted Subsidiaries or is
Collateral held by any newly acquired Restricted Subsidiary of the
Borrower, in no event later than 30 days after the date of the acquisition
of such Collateral; PROVIDED that with respect to any Collateral acquired
in a Permitted Business Acquisition, each action required by this Section
6.14 with respect to such Collateral (including property of, or Capital
Stock of, any newly acquired Restricted Subsidiary) shall be taken no later
than the closing of such Permitted Business Acquisition, unless otherwise
consented to by the Administrative Agent.

(e) Following the Closing Date, the Borrower will, and will cause
each of its Restricted Subsidiaries to, perform any and all acts and
execute any and all documents

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(including, without limitation, the execution, amendment or modification
of any financing statement and continuation statement) for filing in any
appropriate jurisdiction under the provisions of the UCC, local law or
any statute, rule or regulation of any applicable jurisdiction which are
necessary in order to maintain or confirm in favor of the Administrative
Agent for the ratable benefit of the Banks a valid and perfected Lien on
the Collateral and any Additional Collateral, subject to no Liens except
for Prior Liens and Permitted Encumbrances. The Borrower shall, as
promptly as practicable after the filing of any such financing
statements, deliver to the Administrative Agent acknowledgment copies
of, or copies of lien search reports confirming the filing of, financing
statements duly filed under the UCC of all jurisdictions as may be
necessary or, in the reasonable opinion of the Administrative Agent,
desirable to perfect the Lien created, or purported or intended to be
created, by each Security Document.

(f) The Borrower shall use its best efforts and shall cause each
of its Restricted Subsidiaries to use their best efforts, to obtain an
executed Landlord Certification and Waiver with respect to each lease of
Real Property entered into by Credit Party after the Closing Date; PROVIDED
that, the Borrower shall not be required to take actions or incur costs
which are commercially unreasonable with respect to such leases of Real
Property which, in the reasonable judgement of the Administrative Agent,
are not material to the business of the Borrower and its Restricted
Subsidiaries taken as a whole, in order to obtain such Landlord
Certification and Waivers.

6.15. ENVIRONMENTAL EVENTS.

(a) The Borrower will, and will cause each of its Restricted
Subsidiaries to, comply with any and all Environmental Laws, other than
noncompliance which could not reasonably be expected to result in liability
under Environmental Laws which would have a Material Adverse Effect;
PROVIDED that the Borrower will, and will cause each of its Restricted
Subsidiaries to, comply with any and all Environmental Laws, to the extent
any noncompliance would (x) constitute or create a default under any lease
of Real Property as to which a Credit Party is a tenant which would entitle
the lessor of such Real Property to terminate said lease or (y) materially
diminish the value of any Real Property owned by any Credit Party.

(b) The Borrower will, and will cause each of its Restricted
Subsidiaries to, promptly give notice to the Administrative Agent upon
becoming aware thereof (i) of any violation of any Environmental Law, (ii)
any Environmental Notice or (iii) any release or threatened release of any
Hazardous Material at, on, into, under or from any Real Property or any
facility or equipment thereat in excess of reportable or allowable
standards or levels under any Environmental Law, or in a manner and/or
amount which could reasonably be expected to either (x) result in liability
under any Environmental Law, in each case, in excess of $500,000
individually or in the aggregate with any other liability under any
Environmental Laws (other than any such events disclosed in Schedule 5.21
or

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referred to in the reports listed on said Schedule) or (y) materially
interfere with the continued operation of the Real Property which is the
site or subject of the violation, notice or release.

(c) The Borrower will, and will cause each of its Restricted
Subsidiaries to, promptly provide the Administrative Agent with copies of
any notice, submittal or documentation provided by the Borrower or any of
its Restricted Subsidiaries to any Governmental Authority or third party
under any Environmental Law if the matter which is the subject of the
notice, submittal or other documentation could reasonably be expected to
have a Material Adverse Effect. Such notice, submittal or documentation
shall be provided to the Administrative Agent promptly and, in any event,
within ten Business Days after such material is provided to the
Governmental Authority or third party.

(d) In the event of the presence of Hazardous Materials on any
Real Property which is in violation of, or which could reasonably be
expected to result in liability under, any Environmental Laws, in each
case, to the extent such violation, or liability, could reasonably be
expected to (x) have a Material Adverse Effect, or (y) entitle the lessor
of any Real Property with respect to which a Credit Party is the tenant to
terminate the subject lease, or (z) materially diminish the value of any
Real Property owned by any Credit Party, then, in each case, the Borrower
or any of its Restricted Subsidiaries, upon discovery thereof, shall take
appropriate steps to initiate and expeditiously complete all response,
corrective and other action required under any Environmental Laws to
mitigate and eliminate any such liability.

6.16. The Borrower shall and shall cause each of the Unrestricted
Subsidiaries to maintain compliance with each of the Unrestricted Subsidiary
Conditions.

SECTION 7. NEGATIVE COVENANTS. The Borrower hereby covenants and agrees
that as of the Closing Date and thereafter until (a) this Agreement has ceased
to be in effect, (b) the Commitments have terminated and (c) the Loans (together
with interest, fees and all other Obligations incurred hereunder) then due and
payable have been paid in full (except as otherwise agreed or consented to, or
waived, in writing by the Required Banks):

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7.01. CAPITAL EXPENDITURES. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, make Consolidated Capital Expenditures
for any purpose, in excess of the amount specified in the table below for each
of the calendar years specified in such table:

YEAR ENDING AMOUNT
----------- ------

December 31, 1997 $10.4 million
December 31, 1998 $13.5 million
December 31, 1999 $11.5 million
December 31, 2000 $11.5 million
December 31, 2001 $11.5 million
December 31, 2002 $11.5 million
December 31, 2003 $11.5 million
December 31, 2004 $11.5 million

; PROVIDED, HOWEVER, that for purposes of this Section 7.01, the aggregate
amount of Capitalized Lease Obligations incurred by the Borrower and its
Restricted Subsidiaries, on a consolidated basis, shall be included in the
calculation of Consolidated Capital Expenditures in the year in which such
Capitalized Lease Obligations were incurred; PROVIDED, FURTHER, that if the
Borrower and its Restricted Subsidiaries make Consolidated Capital Expenditures
in any calendar year in an amount less than the amount set forth above for such
period (such unused portion the "CARRYOVER AMOUNT"), the Borrower and its
Restricted Subsidiaries may make Consolidated Capital Expenditures in the
immediately succeeding calendar year in an amount not to exceed the sum of (i)
the amount set forth above for such calendar year and (ii) the Carryover Amount;
PROVIDED, FURTHER, that (i) the Carryover Amount calculated for any calendar
year may only be used during the immediately succeeding calendar year and will
not be added to the amount of Consolidated Capital Expenditure availability for
such succeeding calendar year for purposes of calculating the Carryover Amount
for such calendar year, and (ii) the Capital Expenditures for a given calendar
year shall be counted, first, against the amount set forth above for such
calendar year and, second, against the Carryover Amount and PROVIDED, FURTHER,
that after the consummation of any Permitted Business Acquisition, the amounts
set forth in the table above for any periods ending after such Permitted
Business Acquisition shall be increased by an amount equal to 30% of the
projected EBITDA of the acquired company included in the pro forma consolidated
plan for the then current calendar year delivered to the Administrative Agent
pursuant to Section 4.03(b)(iii).

7.02. TOTAL INTEREST COVERAGE RATIO. The Borrower will not permit the
ratio of (a) Consolidated EBITDA of the Borrower for any Test Period ended on or
about a date specified in the table below to (b) Consolidated Interest Expense
of the Borrower for any Test Period ended on or about a date specified in the
table below (provided, however in the case of periods ending on March 31, June
30, or September 30 of 1998, the Consolidated Interest Expense of the Borrower
shall be calculated for the relevant Test Period net of any interest paid with
respect to

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any Existing Revolving Loans which were repaid (and not reborrowed under the
Revolving Loans) on the Closing Date), to be less than the ratio set forth
opposite such date in such table:

TEST PERIOD ENDING RATIO
------------------ -----

March 31, 1998 . . . . . . . . . . . . . . . . 2.00 to 1.00
. . . . . . . . . . . . . . . . 2.00 to 1.00
June 30, 1998. . . . . . . . . . . . . . . . . 2.00 to 1.00
September 30, 1998 . . . . . . . . . . . . . . 2.00 to 1.00
December 31, 1998. . . . . . . . . . . . . . . 2.00 to 1.00

March 31, 1999 . . . . . . . . . . . . . . . . 2.15 to 1.00
June 30, 1999. . . . . . . . . . . . . . . . . 2.15 to 1.00
September 30, 1999 . . . . . . . . . . . . . . 2.25 to 1.00
December 31, 1999. . . . . . . . . . . . . . . 2.25 to 1.00

March 31, 2000 . . . . . . . . . . . . . . . . 2.25 to 1.00
June 30, 2000. . . . . . . . . . . . . . . . . 2.25 to 1.00
September 30, 2000 . . . . . . . . . . . . . . 2.50 to 1.00
December 31, 2000. . . . . . . . . . . . . . . 2.50 to 1.00

March 31, 2001 . . . . . . . . . . . . . . . . 2.50 to 1.00
June 30, 2001. . . . . . . . . . . . . . . . . 2.50 to 1.00
September 30, 2001 . . . . . . . . . . . . . . 2.75 to 1.00
December 31, 2001. . . . . . . . . . . . . . . 2.75 to 1.00

March 31, 2002 . . . . . . . . . . . . . . . . 2.75 to 1.00
June 30, 2002. . . . . . . . . . . . . . . . . 2.75 to 1.00
September 30, 2002 . . . . . . . . . . . . . . 3.00 to 1.00
December 31, 2002. . . . . . . . . . . . . . . 3.00 to 1.00

March 31, 2003 . . . . . . . . . . . . . . . . 3.00 to 1.00
June 30, 2003. . . . . . . . . . . . . . . . . 3.00 to 1.00
September 30, 2003 . . . . . . . . . . . . . . 3.25 to 1.00
December 31, 2003. . . . . . . . . . . . . . . 3.25 to 1.00

March 31, 2004 . . . . . . . . . . . . . . . . 3.25 to 1.00
June 30, 2004. . . . . . . . . . . . . . . . . 3.25 to 1.00
September 30, 2004 . . . . . . . . . . . . . . 3.50 to 1.00
December 31, 2004. . . . . . . . . . . . . . . 3.50 to 1.00

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; PROVIDED that, for purposes of this Section 7.02, Consolidated EBITDA for a
given Test Period (x) shall mean Consolidated EBITDA for the twelve month period
ended on the last day of such Test Period and (y) shall also include the EBITDA
(with appropriate adjustments) derived from any business which was acquired by
the Borrower and its Restricted Subsidiaries during such twelve-month period and
which is consolidated with the Borrower and its Restricted Subsidiaries as of
the last day of such Test Period, for the portion of such twelve month period
before the business was so acquired; and PROVIDED further that, for purposes of
clause (b) of this Section 7.02, Consolidated Interest Expense shall include
only cash interest expense paid during the applicable period.

7.03. FIXED CHARGE COVERAGE RATIO. The Borrower will not permit the
ratio of (a) Consolidated EBITDAC for any Test Period ending on or about the
date specified in the table below MINUS taxes paid in cash during such Test
Period to (b) the sum of (i) Consolidated Interest Expense (which for purposes
of this clause (b) shall mean only cash interest expense paid during such
period) of the Borrower for such period (provided, however, in the case of
periods ending on March 31, June 30, or September 30 of 1998, the Consolidated
Interest Expense of the Borrower shall be calculated for the relevant Test
Period net of any interest paid with respect to any Existing Revolving Loans
which were repaid (and not reborrowed under the Revolving Loan) on the Closing
Date), PLUS (ii) the amount of cash payments on account of principal of
Indebtedness PLUS (iii) payments on account of noncompetition or consulting
arrangements made by the Borrower and its Restricted Subsidiaries, on a
consolidated basis, during such period to be less than the ratio specified
opposite such date; PROVIDED that, for purposes of this Section 7.03,
Consolidated EBITDAC for a given Test Period (x) shall mean Consolidated EBITDAC
for the twelve month period ended on the last day of such Test Period and (y)
shall also include the EBITDAC (with appropriate adjustments) derived from any
business which was acquired by the Borrower and its Restricted Subsidiaries
during such twelve-month period and which is consolidated with the Borrower and
its Restricted Subsidiaries as of the last day of such Test Period, for the
portion of such twelve month period before the business was so acquired:

TEST PERIOD ENDING RATIO
------------------ -----

March 31, 1998 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 1998. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 1998 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 1998. . . . . . . . . . . . . . . 1.10 to 1.00

March 31, 1999 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 1999. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 1999 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 1999. . . . . . . . . . . . . . . 1.10 to 1.00

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March 31, 2000 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 2000. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 2000 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 2000. . . . . . . . . . . . . . . 1.10 to 1.00

March 31, 2001 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 2001. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 2001 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 2001. . . . . . . . . . . . . . . 1.10 to 1.00

March 31, 2002 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 2002. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 2002 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 2002. . . . . . . . . . . . . . . 1.10 to 1.00

March 31, 2003 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 2003. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 2003 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 2003. . . . . . . . . . . . . . . 1.10 to 1.00

March 31, 2004 . . . . . . . . . . . . . . . . 1.10 to 1.00
June 30, 2004. . . . . . . . . . . . . . . . . 1.10 to 1.00
September 30, 2004 . . . . . . . . . . . . . . 1.10 to 1.00
December 31, 2004. . . . . . . . . . . . . . . 1.10 to 1.00

7.04. LEVERAGE RATIO. The Borrower will not permit the Leverage
Ratio on or about the date specified in the table below to be greater than the
ratio specified opposite such date in such table:

TEST PERIOD ENDING RATIO
------------------ -----

March 31, 1998 . . . . . . . . . . . . . . . . 5.50 to 1.00
June 30, 1998. . . . . . . . . . . . . . . . . 5.50 to 1.00
September 30, 1998 . . . . . . . . . . . . . . 5.50 to 1.00
December 31, 1998. . . . . . . . . . . . . . . 5.50 to 1.00

March 31, 1999 . . . . . . . . . . . . . . . . 5.50 to 1.00
June 30, 1999. . . . . . . . . . . . . . . . . 5.50 to 1.00
September 30, 1999 . . . . . . . . . . . . . . 5.25 to 1.00
December 31, 1999. . . . . . . . . . . . . . . 5.25 to 1.00

March 31, 2000 . . . . . . . . . . . . . . . . 5.00 to 1.00
June 30, 2000. . . . . . . . . . . . . . . . . 5.00 to 1.00

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September 30, 2000 . . . . . . . . . . . . . . 4.75 to 1.00
December 31, 2000. . . . . . . . . . . . . . . 4.75 to 1.00

March 31, 2001 . . . . . . . . . . . . . . . . 4.50 to 1.00
June 30, 2001. . . . . . . . . . . . . . . . . 4.50 to 1.00
September 30, 2001 . . . . . . . . . . . . . . 4.25 to 1.00
December 31, 2001. . . . . . . . . . . . . . . 4.25 to 1.00

March 31, 2002 . . . . . . . . . . . . . . . . 4.00 to 1.00
June 30, 2002. . . . . . . . . . . . . . . . . 4.00 to 1.00
September 30, 2002 . . . . . . . . . . . . . . 3.75 to 1.00
December 31, 2002. . . . . . . . . . . . . . . 3.75 to 1.00

March 31, 2003 . . . . . . . . . . . . . . . . 3.50 to 1.00
June 30, 2003. . . . . . . . . . . . . . . . . 3.50 to 1.00
September 30, 2003 . . . . . . . . . . . . . . 3.25 to 1.00
December 31, 2003. . . . . . . . . . . . . . . 3.25 to 1.00

March 31, 2004 . . . . . . . . . . . . . . . . 3.00 to 1.00
June 30, 2004. . . . . . . . . . . . . . . . . 3.00 to 1.00
September 30, 2004 . . . . . . . . . . . . . . 2.75 to 1.00
December 31, 2004. . . . . . . . . . . . . . . 2.75 to 1.00

; PROVIDED that, for purposes of this Section 7.04, for a given date set forth
above, (x) Consolidated Indebtedness shall not include any such Indebtedness as
to which the interest on such Indebtedness is not cash-pay (but is, rather,
pay-in-kind or capitalized), EXCEPT that, if cash interest is paid on any
such non cash-pay Indebtedness during the fiscal quarter ended on such date,
Consolidated Indebtedness shall include the non cash-pay Indebtedness on
which such cash interest was paid, and (y) the component of Consolidated
Indebtedness consisting of Revolving Loans shall equal (i) the sum of the
balance of the Revolving Loans as of the last day of each fiscal month during
the twelve fiscal month period ending on such date DIVIDED by (ii) twelve;
and PROVIDED further that, for purposes of this Section 7.04, Consolidated
EBITDA for a given Test Period (x) shall mean Consolidated EBITDA for the
twelve month period ended on the last day of such Test Period and (y) shall
also include the EBITDA (with appropriate adjustments set forth in financials
delivered pursuant to Section 4.03(b)(x)) derived from any business which was
acquired by the Borrower and its Restricted Subsidiaries during such
twelve-month period and which is consolidated with the Borrower and its
Restricted Subsidiaries as of the last day of such Test Period, for the
portion of such twelve month period before the business was so acquired.

7.05. CONSOLIDATED NET WORTH. Consolidated Net Worth determined as of
the dates specified in the table below shall equal or exceed the amount
specified in such table opposite such dates:

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DETERMINATION DATE AMOUNT
------------------ ------

December 31, 1998 $ 45,000,000
December 31, 1999 $ 50,000,000
December 31, 2000 $ 55,000,000
December 31, 2001 $ 70,000,000
December 31, 2002 $ 85,000,000
December 31, 2003 $105,000,000
December 31, 2004 $130,000,000

7.06. LIENS. The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Lien upon or with respect to any item constituting
Collateral, whether now owned or hereafter acquired, except for the Lien of the
Security Document relating thereto, Prior Liens applicable thereto and Permitted
Encumbrances. The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of the Borrower or any of its Restricted
Subsidiaries, whether now owned or hereafter acquired, or sell any such property
or assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets or assign any right to receive income, or
file or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute, except the
following, which are herein collectively referred to as "PERMITTED
ENCUMBRANCES":

(a) Liens for taxes, assessments or governmental charges or claims
not yet delinquent or Liens for taxes, assessments or governmental charges
or claims being contested in good faith and by appropriate proceedings for
which adequate reserves, as may be required by GAAP, have been established
or as to which bonds have been posted with the applicable authority in the
amounts required by applicable law;

(b) Liens in respect of property or assets of the Borrower or any
of its Restricted Subsidiaries imposed by law (i) which were incurred in
the ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business, and (A) which do not in the aggregate materially detract from the
value of the property or assets of the Borrower and its Restricted
Subsidiaries, taken as a whole, or materially impair the use thereof in the
operation of the business of the Borrower or any of its Restricted
Subsidiaries or (B) which are being contested in good faith by appropriate
proceedings promptly instituted, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset subject to such
Lien or (ii) which do not relate to material liabilities of the Borrower
and its Restricted Subsidiaries and do not in the aggregate materially
detract from the value of the property and assets of the Borrower and its
Restricted Subsidiaries taken as a whole and do not create a default under
any lease of Real Property;

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(c) Liens in connection with any attachment or judgment (including
judgment or appeal bonds) not in excess of $1,000,000 in the aggregate
(exclusive of any amount adequately covered by insurance as to which the
insurance company has acknowledged coverage) unless the attachment or
judgment it secures shall, within 60 days after the entry thereof, not have
been discharged or execution thereof not stayed pending appeal, or shall
not have been discharged within 30 days after the expiration of any such
stay;

(d) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money or the equivalent);

(e) Easements, rights of way, restrictions, minor defects or
irregularities in title not interfering in any material respect with the
business of the Borrower or any of its Restricted Subsidiaries, in each
case incurred in the ordinary course of business and which do not
materially impair for its intended purposes the Real Property to which it
relates;

(f) Zoning and building bylaws and ordinances, municipal bylaws
and regulations, and restrictive covenants, which do not materially
interfere with the use of the subject property by the Borrower or any of
its Restricted Subsidiaries as such property is used as of the Closing Date
(or, with respect to property acquired after the Closing Date, as such
property is used as of the acquisition date of such property);

(g) Liens securing Indebtedness of any Restricted Subsidiary of
the Borrower owing to the Borrower or any Wholly Owned Subsidiary of the
Borrower that is a Restricted Subsidiary;

(h) Liens upon real or tangible personal property acquired or
constructed by the Borrower or its Restricted Subsidiaries after the date
hereof or on such property or equity securities of a Person at the time
such Person becomes a Restricted Subsidiary of the Borrower or any of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that (A) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, the cost of the item of property subject thereto or
such Liens existed on the date such property or securities were acquired
and were not incurred as a result of or in anticipation of such
acquisition, (B) the principal amount of the Indebtedness secured by such
Lien does not exceed when incurred 100% of the fair value (as determined in
good faith by the board of directors of the Borrower or the Borrower) of
the property at the time it was so acquired or constructed, (C) the
Indebtedness secured by the Lien is not created more than 180 days after
the later of the acquisition, completion of construction,

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repair, improvement, addition or commencement of full operation of the
property subject to the Lien, (D) such Lien does not extend to or cover
any other property other than such item of property, (E) the incurrence
of such Indebtedness secured by such Lien is permitted by Section 7.07 and
(F) such Lien is not in violation of any lease of any Real Property of any
Credit Party; and

(i) Liens on any property existing as of the date hereof securing
Existing Debt and any refinancing, extension, renewal or rearrangement
thereof provided that such Lien does not extend to or cover any other
property other than items of property encumbered as of the date hereof.

7.07. INDEBTEDNESS. The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, contract, create, incur, assume, guarantee,
acquire or become liable for (contingently or otherwise) or suffer to exist any
Indebtedness, except:

(a) Indebtedness incurred pursuant to the Credit Documents;

(b) Indebtedness incurred pursuant to the Heller Subordinated
Note;

(c) Indebtedness incurred pursuant to the Seller Note issued
pursuant to the Stock Purchase Agreement dated as of September 3, 1997
among the Borrower, Oda Nursery, Inc. and the former shareholders of Oda
Nursery, Inc.

(d) Indebtedness incurred pursuant to the Senior Subordinated
Notes.

(e) Indebtedness not in excess of $6,000,000 in aggregate
principal amount at any one time outstanding, incurred pursuant to any note
issued to sellers as part of the consideration for a Permitted Business
Acquisition (any such note, a "SELLER NOTE"), provided that any such Seller
Note shall satisfy the following conditions: (i) it shall be unsecured,
(ii) it shall not pay interest prior to maturity, other than interest which
is paid-in-kind (except that up to $600,000 of cash interest may be paid on
Seller Notes annually, subject to there being, at the time of any such
payment of cash interest, no payment Default hereunder, and subject to
restrictions imposed on such payment pursuant to clause (iii) hereof), and
(iii) it shall contain subordination and related provisions which are
acceptable in form and substance to the Administrative Agent, including,
without limitation, that there shall be no payments made with respect to
such Seller Notes (other than the payment of interest, in-kind) while there
is any payment Default or, subject to such conditions as are acceptable to
the Administrative Agent, upon such other Defaults as are acceptable to the
Administrative Agent, and there shall be no right of acceleration on such
Seller Notes on account of such nonpayment.

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(f) Indebtedness arising under noncompetition or consulting
arrangements entered into in connection with Permitted Business
Acquisitions, not to exceed $6,000,000 in the aggregate at any one time
outstanding.

(g) Existing Debt and any refinancing, extension, rearrangement,
renewal or replacement thereof; PROVIDED, HOWEVER, that any such
refinancing, extension, renewal, rearrangement or replacement of Existing
Debt shall be on terms which, both taken as a whole and specifically as
such terms relate to the identity of the obligors, repayments of principal,
covenants, events of default and security in property of the debtor, are in
each event no less favorable to the Borrower than the correlative terms of
the Existing Debt;

(h) Interest Rate Agreements entered into pursuant to Section 6.11
or for other bona fide hedging purposes;

(i) Indebtedness (other than Indebtedness permitted by Section
7.07(l)) not exceeding $4,000,000 in aggregate principal amount outstanding
at any time to finance the cost of the acquisition of personal tangible
property (including Capital Leases, but excluding Indebtedness incurred to
finance Permitted Business Acquisitions), and any refinancing, extension,
renewal, rearrangement or replacement; PROVIDED, HOWEVER, that such
Indebtedness (or the refinancing thereof) shall not exceed when incurred
100% of the fair value of such property when so acquired; and PROVIDED,
FURTHER, that such Indebtedness (or the refinancing thereof) is not secured
by any Lien other than a Lien referred to in Section 7.06(h);

(j) other unsecured Indebtedness not exceeding $2,500,000 in the
aggregate at any time outstanding;

(k) Indebtedness of the Borrower to any of its Wholly Owned
Subsidiaries (which is a Restricted Subsidiary) or of any Restricted
Subsidiary of the Borrower to the Borrower or another Wholly Owned
Restricted Subsidiary of the Borrower (but only so long as such
Indebtedness is held by the Borrower or a Wholly Owned Subsidiary (which is
a Restricted Subsidiary) of the Borrower) to the extent such Indebtedness
is permitted as an Investment by the Person owed such Indebtedness by the
provisions of Section 7.08; and

(l) Indebtedness of any entity, or secured by any personal
tangible property, acquired in a Permitted Business Acquisition, so long as
such Indebtedness is (i) not incurred in contemplation of such Permitted
Business Acquisition, (ii) not in excess of $1,000,000 in the aggregate at
any one time outstanding and (iii) not secured by any Lien other than a
Lien referred to in Section 7.06(h).

7.08. INVESTMENTS. The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, have outstanding or make any Investments except:

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(a) Investments consisting of Cash and Cash Equivalents;

(b) Investments consisting of receivables owing to them and
advances to customers and suppliers, in each case if created, acquired or
made in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms;

(c) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers or in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;

(d) Investments made in Wholly Owned Subsidiaries (that are
Restricted Subsidiaries) of the Borrower or any Person which, as a result
of such Investment, becomes a Wholly Owned Subsidiary (and a Restricted
Subsidiary) of the Borrower (including any such Investment which
constitutes a Permitted Business Acquisition); PROVIDED, HOWEVER, that such
Wholly Owned Subsidiary is engaged in a business related to that of the
Borrower and its Restricted Subsidiaries in compliance with Section 7.17;

(e) Investments consisting of loans or advances made by the
Borrower to its officers, directors and employees in the ordinary course of
business not to exceed $100,000 in the aggregate outstanding at any time
(excluding any such loans or advances made as of the closing date of the
Existing Credit Agreement pursuant to the Put/Call Option Agreement);

(f) Investments made as a result of the receipt of non-cash
proceeds from any Asset Sale made pursuant to and in compliance with
Section 7.11;

(g) Investments in Interest Rate Agreements permitted under
Section 7.07(h);

(h) Investments in addition to those permitted above not exceeding
$1,000,000 in the aggregate at any time outstanding; and

(i) An Investment made with the consent of the Administrative
Agent in an Unrestricted Subsidiary at the time that such Subsidiary is
determined to be an Unrestricted Subsidiary; provided that any such
Investment shall not exceed the greater of (x) $200,000 and (y) 110% of
the Borrower's Investment in such Subsidiary existing immediately prior
to the time that such Subsidiary is determined to be an Unrestricted
Subsidiary.

7.09. PREPAYMENTS OF INDEBTEDNESS. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, make (or give any notice in
respect of) any voluntary or optional payment or prepayment or redemption or
acquisition for value of Indebtedness (including, without limitation, by way of
depositing with any trustee with respect thereto money or securities

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before such Indebtedness is due for the purpose of paying such Indebtedness
when due) or exchange of any such Indebtedness, other than the Loans.

7.10. DIVIDENDS, ETC. The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, declare or pay any dividends or return any
capital to its stockholders (in their capacity as such) or authorize or make any
other distribution, payment or delivery of property or cash to its stockholders
(in their capacity as such), or redeem, retire, purchase or otherwise acquire,
directly or indirectly, for any consideration, any shares of any class of its
capital stock now or hereafter outstanding (or any warrants for or options or
stock appreciation rights in respect of any of such shares), or make any loans
or advances to Affiliates, or set aside any funds for any of the foregoing
purposes, or permit any of its Restricted Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of the capital stock of the
Borrower or any of its Restricted Subsidiaries, as the case may be, now or
hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock) (all of the foregoing,
"DIVIDENDS"), PROVIDED, HOWEVER, that (a) any direct or indirect Wholly Owned
Subsidiary of the Borrower may pay cash Dividends to its parent corporation if
such parent corporation is the Borrower or is both a Wholly Owned Subsidiary and
a Restricted Subsidiary of the Borrower; (b) the Borrower or any of its
Restricted Subsidiaries may make payments to Affiliates pursuant to and in
compliance with Section 7.19; (c) after December 15, 2002, the Borrower may pay
Dividends to holders of its Series A Preferred Stock required by the Certificate
of Designation of such Series A Preferred Stock as in effect on the Closing Date
and the Borrower may pay non-cash dividends in the form of payment-in-kind
preferred stock to holders of its Series A Preferred Stock at any time; (d) the
Borrower may make payments from the Put/Call Funds to Management Stockholders to
redeem their "Option Shares" (as defined in the Put/Call Option Agreement), in
accordance with the Put/Call Option Agreement, provided that any such redemption
is effected prior to January 31, 1998; and (e) upon the death, disability or
termination of employment of Management Stockholders, the Borrower may
repurchase from such Management Stockholders their Capital Stock of the
Borrower in an amount not exceeding $250,000 per year or $1,500,000 in the
aggregate; provided in each case that no Default or Event of Default which has
not been cured or waived is in existence, or would result from such payment.

7.11. DISPOSITION OF ASSETS. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, dispose of all or any part of its
interest in any asset except that the Borrower and its Restricted Subsidiaries
may sell or otherwise dispose of assets to any Person other than an Affiliate so
long as such sales or other dispositions are (a) approved by the Required Banks;
(b) for at least the fair market value of such assets and the aggregate amount
of such asset sales is less than $2,500,000 in any 12-month period and, in any
such case, the Borrower or such Restricted Subsidiary complies with the
mandatory prepayment provisions and Commitment reduction provisions herein and,
in the case of Collateral, so long as the conditions to the release of
Collateral described herein and in the applicable Security Documents are met;
(c) of inventory in the ordinary course of business; (d) (i) of equipment that
has become worn out, obsolete or damaged or otherwise unsuitable or no longer
needed for use in connection with

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the business of the Borrower or any of its Restricted Subsidiaries or should
be replaced, as the case may be, in each case as determined in good faith by
the board of directors of the Borrower or its Restricted Subsidiary, as the
case may be; (ii) for at least the fair value of such equipment, as determined
in good faith by the board of directors of the Borrower or its Restricted
Subsidiaries; and (iii) the proceeds of the sales of such equipment are used
within 120 days of such sales (or such longer period as may be consented to by
the Administrative Agent) to (A) purchase equipment used in substantially
similar lines of business or (B) repay Loans pursuant to Section 3.03 and
until so applied are held in the Reserve Account; or (e) of assets as to which
the likely amount of net sales proceeds that would be realized upon a sale of
such assets is such that a sale of such assets is not, in the reasonable
judgment of the Borrower, economically practicable but such other disposition
is otherwise of commercial value to the Borrower; PROVIDED, HOWEVER, that in
no case shall sales or other dispositions pursuant to this clause (e) be of
assets of a fair market value at the time of such sale which is in excess of
an aggregate of $750,000 in any calendar year, and in the case of Collateral,
so long as the conditions to the release of Collateral described herein and in
the applicable Security Documents are met; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the Borrower will not, and will not permit any
of its Restricted Subsidiaries to, sell, with or without recourse, or discount
(other than in connection with trade discounts in the ordinary course of
business consistent with past practice) or otherwise sell for less than the
face value thereof, notes or accounts receivable owed to it by its third-party
customers or suppliers.

The consideration received by the Borrower and its Restricted Subsidiaries
from each sale of assets permitted by this Section 7.11, other than with respect
to such sales involving consideration of not more than $500,000 in the aggregate
in any calendar year, shall be received in whole within 15 days of such sale and
at least 70% of the consideration from each sale shall consist of Cash or Cash
Equivalents. Any non-Cash proceeds received from the sale of assets
constituting Collateral shall be pledged pursuant to and in accordance with the
applicable Security Documents and shall constitute Collateral.

7.12. CONTINGENT OBLIGATIONS. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or become
or be liable with respect to any Contingent Obligation except:

(a) guarantees resulting from endorsement of instruments for
deposit or collection in the ordinary course of business;

(b) Interest Rate Agreements permitted under Section 7.07(h);

(d) obligations with respect to the Indebtedness permitted to be
incurred under Section 7.07;

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(e) other Contingent Obligations not to exceed $750,000
outstanding at any one time; and

(f) Contingent Obligations in respect of the repurchase or
redemption of Capital Stock of the Borrower held by Management
Stockholders, upon the termination of such shareholders' employment, which
meet the specifications of Section 7.10.

7.13. MERGER AND CONSOLIDATIONS. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, merge or consolidate with or into
any other entity; PROVIDED, HOWEVER, that Holdings may merge with and into the
Borrower on the Closing Date and any Restricted Subsidiary of the Borrower or
any Person acquired in a Permitted Business Acquisition may be merged or
consolidated with or into (a) the Borrower, if the Borrower is the continuing or
surviving corporation or (b) any Restricted Subsidiary of the Borrower, if (i)
the continuing or surviving corporation is both a Wholly Owned Subsidiary and a
Restricted Subsidiary of the Borrower and (ii) the continuing or surviving
corporation is, or immediately thereafter becomes, party to a Subsidiary
Guarantee and a Security Agreement and all related documentation necessary for
the perfection of the liens and security interests created thereunder.

7.14. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Without the prior written
consent of the Administrative Agent, the Borrower will not, and will not permit
any of its Restricted Subsidiaries to, amend, modify or change any of the terms
or provisions of its certificate of incorporation (including, without
limitation, by the filing of any certificate of designation), by-laws or
agreement of limited partnership, in each case to the extent such amendment,
modification or change is adverse to the Banks as Banks hereunder, provided,
however, the Borrower may amend and restate its certificate of incorporation on
the Closing Date in the form attached hereto as Exhibit 7.14.

7.15. ERISA. At no time shall the actuarial present value of unfunded
liabilities for post-employment health care benefits of the Borrower, any of its
Restricted Subsidiaries or any ERISA Affiliate of any of them, whether or not
provided under a Plan, calculated in a manner consistent with Statement No. 106
of the Financial Accounting Standards Board, exceed $750,000 in aggregate.

7.16. NO NON-WHOLLY OWNED SUBSIDIARIES. Neither the Borrower nor any of
its Restricted Subsidiaries shall have, create or suffer to exist any Subsidiary
of any of them which is not a Wholly Owned Subsidiary, including, without
limitation, any such Restricted Subsidiary acquired in a Permitted Business
Acquisition.

7.17. CHANGES IN BUSINESS. Other than asset dispositions permitted
under Section 7.11, the Borrower will not, and will not permit any of its
Restricted Subsidiaries to, materially alter its business from that conducted by
it at the Closing Date.

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7.18. AMENDMENTS OR WAIVERS OF CERTAIN DOCUMENTS. After the Closing
Date, the Borrower will not, and will not permit any of its Restricted
Subsidiaries to, amend, terminate or otherwise change any Public Financing
Documents or the terms of any of the leases of Real Property referred to on
Schedule 5.16 without, with respect to any amendment, termination or change
which is adverse to the Banks as Banks hereunder, the prior written consent of
the Administrative Agent. The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, amend or otherwise change the terms of any Existing
Debt (excluding such Indebtedness arising under Capital Leases), except as
otherwise permitted under this Section 7.

7.19. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, enter into any transaction
or series of transactions, whether or not in the ordinary course of business,
with any holder of 5% or more of any class of equity interests of the Borrower
or with any Affiliate of the Borrower other than on terms and conditions
substantially as favorable to the Borrower or such Restricted Subsidiary as
would be obtainable by the Borrower or such Subsidiary at the time in a
comparable arm's-length transaction with a Person other than a holder of 5% or
more of any class of equity interests of the Borrower or an Affiliate of the
Borrower; PROVIDED, HOWEVER, that the foregoing restrictions shall not apply
to (a) transactions between the Borrower and any of its Wholly Owned
Subsidiaries (that are Restricted Subsidiaries) and between Wholly Owned
Subsidiaries of the Borrower (that are Restricted Subsidiaries) permitted by
the other provisions of this Agreement, (b) loans or advances made by the
Borrower to its officers, directors and employees permitted under Section
7.08(e), (c) the payment of fees to Indosuez and its respective Affiliates for
financial services, such fees not to exceed the usual and customary fees for
similar services, (d) the issuance of Capital Stock of the Borrower pursuant
to any pension, stock option, profit sharing or other employee benefit plan or
agreement of the Borrower or its Restricted Subsidiaries in the ordinary
course of business, (e) a payment to KCSN or its Affiliates on or about the
Closing Date for management services pursuant to the termination of the
Management Agreement, not to exceed $2,000,000, (f) the continuation and
renewal of the leases referred to on Schedule 5.16, (g) distributions with
respect to the Heller Subordinated Note permitted under Section 7.23 and the
Heller Subordination Agreement, (h) the redemption of Capital Stock of the
Borrower held by Management Stockholders or the Senior Managers subject to the
conditions described in Section 7.10 and (i) transactions between the Borrower
and holders of the Borrower's Series A Preferred Stock permitted by the other
provisions of this Agreement.

7.20. CAPITAL STRUCTURE. The Borrower shall not permit any of its
Restricted Subsidiaries to issue, sell, assign, pledge or otherwise encumber or
dispose of any of its Capital Stock (including partnership interests or other
securities or warrants, rights or options to acquire capital stock, partnership
interests or other securities), without first providing prior written notice
thereof to the Administrative Agent and making arrangements satisfactory to the
Administrative Agent to ensure that any such Capital Stock will be deposited
with the Administrative Agent, and that the Administrative Agent will have a
valid first priority perfected security interest in such Capital Stock.

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7.21. SALE AND LEASE-BACKS. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, become or
thereafter remain liable as lessee or as guarantor or other surety with respect
to the lessee's obligations under any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real or personal or mixed) whether now
owned or hereafter acquired, (a) which the Borrower or any of its Restricted
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person or (b) which the Borrower or any such Restricted Subsidiary intends to
use for substantially the same purpose as any other property which has been or
is to be sold or transferred by the Borrower or any such Restricted Subsidiary
to any Person in connection with such lease, if in the case of clause (a) or (b)
above, such sale and such lease are part of the same transaction or a series of
related transactions or such sale and such lease occur within one year of each
other or are with the same other Person.

7.22. CLEAN-DOWN PERIOD. During the Clean-down Period for each fiscal
year of the Borrower, the aggregate unpaid principal amount of outstanding
Revolving Loans and Supplemental Revolving Loans, plus outstanding Letters of
Credit Usage (which are not cash collateralized in a manner satisfactory to the
Administrative Agent) shall not exceed the Clean-down Amount.

7.23. CERTAIN PAYMENTS. The Borrower and its Restricted Subsidiaries
shall make no payments or distributions with respect to (i) the Heller
Subordinated Notes, except as permitted under the Heller Subordination Agreement
or (ii) the Senior Subordinated Notes, except as permitted under the
subordination provisions of such Senior Subordinated Notes. Without limiting
the foregoing, on or after December 31, 1998, the Borrower shall be permitted to
pay interest in cash on the Heller Subordinated Notes to the holders thereof
(the "HELLER SUBORDINATED LENDERS") in an amount equal to any scheduled semi-
annual interest payment on the Subordinated Notes if (A) at the time of making
such payment there is not in existence, nor will there occur after giving effect
to such payment, a Default or Event of Default; (B) after giving pro forma
effect to such cash payment as if such payment was made during the relevant Test
Period (i) the ratio of (w) total Consolidated Indebtedness of the Borrower and
its Restricted Subsidiaries (including the outstanding balance under any
noncompete or consulting arrangements) immediately prior to such payment to (x)
Consolidated EBITDA of the Borrower and its Restricted Subsidiaries is not more
than 3.25:1.0 (PROVIDED, that, for purpose of the foregoing clause (i), the
calculations shall be performed in accordance with the provisos to Section 7.04)
and Consolidated Indebtedness shall include the outstanding balance (including
capitalized interest) of the Heller Subordinated Notes; and (ii) the ratio of
(y) Consolidated EBITDA of the Borrower and its Restricted Subsidiaries to (z)
Consolidated Interest Expense (which, for the purposes of this Section 7.23,
shall include only cash interest expense) of the Borrower and its Restricted
Subsidiaries is not less than 3.0:1.0; (C) during the period two weeks before
the scheduled interest payment date on the Heller Subordinated Notes for which
the Borrower has proposed a cash interest payment there shall be $2.5 million of
availability for additional Borrowings of a Revolving Loan or Supplemental
Revolving Loan pursuant to Section 1.01; and (D) the Borrower shall have
delivered to the Administrative Agent an Officers' Certificate (i) setting forth
the calculation of the financial ratios required by clause (B) above and

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(ii) stating that, based on the annual budgets or forecasts currently in
effect and provided pursuant to Section 4.01(j) or 4.03 hereof and after
giving effect to the amount of any interest payment permitted by this Section
7.23, such persons do not expect that a Default or an Event of Default shall
occur in the then current fiscal quarter or the next succeeding fiscal
quarter, in each case, of the Borrower and its Subsidiaries.

SECTION 8. EVENTS OF DEFAULT. Each of the events specified in Sections
8.01 through 8.09, inclusive, is referred to as an "EVENT OF DEFAULT":

8.01. PAYMENTS. The Borrower shall (a) default in the payment when due
of any principal of the Loans, (b) default in the payment when due of any
interest on the Loans, and such default shall continue for two or more Business
Days or (c) fail to pay any other amounts owing hereunder or under any other
Credit Document, and such failure shall continue for five Business Days after
the Borrower's receipt of written notice thereof.

8.02. REPRESENTATIONS, ETC. Any representation, warranty or statement
made or deemed made by operation of Sections 4.01, 4.02, 4.03 or 5 by any Credit
Party herein or in any other Credit Document or in any written statement or
certificate delivered or required to be delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made by operation of Sections 4.01, 4.02, 4.03 or 5.

8.03. COVENANTS.

(a) Any Credit Party shall default in the due performance or
observance by it of any term, covenant or agreement contained in Sections
6.11, 6.12 or Section 7; or

(b) any Credit Party shall default in the due performance or
observance by it of any other term, covenant or agreement contained in this
Agreement, any other Credit Document or any Security Document (except as
otherwise provided in this Section 8) and such default shall continue
unremedied after (i) the expiry of any specified grace period relative to
such default or, (ii) where no grace period is specified, 30 days (or, in
the case of Section 6.16(d), ten Business Days) after the date of such
default.

8.04. DEFAULT UNDER OTHER AGREEMENTS.

(a) Any Credit Party shall (i) default in any payment with
respect to any Indebtedness (other than Obligations) having a principal
amount of $750,000 or more individually or $1,500,000 or more in the
aggregate, for all such Persons, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created, or (ii) default in the observance or performance of any agreement
or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or,

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except for any such default or other event or condition as to such
Indebtedness arising under Capital Leases, to permit (with or without
notice, lapse of time or both) the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause any
such Indebtedness to become due (whether by acceleration, redemption,
etc.) prior to its stated maturity;

(b) any such Indebtedness of any Credit Party shall be declared to
be due and payable, or required to be prepaid or redeemed other than by a
regularly scheduled or required prepayment, prior to the stated maturity
thereof; or

(c) Any Credit Party shall default in the performance or
observance of any obligation under any lease reflected on Schedule 5.16
(excluding those leases which the Borrower has designated on Schedule 5.16
as not material, and the Administrative Agent has agreed with such
designation), and such default results in the termination of such lease.

8.05. BANKRUPTCY, ETC. Any Credit Party shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"BANKRUPTCY CODE"); or an involuntary case is commenced against any Credit Party
and the petition is not controverted within 20 days, or is not dismissed within
60 days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of any Credit Party; or any Credit Party commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to any Credit Party; or
there is commenced against any Credit Party any such proceeding which remains
undismissed for a period of 60 consecutive days; or any Credit Party is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or any Credit Party suffers
any appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
any Credit Party makes a general assignment for the benefit of creditors; or any
corporate action is taken by any Credit Party for the purpose of effecting any
of the foregoing.

8.06. SECURITY DOCUMENTS; GUARANTEES.

(a) Any Security Document shall cease to be in full force and
effect, or shall cease to give the Administrative Agent the Liens, rights,
powers, and privileges purported to be created thereby, in favor of the
Administrative Agent, superior to and prior to the rights of all third
Persons and subject, in each case, to no Liens other than Permitted
Encumbrances, Prior Liens and Liens expressly permitted by the applicable
Security Document, or any judgment creditor having a Lien against any
material item of Collateral shall commence legal action to foreclose such
Lien or otherwise exercise its remedies against any material item of
Collateral, or the Administrative Agent shall cease to hold,

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for the benefit of the Banks, 100% of the Borrower's Restricted
Subsidiaries Capital Stock.

(b) Any Subsidiary Guarantee, or any provisions thereof shall
cease to be in full force and effect in all material respects, or any
guarantor thereunder or any Person acting by or on behalf of such guarantor
shall deny or disaffirm such guarantor's obligations under such guarantee
or shall default in the due performance or observance of any term, covenant
or agreement on its part to be performed or observed pursuant to such
guarantee.

8.07. SUBORDINATION.

(a) The terms of the Heller Subordination Agreement, the subordination
provisions of the Senior Subordinated Notes, or of the subordination
as to any Seller Note shall cease, for any reason, to be in full
force and effect for the benefit of the Banks, or any Credit Party
or the holder of the Heller Subordinated Notes or any Seller Note or
the trustee or holders of the Senior Subordinated Notes shall so
assert or shall otherwise assert that the Obligations are not senior
to the Heller Subordinated Notes, the Senior Subordinated Notes or
any Seller Note, as the case may be.

(b) An event described in Section 2.2(a) of the Heller Subordinated Notes,
as requiring mandatory redemption of the Heller Subordinated Notes,
shall occur.

(c) An event described in the indenture governing the Senior Subordinated
Notes which requires redemption of any position of the Senior
Subordinated Notes, shall occur.

8.08. JUDGMENTS. One or more judgments or decrees shall be entered
against any Credit Party involving a liability of $750,000 or more in the case
of any one such judgment or decree and $1,500,000 in the aggregate for all such
judgments or decrees for the Borrower and its Restricted Subsidiaries (in either
case in excess of the amount covered by insurance as to which the insurance
company has acknowledged coverage) and any such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal for a period of
60 consecutive days from the entry thereof.

8.09. OWNERSHIP.

(a) KCSN, together with any other Person controlled by or under
common control with Kohlberg & Company, LLC, shall,
collectively, cease to have and to exercise the right to
elect or designate directors entitled to cast a majority of
the votes of the Borrower's board of directors; or

(b) Any Person or group of related Persons for purposes of
Section 13(d) of the Securities Exchange Act of 1933 (other
than KCSN, taken together with any other Person controlled
by or under common control with

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Kohlberg & Company, LLC) shall own and/or control (x) a
percentage of the issued and outstanding capital stock of
the Borrower entitled (without regard to the occurrence of
any contingency) to vote for the election of directors
which is equal to or greater than the amount of such
securities held by KCSN, taken together with any other
Person controlled by or under common control with Kohlberg
& Company, LLC, or (y) more of the issued and outstanding
capital stock of the Borrower (taking into consideration
both voting and nonvoting capital stock) than KCSN, taken
together with any other Person controlled by or under
common control with Kohlberg & Company, LLC; or

8.10. CERTAIN ACTIONS FOLLOWING AN EVENT OF DEFAULT. Upon the occurrence
and during the continuance of any Event of Default, the Administrative Agent
may, and, upon the written request of the Required Banks shall, by written
notice to the Borrower (which shall be deemed notice to each other Credit
Party), take any or all of the following actions, without prejudice to the
rights of the Administrative Agent or any Bank to enforce its claims against the
Borrower or any other Credit Party, except as otherwise specifically provided
for in this Agreement (PROVIDED, HOWEVER, that upon an Event of Default
specified in Section 8.05 the actions provided for in clauses (a) and (b) below
shall occur automatically without the giving of any notice):

(a) declare the Total Revolving Loan Commitments and the
Supplemental Revolving Loan Commitments terminated (and, if prior to the
Acquisition Term Loan Commitment Termination Date and for the Supplemental
Term Loan Commitment Termination Date, declare the Acquisition Term Loan
Commitments and/or the Supplemental Term Loan Commitments, as applicable,
terminated), whereupon the Revolving Loan Commitment the Supplemental Loan
Commitment (and, if applicable, the Acquisition Term Loan Commitment) of
each Bank shall forthwith terminate immediately and any accrued and unpaid
Commitment Fee shall forthwith become due and payable without any other
notice of any kind;

(b) declare the principal of and accrued interest in respect of
all Loans and all Obligations owing hereunder and thereunder to be,
whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Credit Party; and/or

(c) enforce, as Administrative Agent (or direct the Administrative
Agent to enforce), any or all of the remedies created pursuant to the
Security Documents. If an Event of Default is cured or waived in
accordance with the terms of this Agreement, it ceases (and, if waived,
pursuant to the terms, and to the extent, of such waiver).

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SECTION 9. DEFINITIONS. Certain capitalized terms are used in this
Agreement with the specific meanings set forth or referred to below in this
Section 9. Capitalized terms defined in this Agreement in the singular or
plural form include the plural and singular form, respectively.

"ACCOUNT" means all of the "accounts" of the Borrower and its Restricted
Subsidiaries (as that term is defined in Section 9-106 of the Uniform Commercial
Code as in effect in the State of New York) whether or not such Account has been
earned by performance, whether now existing or existing in the future,
including, without limitation, all (a) accounts receivable, including, without
limitation, all accounts created by or arising from the sale of goods or
rendition of services by the Borrower and its Restricted Subsidiaries; (b)
unpaid seller's rights (including rescission, replevin, reclamation and stopping
in transit) relating to the foregoing or arising therefrom; (c) rights to any
goods represented by any of the foregoing, including returned or repossessed
goods; (d) reserves and credit balances held by the Borrower and its Restricted
Subsidiaries with respect to any such accounts receivable or any account debtor;
(e) guarantees or collateral for any of the foregoing; and (f) insurance
policies or rights relating to any of the foregoing.

"ACQUISITION PORTION" means, at any time, the portion of the Loan Facility
evidenced by the Total Acquisition Term Loan Commitment.

"ACQUISITION TERM LOAN" is defined in Section 1.01(b).

"ACQUISITION TERM LOAN CLOSING DATE" is defined in Section 1.01(b).

"ACQUISITION TERM LOAN COMMITMENT" means, with respect to each Bank, the
amount set forth below such Bank's name on Exhibit A hereto directly below the
column entitled "Acquisition Term Loan", as same may be reduced from time to
time pursuant to Sections 2.01, 3.03 and/or 8.

"ACQUISITION TERM LOAN COMMITMENT TERMINATION DATE" means the last Business
Day of December, 1999.

"ACQUISITION TERM LOAN MATURITY DATE" means the last Business Day of
December, 2004.

"ACQUISITION TERM NOTE" is defined in Section 1.05(a)(ii).

"ADDITIONAL SECURITY DOCUMENTS" is defined in Section 6.14(a).

"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and executive
officers of such Person), controlled by, or under direct or indirect common
control with such Person; PROVIDED, HOWEVER, that none of Indosuez, IBJS, BKOB,
nor any Affiliate of Indosuez, or BKOB shall be deemed to be an Affiliate of any
Credit Party. A Person shall be deemed to control a corporation for the

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purposes of this definition if such Person possesses, directly or indirectly,
the power (a) to vote 10% or more of the securities having ordinary voting power
for the election of directors of such corporation or (b) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.

"ADMINISTRATIVE AGENT" is defined in the preamble to this Agreement and
shall include any successor Administrative Agent appointed in accordance
herewith in its capacity as Administrative Agent for the Banks.

"AGENTS" is defined in the preamble to this Agreement.

"AGENT'S OFFICE" shall mean the office of the Administrative Agent located
at 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, or such
other office as the Administrative Agent may hereafter designate in writing as
such to the other parties hereto.

"AGREEMENT" shall mean the Original Credit Agreement, as amended and
restated by the Existing Credit Agreement and hereby, including as the same may
after its execution be amended, supplemented or otherwise modified from time to
time in accordance with the terms hereof.

"ASSET RESTORATION AMOUNT" is defined in Section 3.03(f)(i).

"ASSET SALE" means the sale, transfer or other disposition, to the extent
consummated after the Closing Date, by the Borrower or any of its Restricted
Subsidiaries to any Person other than the Borrower or any of its Wholly Owned
Subsidiaries (which are Restricted Subsidiaries) of any asset of the Borrower or
such Subsidiary, except for (a) transactions included in the definition of the
Public Financing or (b) the issuance of equity securities under any stock option
or other benefit plan available to the employees or directors of the Borrower or
any of its Subsidiaries.

"ASSETS" means all of the assets of the Borrower and its Restricted
Subsidiaries from time to time.

"ASSIGNMENT AGREEMENT" is defined in Section 11.04(c).

"AUTHORIZED OFFICER" shall mean any senior officer of the Borrower or the
Borrower, as applicable, designated as such in writing to the Administrative
Agent by the Borrower.

"BANK" is defined in the preamble to this Agreement and in Section 11.04.

"BANKRUPTCY CODE" is defined in Section 8.05.

"BASE RATE" means the higher of (a) 1/2% per annum in excess of the Federal
Funds Rate and (b) the rate which the Administrative Agent announces from time
to time as its prime

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commercial lending rate, as in effect from time to time; PROVIDED,
HOWEVER, that (i) the rate the Administrative Agent announces as its
prime commercial lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any
customer and (ii) the Administrative Agent may make commercial loans or
other loans at rates of interest at, above or below the rate it
announces as its prime lending rate.

"BASE RATE LOAN" means each Loan bearing interest at the rate provided in
Section 1.08(a).

"BASE RATE MARGIN" means, with respect to any Revolving Loan, any
Acquisition Term Loan, any Supplemental Term Loan or and Supplemental Revolving
Loan, with respect to interest payable in any quarter, the rate set forth in the
table below opposite the Leverage Ratio of the Borrower as determined on the
last day of such quarter; provided, however the Base Rate Margin applicable in
any quarter shall equal 1.25% unless the Borrower has delivered at least 10
Business Days prior to the end of such quarter a certificate of the Borrower's
president or chief financial officer to the Administrative Agent irrevocably
certifying the Leverage Ratio for such quarter:

LEVERAGE RATIO BASE RATE MARGIN
-------------- ----------------
> 5.00x 1.25%
4.51x - 5.00x 1.00%
4.01x - 4.50x 0.75%
3.51x - 4.00x 0.50%
3.01x - 3.50x 0.25%
2.51x - 3.00x 0.00%
2.01x - 2.50x 0.00%
< 2.01x 0.00%

"BKOB" is defined in the preamble to this Agreement.

"BORROWER" is defined in the preamble to this Agreement.

"BORROWING" means the incurrence pursuant to a Notice of Borrowing and
under the Loan Facility of one Type of Loan by the Borrower from all of the
Banks on a pro rata basis on a given date (or resulting from conversions on a
given date), having, in the case of Reserve Adjusted Eurodollar Loans, the same
Interest Period.

"BORROWING BASE" means, at any date of determination, an amount equal to
the sum of (x) 85% of Eligible Accounts Receivable PLUS (y) 55% of Eligible
Inventory, in each case as shown on the most recent Borrowing Base
Certificate delivered prior to such date of determination; PROVIDED that
during any Clean-down Period, the Borrowing Base shall be the lesser of (x)
the amount derived from the foregoing calculation and (y) the Clean-down
Amount.

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"BORROWING BASE CERTIFICATE" is defined in Section 6.01(m).

"BREAKAGE COSTS" is defined in Section 1.10(f).

"BUSINESS DAY" means (a) for all purposes other than as covered by clause
(b) below, any day excluding Saturday, Sunday and any day which shall be in the
City of New York or the State of California a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close and (b) with respect to all notices and determinations in connection with,
and payments of principal and interest on, Reserve Adjusted Eurodollar Loans,
any day which is a Business Day described in clause (a) and which is also a day
for trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.

"CAPITAL LEASE" of any Person means any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is, or is required to be, accounted for as a capital lease on the balance
sheet of that Person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms.

"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase, or securities convertible into,
any of the foregoing.

"CAPITALIZED LEASE OBLIGATIONS" of any Person means all obligations under
Capital Leases of such Person or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.

"CARRYOVER AMOUNT" is defined in Section 7.01.

"CASH" means Dollars in money, currency or a credit balance in a Deposit
Account.

"CASH EQUIVALENTS" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than three years from the date of acquisition; (b) marketable direct obligations
issued by any State of the United States of America or any local government or
other political subdivision thereof rated (at the time of acquisition of such
security) at least AA by S&P or the equivalent thereof by Moody's having
maturities of not more than one year from the date of acquisition; (c) U.S.
dollar denominated time deposits, certificates of deposit and bankers'
acceptances of (i) any Bank, (ii) any domestic commercial bank of recognized
standing having capital and surplus in excess of $10,000,000,000 or (iii) any
bank whose short-term commercial paper rating (at the time of acquisition of
such security) by S&P is at least A-1 or the equivalent thereof or by Moody's
is at least P-1 or the equivalent thereof (any such bank, an "APPROVED

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BANK"), in each case with maturities of not more than six months from the
date of acquisition; (d) commercial paper and variable or fixed rate notes
issued by any Bank or Approved Bank or by the parent company of any Bank or
Approved Bank and commercial paper and variable rate notes issued by, or
guaranteed by, any industrial or financial company with a short-term
commercial paper rating (at the time of acquisition of such security) of at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's, or guaranteed by any industrial company with a long-term
unsecured debt rating (at the time of acquisition of such security) of at
least AA or the equivalent thereof by S&P or the equivalent thereof by
Moody's and in each case maturing within one year after the date of
acquisition; (e) repurchase agreements with any Bank or any primary dealer
maturing within one year from the date of acquisition that are fully
collateralized by investment instruments that would otherwise be Cash
Equivalents; PROVIDED that the terms of such repurchase agreements comply
with the guidelines set forth in the Federal Financial Institutions
Examination Council Supervisory Policy -- Repurchase Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market mutual funds, all of the assets of which are invested in securities
and instruments of the types set forth in clauses (a) through (d) above.

"CERCLA" is defined in Section 5.21(b).

"CLEAN-DOWN AMOUNT" means $15,000,000.

"CLEAN-DOWN PERIOD" means, for each fiscal year of the Borrower, the 30
consecutive calendar day period designated by the Borrower for such fiscal year,
falling within the 90 day period commencing on July 1 of that year and ending on
September 30 of that year.

"CLOSING DATE" means the date on which the Initial Loans are made and the
Public Financing is consummated.

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

"COLLATERAL" means all assets of the Borrower and/or its Restricted
Subsidiaries from time to time (excluding the Put/Call Funds) and any other
assets which are required to be subjected to Liens and security interests in
favor of the Administrative Agent, for the benefit of the Banks, as collateral
security for the payment or performance of any of the Obligations, including the
assets described as collateral security in the Security Documents and any
Subsidiary Guarantee.

"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the account of the Borrower for the benefit of the
Borrower or any of its Restricted Subsidiaries, for the purpose of providing the
primary payment mechanism in connection with the purchase of any materials,
goods or services by the Borrower or any of its Restricted Subsidiaries in the
ordinary course of business of the Borrower or such Restricted Subsidiaries.

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"COMMITMENTS" means, with respect to each Bank, the Revolving Loan
Commitment, the Acquisition Term Loan Commitment and the Supplemental Loan
Commitment of such Bank.

"COMMITMENT FEE" is defined in Section 2.03.

"COMPLIANCE CERTIFICATE" means a certificate issued pursuant to Section
6.01(e) signed by a chief financial officer, controller, chief accounting
officer or other Authorized Officer of the Borrower.

"CONSOLIDATED AMORTIZATION EXPENSE" for any Person means, for any period,
the consolidated amortization expense of such Person for such period (including
amortization of any step-up in value of inventory or other assets as may be
required by purchase accounting), determined on a consolidated basis for such
Person and its Restricted Subsidiaries in conformity with GAAP.

"CONSOLIDATED CAPITAL EXPENDITURES" of any Person means, for any period,
the aggregate gross increase during that period, in the property, plant or
equipment reflected in the consolidated balance sheet of such Person and its
consolidated Restricted Subsidiaries, in conformity with GAAP, but excluding
expenditures made in connection with the replacement, substitution or
restoration of assets (a) to the extent financed from insurance proceeds paid on
account of the loss of or damage to the assets being replaced or restored or
from indemnity payments, received under the Recapitalization Documents or from
any Replacement Asset Amount or Asset Restoration Amount, (b) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced or (c) with regard to equipment that is purchased
substantially simultaneously with the trade-in of existing equipment, fixed
assets or improvements, the credit granted by the seller of such equipment for
the trade-in of such equipment, fixed assets or improvements; PROVIDED, HOWEVER,
that Consolidated Capital Expenditures shall exclude the purchase price paid in
connection with the acquisition of any other Person in a Permitted Business
Acquisition financed, in whole or in part, with the proceeds of an Acquisition
Term Loan (including through the purchase of all of the capital stock or other
ownership interests of such Person or through merger or consolidation) to the
extent allocable to property, plant and equipment.

"CONSOLIDATED CURRENT ASSETS" means, with respect to any Person as at any
date of determination, the total assets of such Person and its consolidated
Restricted Subsidiaries which may properly be classified as current assets on a
consolidated balance sheet of such Person and its Restricted Subsidiaries in
accordance with GAAP.

"CONSOLIDATED CURRENT LIABILITIES" means, with respect to any Person as at
any date of determination, the total liabilities of such Person and its
consolidated Restricted Subsidiaries which may properly be classified as current
liabilities (other than the current portion of any

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Loans or any Existing Debt) on a consolidated balance sheet of such Person
and its consolidated Restricted Subsidiaries in accordance with GAAP.

"CONSOLIDATED DEPRECIATION EXPENSE" for any Person means, for any period,
the consolidated depreciation expense of such Person for such period, determined
on a consolidated basis for such Person and its consolidated Restricted
Subsidiaries in conformity with GAAP.

"CONSOLIDATED EBITDA" for any Person means, without duplication, for any
period, the sum of the amounts for such period of

(i) Consolidated Net Income,

(ii) Consolidated Tax Expense,

(iii) Consolidated Interest Expense,

(iv) Consolidated Depreciation Expense,

(v) Consolidated Amortization Expense,

(vi) other non-cash expenses incurred during such period,

(vii) any expenses or charges related to the termination of the
Management Agreement, and

(viii) any write-off of deferred financing costs in connection with
this Second Amended and Restated Credit Agreement.

"CONSOLIDATED EBITDAC" for any Person means, for any period, Consolidated
EBITDA minus Consolidated Capital Expenditures (other than Expansion Capital
Expenditures).

"CONSOLIDATED INDEBTEDNESS" for any Person means, at any time for the
determination thereof, the principal amount of all Indebtedness of such Person
and its consolidated Restricted Subsidiaries, determined on a consolidated basis
in accordance with GAAP.

"CONSOLIDATED INTEREST EXPENSE" for any Person means, for any period, the
sum of (a) total interest expense (including that attributable to Capital Leases
in accordance with GAAP) and (b) total dividends paid on any preferred stock, in
each case of such Person and its Restricted Subsidiaries on a consolidated basis
with respect to all outstanding Indebtedness and preferred stock of such Person
and its Restricted Subsidiaries, including, without limitation, all commissions,
discounts and other fees and charges of a similar nature owed with respect to
letters of credit and bankers' acceptance financing, but excluding, however, any
amortization of

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deferred financing costs, all as determined on a consolidated basis for such
Person and its consolidated Restricted Subsidiaries in accordance with GAAP.
For purposes of clause (b) above, dividend requirements shall be increased to
an amount representing the pretax earnings that would be required to cover
such dividend requirements; accordingly, the increased amount shall be equal
to such dividend requirements multiplied by a fraction, the numerator of
which is such dividend requirement and the denominator of which is one MINUS
the applicable actual combined federal, state, local and foreign income tax
rate of such Person and its subsidiaries (expressed as a decimal), on a
consolidated basis, for the calendar year immediately preceding the date of
the transaction giving rise to the need to calculate Consolidated Interest
Expense.

"CONSOLIDATED NET INCOME" for any Person means, for any period, the net
income (or loss) of such Person and its Restricted Subsidiaries on a
consolidated basis for such period taken as a single accounting period
determined on a consolidated basis for such Person and its consolidated
Restricted Subsidiaries in conformity with GAAP; PROVIDED, HOWEVER, that there
shall be excluded (a) the income (or loss) of any other Person (other than
consolidated Restricted Subsidiaries of such Person) in which any third Person
(other than such Person or any of its consolidated Restricted Subsidiaries) has
a joint interest, except to the extent of the amount of dividends or other
distributions actually received by such Person or any of its consolidated
Restricted Subsidiaries from such other Person during such period, and (b) the
income of any consolidated Restricted Subsidiary of such Person to the extent
that the declaration or payment of dividends or similar distributions by that
consolidated Restricted Subsidiary of that income is not at the time permitted
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
consolidated Restricted Subsidiary.

"CONSOLIDATED NET WORTH" means, at any date of determination, the total of
stockholders' equity of the Borrower and its Restricted Subsidiaries determined
in accordance with GAAP on a consolidated basis.

"CONSOLIDATED TAX EXPENSE" for any Person means, for any period, the
consolidated tax expense of such Person for such period, determined on a
consolidated basis for such Person and its consolidated Restricted Subsidiaries
in conformity with GAAP.

"CONTINGENT OBLIGATIONS" means, as to any Person, without duplication, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of
any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary

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obligation or (d) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that
the term Contingent Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
maximum amount that such Person may be obligated to expend pursuant to the
terms of such Contingent Obligation or, if such Contingent Obligation is not
so limited, the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by
such Person in good faith.

"CREDIT DOCUMENTS" means (a) the Original Credit Agreement, as amended and
restated by the Existing Credit Agreement and by this Agreement, (b) each Note,
(c) each Security Document, (d) any Subsidiary Guarantee and (e) any other
agreement, document or instrument between the Administrative Agent and the
Borrower or any other Credit Party or between or among the Agent, the Banks and
the Borrower or any other Credit Party, which amends, supplements or modifies
this Agreement, the Notes, any Security Document or any Subsidiary Guarantee or
which is stated to be a Credit Document.

"CREDIT PARTY" means each of the Borrower and each Restricted Subsidiary of
the Borrower.

"DEFAULT" means any event, act or condition which with notice or lapse of
time, or both, would constitute an Event of Default.

"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.

"DIVIDENDS" is defined in Section 7.10.

"DOLLARS" means United States dollars.

"EFFECTIVE DATE" means December 31, 1996, such being the date of the
Original Credit Agreement and the making of the initial Loans thereunder.

"ELIGIBLE ACCOUNTS RECEIVABLE" means, as at any applicable date of
determination, the aggregate face amount of Borrower's and its Restricted
Subsidiaries' Accounts included in clause (a) of the definition of Account
hereunder, without duplication, MINUS (i) (without duplication) the aggregate
amount of all reserves, limits and deductions with respect to such Accounts
required by paragraphs (a) through (q) below and (ii) the aggregate amount of
all returns, discounts, claims, credits, charges (including warehouseman's
charges) and allowances of any nature with respect to such Accounts (whether
issued, owing, granted or outstanding). Unless

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otherwise approved in writing by the Administrative Agent in its sole
discretion, no individual Account shall be deemed to be an Eligible Account
Receivable if:

(a) the Borrower or its Restricted Subsidiary does not have legal
and valid title to the Account or the account has been written off as
uncollectible; or

(b) the Account is not the valid, binding and legally enforceable
obligation of the account debtor subject, as to enforceability, only to
(i) applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability of
creditors' rights generally and (ii) judicial discretion in connection with
the remedy of specific performance and other equitable remedies; or

(c) the Account arises out of a sale made by the Borrower or a
Restricted Subsidiary to an Affiliate of the Borrower (other than a Person
that is an Affiliate solely by virtue of being under common control with
the Borrower); or

(d) the Account or any portion thereof is unpaid more than 90 days
after the original invoice date; or

(e) other than Accounts of Home Depot, the Account, when
aggregated with all other Accounts of the same account debtor (or any
Affiliate thereof), exceeds 30% in face value of all Accounts of the
Borrower then outstanding, to the extent of such excess; or

(f) (i) the Account is subject to any claim on the part of the
account debtor disputing liability under such Account in whole or in part,
to the extent of the amount of such dispute or (ii) the Account otherwise
is or is reasonably likely to become subject to any right of setoff or any
counterclaim, claim or defense by the account debtor, to the extent of the
amount of such setoff or counterclaim, claim or defense or (iii) the
account debtor for such Account is also a creditor of the Borrower, to the
extent of the amount owed by the Borrower to the account debtor; or

(g) the account debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors or if a decree or order for
relief has been entered by a court having jurisdiction in the premises in
respect of the account debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or if any other
petition or other application for relief under the federal bankruptcy laws
has been filed by or against the account debtor, or if the account debtor
has failed, suspended business, ceased to be solvent, or consented

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to or suffered a receiver, trustee, liquidator or custodian to be appointed
for it or for all or a significant portion of its assets or affairs; or

(h) the Administrative Agent does not have a valid and perfected
first priority security interest in such Account; or

(i) the sale to the account debtor for such Account is on a
consignment, bill-and-hold, sale on approval, guaranteed sale or sale-and-
return basis or pursuant to any written agreement providing for repurchase
or return other than return arrangements in the ordinary course of business
consistent with the past business practices of Borrower; or

(j) it is from an account debtor (or any Affiliate thereof) and
25% or more, in face amount, of other Accounts from either such account
debtor or any Affiliate thereof are due or unpaid for more than 90 days
after the original invoice date; or

(k) 25% or more, in face amount, of other Accounts from the same
account debtor are not deemed Eligible Accounts Receivable hereunder; or

(l) the amount debtor is a foreign Governmental Authority;

(m) the Account is an Account a security interest in which would
be subject to the Federal Assignment of Claims Act of 1940, as amended (31
U.S.C. Section 3727 et seq.), unless (i) such Account, together with all
other Eligible Accounts a security interest in which would be subject to
such Act, does not exceed 2% in face value of all Eligible Accounts of the
Borrower and its Restricted Subsidiaries then outstanding, or (ii) Borrower
has assigned the Account to the Administrative Agent in compliance with the
provisions of such Act; or

(n) the sale is to an account debtor outside the United States or
Canada or incorporated in or primarily doing business in any jurisdiction
located outside the United States or Canada, unless (i) the obligations
with respect to such Account are secured by the issuance of a letter of
credit by a bank reasonably acceptable to the Administrative Agent,
guarantee or acceptance terms, (PROVIDED, HOWEVER, that obligations so
secured shall not exceed 5% in face value of all Eligible Accounts of
Borrower and its Restricted Subsidiaries then outstanding) or (ii) such
Account is otherwise approved by and acceptable to the Administrative
Agent; or

(o) the Administrative Agent determines in good faith, and in
accordance with its internal credit policies and reasonable commercial
banking practices that (i) collection of the Account is insecure or (ii)
the Account may not be paid by reason of the account debtor's financial
inability to pay; PROVIDED, HOWEVER, that any Account referred to in this
clause (o) shall not become ineligible until the

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Administrative Agent shall have given the Borrower five Business Days'
advance notice of such determination; or

(p) the goods giving rise to such Account have not been shipped
and delivered to and accepted by the account debtor or the services giving
rise to such Account have not been performed by the Borrower and accepted
by the account debtor or the Account otherwise does not represent a final
sale; or

(q) the Account does not comply in all material respects with all
applicable legal requirements, including, where applicable, the Federal
Consumer Credit Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board of Governors of the Federal Reserve System, in
each case as amended.

In addition to the foregoing, Eligible Accounts Receivable shall include
such Accounts as the Borrower shall request and that the Administrative Agent
approves in advance, in writing and in its sole discretion (or if the aggregate
face amount to be approved exceeds $1,300,000 at any one time, the approval of
the Required Banks has been obtained in writing).

"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized under the laws of
the United States, or any State thereof, and having total assets in excess of
$1,000,000,000; (b) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having total
assets in excess of $1,000,000,000; (c) a finance company, insurance company,
investment company or other financial institution organized under the laws of
the United States, or any State thereof, that is engaged in purchasing or
otherwise investing in commercial loans in the ordinary course of business,
having total assets in excess of $100,000,000; or (d) an entity managed by a
Bank or Affiliate of a Bank; PROVIDED, HOWEVER, that the original Commitment
held by such entity is at least $5,000,000.

"ELIGIBLE INVENTORY" means the total of:

(a) the gross amount of Inventory of the Borrower and its Restricted
Subsidiaries, valued at the lower of cost (on a FIFO basis) or market,
which (i) is owned solely by the Borrower or any of its Restricted
Subsidiaries and with respect to which the Borrower or such Restricted
Subsidiary has good, valid and marketable title; (ii) is stored on property
that is owned or leased by (A) the Borrower or any of its Restricted
Subsidiaries or (B) a warehouseman that has contracted with the Borrower or
any of its Restricted Subsidiaries to store Inventory on such
warehouseman's property (PROVIDED, HOWEVER, that, with respect to Inventory
stored on property owned or leased by a warehouseman, the Borrower or such
Restricted Subsidiary shall have delivered to the Administrative Agent
acknowledgment agreements executed by such warehouseman); (iii) is subject
to a valid, enforceable and first priority Lien in favor of the
Administrative Agent (subject, with respect to Eligible Inventory stored at
sites described in clause

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(ii)(B) above, to Liens for normal and customary warehouseman charges);
(iv) is located in the United States; and (v) is not, in the reasonable
judgment of the Administrative Agent, obsolete or slow moving in relation
to customary industry practice, and which otherwise conforms to the
requirements for eligibility contained in clauses (i) through (iv) above;
MINUS (without duplication);

(b) the amount of any goods returned or rejected by the customers of
the Borrower or any of its Restricted Subsidiaries and goods in transit to
third parties (other than to agents or warehousemen of the Borrower or any
of its Restricted Subsidiaries that comply with clause (a)(ii)(B) above);
MINUS (without duplication); and

In addition to the foregoing, Eligible Inventory shall include such items of the
Inventory of the Borrower and its Restricted Subsidiaries as the Borrower shall
request and the Administrative Agent (or if the aggregate amount to be approved
exceeds $1,300,000 at any one time, the Required Banks) shall approve in
advance, in writing and in its (their) sole discretion.

"ENVIRONMENT" means any surface water, ground water, drinking water supply,
land surface or subsurface strata or ambient air and includes, without
limitation, any indoor location.

"ENVIRONMENTAL AUTHORIZATIONS" is defined in Section 5.21.

"ENVIRONMENTAL LAWS" means the common law and all federal, state, local and
foreign laws or regulations, codes, orders, decrees, judgments or injunctions
issued, promulgated, approved or entered thereunder, now or hereafter in effect,
relating to pollution or protection of public or employee health or safety or
the Environment, including, without limitation, laws relating to (a) emissions,
discharges, releases or threatened releases of Hazardous Materials into the
Environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), (b) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of Hazardous Materials, and (c) underground and aboveground storage
tanks, and related piping, and emissions, discharges, releases or threatened
releases therefrom.

"ENVIRONMENTAL NOTICE" means any written notice or claim by any
Governmental Authority or other third party alleging liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental costs, compliance costs or harm, injuries or damages to any person,
property or natural resources, or any fines or penalties) arising out of, based
upon, resulting from or relating to any Environmental Law.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA as in
effect at the date of this

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Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.

"ERISA AFFILIATE" of a Person means any entity, whether or not
incorporated, which is under common control or would be considered a single
employer with such Person within the meaning of Section 414(b) or (c) of the
Code and regulations promulgated under those Sections or within the meaning of
Section 4001(b) of ERISA and regulations promulgated under that Section.

"EURODOLLAR RATE" means with respect to each Interest Period for a Reserve
Adjusted Eurodollar Loan, (a) the arithmetic average (rounded to the nearest
1/100 of 1%) of the offered quotation to first-class banks in the interbank
Eurodollar market by each of the Reference Banks for dollar deposits of amounts
in same day funds comparable to the outstanding principal amount of the Reserve
Adjusted Eurodollar Loan for which an interest rate is then being determined
with maturities comparable to the Interest Period to be applicable to such
Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date which
is two Business Days prior to the commencement of such Interest Period divided
(and rounded upward to the next whole multiple of 1/16 of 1%) DIVIDED BY (b) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D);
PROVIDED, HOWEVER, that if any Reference Bank fails to provide the
Administrative Agent with its aforesaid rate, then the Eurodollar Rate shall be
determined based on the rate or rates provided to the Administrative Agent by
the remaining Reference Banks.

"EURODOLLAR RATE MARGIN" means, with respect to any Revolving Loan,
Acquisition Loan, Supplemental Term Loan or any Supplemental Revolving Loan,
with respect to any Interest Period, the rate set forth in the table below
opposite the Leverage Ratio of the Borrower as determined on the last day of
such Interest Period:

LEVERAGE RATIO EURODOLLAR RATE MARGIN
-------------- ----------------------
GREATER THAN 5.00x 2.75%
4.51x - 5.00x 2.50%
4.01x - 4.50x 2.25%
3.51x - 4.00x 2.00%
3.01x - 3.50x 1.75%
2.51x - 3.00x 1.50%
2.01x - 2.50x 1.25%
LESS THAN 2.01x 1.00%

"EVENT OF DEFAULT" is defined in Section 8.

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"EXCESS" is defined in Section 3.03(b).

"EXCESS CASH FLOW" means, without duplication, for any Person for any
period for which such amount is being determined, (a) Consolidated Net Income,
MINUS (b) any amount which is both (i) included in Consolidated Net Income and
(ii) required to be applied to the prepayment of the Loans pursuant to Section
3.03, PLUS (minus) (c) the amount of depreciation, depletion, amortization of
intangibles, deferred taxes and other non-cash expenses (revenues) which,
pursuant to GAAP, were deducted (added) in determining such Consolidated Net
Income of such Person, MINUS (d) additions to working capital for such period
(I.E., the increase or decrease in Consolidated Current Assets of such Person
from the beginning to the end of such period (excluding Cash or Cash Equivalents
which are either Net Cash Proceeds or Net Financing Proceeds required to be
applied to the prepayment of the Loans pursuant to Section 3.03(d) during such
period) of such Person minus the increase or plus the decrease in Consolidated
Current Liabilities), MINUS (e) cash expenditures in respect of Consolidated
Capital Expenditures that are made during such period, MINUS (f) Scheduled
Acquisition Term Loan Principal Payments, Scheduled Supplemental Term Loan
Principal Payments, and voluntary prepayments of Loans not subject to
reborrowing made during such period, MINUS (g) cash payments to Management
Stockholders to repurchase capital stock pursuant to Section 7.10, MINUS (h)
principal payments on Indebtedness permitted under Section 7.07. For purposes
of the foregoing and without duplication, Consolidated Net Income will exclude
(A) all net losses on the sale of capital assets or out of the ordinary course
of business and (B) all write-downs of capital assets.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"EXISTING ACQUISITION TERM LOANS" is defined in the recitals to this
Agreement.

"EXISTING ACQUISITION TERM NOTES" means the Acquisition Term Notes issued
pursuant to the Existing Credit Agreement and dated the Effective Date, to be
canceled upon issuance of the Acquisition Term Notes to be issued hereunder as
of the Closing Date.

"EXISTING CREDIT AGREEMENT" is defined in the preamble of this Agreement.

"EXISTING DEBT" means Indebtedness of Borrower and its Subsidiaries set
forth on Schedule 5.19.

"EXISTING LEASES" means the Leases of the Borrower and its Subsidiaries set
forth on Schedule 5.16.

"EXISTING LOANS" means the Existing Term A Loans, the Existing Term B
Loans, the Existing Acquisition Term Loans and the Existing Revolving Loans,
all of which are to be refinanced and replaced with the proceeds of the Initial
Loans hereunder.

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"EXISTING NOTE" means each Existing Term A Note, Existing Term B Note,
Existing Revolving Note and Existing Acquisition Term Note.

"EXISTING REVOLVING LOANS" is defined in the recitals to this Agreement.

"EXISTING REVOLVING NOTES" means the Revolving Notes issued pursuant to the
Existing Credit Agreement and dated the Effective Date, to be canceled upon
issuance of the Revolving Notes to be issued hereunder as of the Closing Date.

"EXISTING TERM A LOANS" is defined in the recitals to this Agreement.

"EXISTING TERM B LOANS" is defined in the recitals to this Agreement.

"EXISTING TERM A NOTES" means the Term A Notes issued pursuant to the
Existing Credit Agreement and dated the Effective Date, to be canceled upon
payment therefor on the Closing Date.

"EXISTING TERM B NOTES" means the Term B Notes issued pursuant to the
Existing Credit Agreement and dated the Effective Date, to be canceled upon
payment therefor on the Closing Date.

"EXPANSION CAPITAL EXPENDITURES" means up to $7.5 million of Consolidated
Capital Expenditures incurred during the period from July 31, 1997 to and
including January 31, 1998 in connection with the existing properties and
buildings located in the Texas cities of Huntsville, Houston, Waco, Waller and
Walnut Springs.

"FEDERAL FUNDS RATE" means on any one day the weighted average of the
rate on overnight Federal funds transactions with members of the Federal
Reserve System only arranged by Federal funds brokers as published as of such
day by the Federal Reserve Bank of New York, or if not so published, the rate
then used by first-class banks in extending overnight loans to other
first-class banks.

"FINANCING PROCEEDS" means the Cash or Cash Equivalents (other than Net
Cash Proceeds or proceeds of any sale, transfer or other disposition of assets
specifically excluded from the definition of "Asset Sale" by the exceptions
contained therein) received by the Borrower or any of its Restricted
Subsidiaries, directly or indirectly, from any financing transaction of whatever
kind or nature, including without limitation from any incurrence of Indebtedness
from any mortgage or pledge of an asset or interest therein (including any
transaction which is the substantial equivalent of a mortgage or pledge), from
any lease to a third party and a pledge of the lease payments due thereunder to
secure Indebtedness, from any joint venture arrangement, from any exchange of
assets and a sale of the assets received in such exchange, or any other similar
arrangement or technique whereby a Credit Party obtains Cash in respect of an
asset, net of direct costs associated therewith. Financing Proceeds shall not

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include any amounts with respect to (a) any Borrowings of Revolving Loans,
Acquisition Term Loans, Supplemental Revolving Loans or Supplemental Term Loans,
(b) the incurrence or refinancing of Indebtedness permitted by Sections 7.07(g)
and (h) effected in accordance with the applicable provisions of such Sections
and (c) transactions between any of the Borrower and its Wholly Owned
Subsidiaries that are Restricted Subsidiaries.

"FIRREA" means the Financial Institutions Reform, Recovery & Enforcement
Act of 1989, as amended from time to time, and any successor statute.

"FOREIGN BANK" is defined in Section 3.07(c).

"GAAP" means generally accepted accounting principles in the United States
of America observed in the preparation of the audited financial statements of
the Borrower for its fiscal year ended June 30, 1997 and delivered pursuant to
Section 4.01(j), consistently applied.

"GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign or other
governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body including, without limitation, those governing the regulation and
protection of the Environment, whether now or hereafter in existence, or any
officer or official thereof.

"HAZARDOUS MATERIALS" means all pollutants, contaminants or chemical,
industrial, hazardous or toxic materials, substances, constituents or wastes,
including, without limitation, asbestos, or asbestos-containing materials,
polychlorinated biphenyls and petroleum, oil, or petroleum or oil products,
derivatives or constituents, including, without limitation, crude oil or any
fraction thereof, or any other material, waste, chemical, substance or
constituent subject to regulation under any Environmental Law.

"HELLER SUBORDINATED LENDERS" is defined in Section 7.23.

"HOLDINGS" is defined in the preamble to this Agreement.

"IBJS" is defined in the preamble to this Agreement.

"INDEBTEDNESS" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (c) the undrawn amount of
all letters of credit issued for the account of such Person and, without
duplication, all unreimbursed drafts drawn thereunder, (d) all Indebtedness of a
second Person secured by any Lien on any property owned by such first Person,
whether or not such Indebtedness has been assumed by such first Person, (e) all
Capitalized Lease Obligations of such Person, (f) all obligations of such Person
to pay a specified purchase price for goods or

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services whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (g) the total risk amount (as determined by the Administrative
Agent) of such Person under Interest Rate Agreements and (h) all Contingent
Obligations of such Person; PROVIDED, HOWEVER, that Indebtedness shall not
include trade payables, accrued expenses, accrued dividends and accrued income
taxes, in each case arising in the ordinary course of business.

"INDOSUEZ" is defined in the preamble to this Agreement.

"INFORMATION" is defined in Section 11.04(e).

"INITIAL BANK" means a Bank that is an original signatory to this
Agreement.

"INITIAL BORROWERS" is defined in the preamble to this Agreement.

"INITIAL DATE" means, in the case of each Bank party hereto on the Closing
Date, the Closing Date, and in the case of each other Bank, the effective date
of the Assignment Agreement pursuant to which it became a Bank hereunder.

"INITIAL LOANS" means the Loans made on the Closing Date.

"INITIAL REVOLVING LOANS" means the initial Revolving Loans made on the
Closing Date in an aggregate amount not to exceed $[ ] used to make
payments as set forth in Section 1.01(a).

"INTELLECTUAL PROPERTY" is defined in Section 5.14.

"INTEREST PERIOD" means, with respect to any Reserve Adjusted Eurodollar
Loan, the interest period applicable thereto, as determined pursuant to Section
1.09.

"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate futures
contract, interest rate option contract or other similar agreement or
arrangement to which any Credit Party is a party, designed to protect the
Borrower or any of its Restricted Subsidiaries against fluctuations in interest
rates.

"INTEREST RATE DETERMINATION DATE" means, with respect to a Reserve
Adjusted Eurodollar Loan, the date for calculating the Eurodollar Rate for
purposes of determining the interest rate in respect of an Interest Period, and
for each such Borrowing the date which is two Business Days prior to the
commencement of the Interest Period for such Borrowing.

"INVENTORY" means all of the inventory of the Borrower and its Restricted
Subsidiaries (on a consolidated basis), including, without limitation, (a) all
finished goods, raw materials, work in process and packaging materials produced,
used or consumed in the business

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of the Borrower and its Restricted Subsidiaries, whether finished or
unfinished, held for sale or furnished or to be furnished under contracts of
service, and (b) all finished goods returned or repossessed by the Borrower or
any of its Restricted Subsidiaries.

"INVESTMENT" means with respect to any Person (a) any share of Capital
Stock, partnership interest, evidence of Indebtedness or other security issued
by any other Person, (b) any loan, advance, extension of credit to, or
contribution to the capital of, any other Person, (c) the acquisition of the
stock or assets of a business or (d) any other investment; PROVIDED, HOWEVER,
that the term "Investment" shall not include (i) fixed assets or inventory
acquired in the ordinary course of business and payable in accordance with
customary trade terms, (ii) advances to employees for travel expenses, drawing
accounts and similar expenditures, (iii) stock or other securities acquired in
connection with the satisfaction or enforcement of Indebtedness or claims due or
owing to any Person or as security for any such Indebtedness or claim, or (iv)
demand deposits in banks or trust companies. The amount of an Investment
outstanding at any time shall be determined in accordance with GAAP; PROVIDED,
HOWEVER, that no Investment shall be increased as a result of an increase in the
undistributed retained earnings of the Person in whom an Investment was made or
decreased as a result of equity in the losses of any such Person.

"KCSN" is defined in the preamble to this Agreement.

"LANDLORD CERTIFICATION AND WAIVER" means, with respect to any Real
Property leased by the Borrower or any of its Restricted Subsidiaries, a
statement executed by the landlord of such Real Property, in form and substance
satisfactory to the Administrative Agent, providing the Administrative Agent
with, among other things, (i) the right to take and perfect a mortgage or other
assignment of the applicable Credit Party's interest in the lease as collateral
security for the Obligations, (ii) the right to cure defaults and perform under
the lease in the event of a failure to perform by such Credit Party, (iii) the
right to foreclose or otherwise realize upon said security interest in the lease
and to assign the Credit Party's rights in the lease to a third party in
connection with such foreclosure or other realization and (iv) the right to take
upon such foreclosure or other realization any property of the Credit Party
located on the leased Real Property (which right shall be superior to that of
the lessor).

"LEASE" means any lease, sublease, franchise agreement, license, occupancy
or concession agreement.

"LETTER OF CREDIT" or "LETTERS OF CREDIT" means, (i) Standby Letter or
Letters of Credit and (ii) Commercial Letter or Letters of Credit, in each case,
issued or to be issued by Issuing Banks for the account of Borrower pursuant to
Section 1.13.

"LETTER OF CREDIT CASH COLLATERAL" shall have the meaning provided in
Section 1.13(a)(iv).

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"LETTER OF CREDIT CASH COLLATERAL ACCOUNT" shall have the meaning provided
in Section 1.13(a)(iv).

"LETTER OF CREDIT PARTICIPATION" shall have the meaning provided in Section
1.13(a)(ii).

"LETTERS OF CREDIT USAGE" means, as at any date of determination, the sum
of (i) the maximum aggregate amount that is or at any time thereafter may become
available to be drawn under all Letters of Credit then outstanding plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by all Issuing
Banks and not theretofore reimbursed by Borrower.

"LEVERAGE RATIO" means, as of any date of determination, the ratio of (a)
the Consolidated Indebtedness (including the outstanding balance under any
noncompete or consulting arrangements) of the Borrower and its Restricted
Subsidiaries as of the last day of each calendar quarter ending on or about any
date of determination to (b) the Consolidated EBITDA of the Borrower and its
Restricted Subsidiaries for the Test Period ending on or about such date;
PROVIDED that, for purposes of this definition, Consolidated Indebtedness shall
not include indebtedness under the Existing Revolving Loans which is repaid (and
not reborrowed under the Revolving Loan) on the Closing Date; and PROVIDED,
FURTHER, that, for purposes of this definition, Consolidated EBITDA for a given
Test Period (x) shall mean Consolidated EBITDA for the twelve month period ended
on the last day of such Test Period and (y) shall also include the EBITDA (with
appropriate adjustments) derived from any business which was acquired by the
Borrower and its Restricted Subsidiaries during such twelve-month period and
which is consolidated with the Borrower and its Restricted Subsidiaries as of
the last day of such Test Period, for the portion of such twelve month period
before the business was so acquired.

"LIEN" means any mortgage, pledge, security interest, encumbrance, lien,
claim, hypothecation, assignment for security or charge of any kind (including
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof).

"LOAN" means each Revolving Loan, Acquisition Term Loan, Supplemental
Revolving Loan and Supplemental Term Loan.

"LOAN FACILITY" means the credit facility evidenced by the Total Revolving
Loan Commitment, the Total Acquisition Term Loan Commitment and the Total
Supplemental Loan Commitment..

"LOSS PROCEEDS" is defined in Section 3.03(f).

"MANAGEMENT AGREEMENT" means the Fee Agreement dated as of December 31,
1996 between the Borrower and Kohlberg & Company, LLC., as amended.

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"MANAGEMENT STOCKHOLDERS" means, collectively, Michael F. Vukelich, Jerry
L. Halamuda, Gary E. Mariani, Gene Malcolm, Steven J. Bookspan, Michael T.
Neenan, Robert F. Strange, Jim Tsurudome, Richard George, Gary Crook, Dave
Grimshaw, John Negrete, Dennis Bahen, and other individuals from time to time
party to the Stockholders Agreement.

"MATERIAL ADVERSE EFFECT" means, (a) with respect to the Borrower and its
Restricted Subsidiaries, any material adverse effect (whether occurring before
or after giving effect to the Public Financing and the financing thereof and the
other transactions contemplated hereby and by the other Transaction Documents)
with respect to the operations, business, properties, assets, liabilities
(contingent or otherwise), financial condition or prospects of the Borrower and
its Restricted Subsidiaries, taken as a whole, or (b) any fact or circumstance
(whether or not the result thereof would be covered by insurance) as to which
singly or in the aggregate there is a reasonable likelihood of (i) a material
adverse change described in clause (a) with respect to the Borrower and its
Restricted Subsidiaries, taken as a whole, or (ii) the inability of any Credit
Party to perform in any material respect its Obligations hereunder or under any
of the other Transaction Documents or the inability of the Banks to enforce in
any material respect their rights purported to be granted hereunder or under any
of the other Transaction Documents or the Obligations (including realizing on
the Collateral).

"MINIMUM BORROWING AMOUNT" means $100,000.

"MOODY'S" means Moody's Investors Service, Inc.

"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA with respect to which the Borrower or any of its
ERISA Affiliates is or has been required to contribute.

"NET CASH PROCEEDS" means with respect to any Asset Sale, the aggregate
payments of Cash or Cash Equivalents received by the Borrower and/or any of its
Restricted Subsidiaries, as the case may be, from such Asset Sale, net of direct
expenses of sale, net of taxes (including income taxes and transfer taxes) and
net of repayment of Indebtedness or Capitalized Leases in each case secured by a
Lien on the asset subject to such Asset Sale; PROVIDED, HOWEVER, that with
respect to taxes, expenses shall only include taxes to the extent that taxes are
payable in cash with respect to the current year after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements; and PROVIDED, FURTHER, that Net
Cash Proceeds shall not include any amounts or items included in the definition
of Financing Proceeds or Net Financing Proceeds.

"NET FINANCING PROCEEDS" means Financing Proceeds, net of direct expenses
of the transaction and net of taxes (including income taxes) currently paid or
payable in cash with respect to the current year after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements as a result of the transaction
generating such Financing Proceeds.

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"NOTE" means each Revolving Note, Acquisition Term Note, Supplemental
Revolving Note and Supplemental Term Note.

"NOTICE OF ACQUISITION LOAN BORROWING" is defined in Section 1.03.

"NOTICE OF BORROWING" is defined in Section 1.03.

"NOTICE OF REVOLVING LOAN BORROWING" is defined in Section 1.03.

"NOTICE OF CONVERSION/CONTINUATION" is defined in Section 1.06.

"OBLIGATIONS" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Administrative Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document or secured by any of the Security Documents, including,
without limitation, interest accruing subsequent to the filing of a petition
initiating any proceeding in bankruptcy, insolvency or like proceeding of any
Credit Party, whether or not such interest is an allowed claim enforceable
against the debtor in a bankruptcy case under the Bankruptcy Code.

"OFFICERS' CERTIFICATE" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its Chairman of the Board (if an
officer), Chief Executive Officer, its President or one of its Vice Presidents,
its Chief Financial Officer or its Treasurer (in such Person's capacity as an
officer and not individually); PROVIDED, HOWEVER, that every Officers'
Certificate with respect to compliance with a condition precedent to the making
of any Loan hereunder shall include (a) a statement that the officers making or
giving such Officers' Certificate have read such condition and any definitions
or other provisions contained in this Agreement relating thereto, (b) a
statement that, in the opinion of the signers, they have made or have caused to
be made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such condition has been
complied with, and (c) a statement as to whether, in the opinion of the signers,
such condition has been complied with.

"OPERATING LEASE" of any Person shall mean any lease (including, without
limitation, leases which may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) by such Person as lessee which is not
a Capital Lease.

"ORIGINAL CREDIT AGREEMENT" is defined in the preamble to this Agreement.

"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.

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<PAGE>

"PENSION PLAN" means any pension plan as defined in Section 3(2) of ERISA
(other than a Multiemployer Plan) which is or has been maintained by or to which
contributions are or have been made by the Borrower or any of its ERISA
Affiliates.

"PERMITTED BUSINESS ACQUISITION" means an acquisition by the Borrower or
its Restricted Subsidiaries of assets or property used or useful in the
Borrower's business which is proposed to be financed with the proceeds of an
Acquisition Term Loan Borrowing or a Supplemental Term Loan Borrowing.

"PERMITTED ENCUMBRANCES" is defined in Section 7.06.

"PERSON" means any individual, partnership, joint venture, limited
liability company, firm, corporation, association, trust or other enterprise or
any government or political subdivision or any agency, department or
instrumentality thereof.

"PLAN" means, at any time, any pension benefit plan subject to Title IV of
ERISA.

"PORTION" means the Revolving Portion, the Acquisition Term Portion or the
Supplemental Portion.

"PREPAYMENT COLLATERAL ACCOUNT" is defined in Section 3.08(b).

"PRIOR LIENS" is defined in Section 5.10.

"PROJECTED FINANCIAL STATEMENTS" is defined in Section 5.09(c).

"PUBLIC FINANCING" means the proposed offering of up to $40 million of PIK
preferred stock of the Borrower and the public offering of up to $85 million of
Senior Subordinated Notes.

"PUBLIC FINANCING DOCUMENTS" means the registration statements,
prospectuses, underwriting agreements, certificates, notes, agreements and
documents prepared or entered into by the Company with respect to the Public
Financing.

"PUT/CALL FUNDS" means the aggregate $100,051 set aside by the Borrower to
redeem "Option Shares" (as defined in the Put/Call Option Agreement) pursuant to
the Put/Call Option Agreement.

"PUT/CALL OPTION AGREEMENT" means the Put/Call Option Agreement dated as of
December 31, 1996 among Holdings, KCSN and the Management Stockholders.

"REAL PROPERTY" means all right, title and interest of the Borrower or any
of its Restricted Subsidiaries (including, without limitation, any leasehold
estate) in and to a parcel of

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real property owned or leased (or, with respect to representations, warranties
and covenants relating to compliance with Environmental Laws, operated) by the
Borrower or any of its Restricted Subsidiaries together with, in each case,
all improvements and appurtenant fixtures, equipment, personal property,
easements and other property and rights incidental to the ownership or lease
(or operation, as applicable) thereof, in each case, from time to time after
the Closing Date.

"RECAPITALIZATION" means the recapitalization of Holdings whereby a
controlling interest in Holdings was acquired by KCSN pursuant to the
Recapitalization Agreement.

"RECAPITALIZATION AGREEMENT" is defined in the recitals to this Agreement.

"REFERENCE BANKS" means Indosuez, Citibank, N.A. and The Chase Manhattan
Bank, N.A.

"REGISTER" is defined in Section 11.04(c).

"REGULATIONS D, G, T, U AND X" means Regulations D, G, T, U and X (or
any one or more of them specified) of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.

"REPLACEMENT ASSET AMOUNT" is defined in Section 3.03(c)(i).

"REQUIRED BANKS" means at any time Banks holding at least 51% of the
sum of the (x) Total Commitments and (y) outstanding Loans; PROVIDED, HOWEVER
that in the event there is only one Bank, "Required Banks" shall mean such Bank;
and PROVIDED, FURTHER that for the purposes of Section 4, the requirement that
any document, agreement, certificate or other writing is to be satisfactory to
the Required Banks shall be satisfied if (a) such document, agreement,
certificate or other writing was delivered in its final form to the Banks prior
to the Closing Date (or if amended or modified thereafter, the Administrative
Agent shall have reasonably determined such amendment or modification not to be
material), (b) such document, agreement, certificate or other writing is
satisfactory to the Administrative Agent and (c) Banks holding more than 51% of
the Total Commitments held by Banks have not objected in writing to such
document, agreement, certificate or other writing to the Administrative Agent
prior to the Closing Date.

"RESERVE ACCOUNT" is defined in Section 3.08(a).

"RESERVE ADJUSTED EURODOLLAR LOAN" means any Loan bearing interest at
a rate determined by reference to the Eurodollar Rate in accordance with the
provisions of Section 1.08(b).

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<PAGE>

"RESTRICTED SUBSIDIARY" means any Subsidiary of the Borrower or of the
Borrower's Subsidiaries which is not an Unrestricted Subsidiary.

"REVOLVING LOAN" is defined in Section 1.01(a).

"REVOLVING LOAN COMMITMENT" means, with respect to each Bank, the
amount set forth below such Bank's name on Schedule A hereto directly below the
column entitled "Revolving Loan", as same may be reduced from time to time
pursuant to Sections 2.01, 3.03 and/or 8.

"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the Business Day
immediately preceding the Revolving Loan Maturity Date.

"REVOLVING LOAN MATURITY DATE" means the last Business Day of
December, 2002.

"REVOLVING NOTE" is defined in Section 1.05(a)(i).

"REVOLVING PORTION" means, at any time, the portion of the Loan
Facility evidenced by the Total Revolving Loan Commitment.

"S&P" means Standard & Poor's Corporation.

"SCHEDULED ACQUISITION TERM LOAN PRINCIPAL PAYMENTS" means, with respect to
the principal payments on the Acquisition Term Loan to be made on the last
Business Day of each calendar quarter specified in the table below, in each
case, for each such date, in the Dollar amount which is the product of (x) the
percentage specified opposite such date in such table, and (y) the greater of
(a) the total outstanding principal amount of all of the Acquisition Term Loans
as of the close of business on the Acquisition Term Loan Commitment Termination
Date (after giving effect to any Borrowings under the Acquisition Term Loans on
such date) and (b) the Total Acquisition Loan Commitment on the date, if any,
that aggregate Unutilized Acquisition Commitments equals zero:

Percentage to Obtain
Acquisition Term Loan
Period Principal Payment
------ ---------------------

The earlier of the date the aggregate
Unutilized Acquisition Commitments equals
zero and the Acquisition Term Loan Commitment
Termination Date, through December 31, 2002 0.250%

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and, with respect to the principal payments on the Acquisition Term Loan to be
made on the last Business Day of each calendar quarter specified in the table
below, in each case, for each such date, in the Dollar amount which is the
product of (x) the ratio specified opposite such date in such table, and (y) the
total outstanding principal amount of all of the Acquisition Term Loans as of
such date:

Period Ratio
------ -----

January 1, 2003 through the last Business
day of December, 2004 1/8

"SCHEDULED SUPPLEMENTAL TERM LOAN PRINCIPAL PAYMENTS" means, with respect
to the principal payments on the Supplemental Term Loan to be made on the last
Business Day of each calendar quarter specified in the table below, in each
case, for each such date, in the Dollar amount which is the product of (x) the
percentage specified opposite such date in such table, and (y) the greater of
(a) the total outstanding principal amount of all of the Supplemental Term Loans
as of the close of business on the Supplemental Term Loan Commitment Termination
Date (after giving effect to any Borrowings under the Supplemental Term Loans on
such date) and (b) the Total Supplemental Loan Commitment on the date, if any,
that aggregate Unutilized Supplemental Commitments equals zero:

Percentage to Obtain
Acquisition Term Loan
Period Principal Payment
------ ---------------------

The earlier of the date the aggregate
Unutilized Supplemental Commitments equals
zero and the Supplemental Term Loan Commitment
Termination Date, through December 31, 2002 0.250%

and, with respect to the principal payments on the Supplemental Term Loan to be
made on the last Business Day of each calendar quarter specified in the table
below, in each case, for each such date, in the Dollar amount which is the
product of (x) the ratio specified opposite such date in such table, and (y)
the total outstanding principal amount of all of the Supplemental Term Loans as
of such date:

Period Ratio
------ -----

January 1, 2003 through the last Business
Day of December, 2004 1/8

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<PAGE>

"SEC" means the Securities and Exchange Commission or any successor
thereto.

"SECURITIES" means any stock, shares, partnership interests,
membership interests, voting trust certificates, bonds, debentures, options,
warrants, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participation
in temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SECURITY AGREEMENTS" means, collectively, the Security Agreements
executed by the Borrower and any Subsidiary of the Borrower pursuant to Section
6.14, each substantially in the form of Exhibit 9A, except for such changes
therein as shall have been approved by the Administrative Agent as the same may
after its execution be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof and hereof.

"SECURITY DOCUMENTS" means each of the Security Agreements, the
Landlord Certification and Waivers, any mortgages, deeds of trust or leasehold
mortgages granting a security interest in favor of the Administrative Agent (or
other agent for the Banks) in any Real Property of any Credit Party, the
Trademark Security Agreement and any other documents (including UCC financing
statements) utilized to pledge or perfect a security interest in any other
property or assets of whatever kind or nature as Collateral for the Obligations.

"SELLER NOTE" is defined in Section 7.07(e).

"SELLERS" is defined in the preamble to this Agreement.

"SENIOR MANAGERS" means, collectively, Michael F. Vukelich and Jerry
L. Halamuda.

"SENIOR OFFICER" means any of the chief executive officer, president,
chief financial officer, controller, chief accounting officer, chief operating
officer, treasurer or any vice president of the Borrower.

"SENIOR SUBORDINATED LENDERS" means the holders of the Senior
Subordinated Notes.

"SENIOR SUBORDINATED NOTES" means, up to $85 million in aggregate
principal amount of Senior Subordinated Notes due 2007 of the Borrower issued in
the Public Financing.

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<PAGE>

"SPECIFIED COLLATERAL PERFECTION ACTIONS" is defined in Section 6.18
of the Original Credit Agreement.

"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) workers'
compensation liabilities of the Borrower or any of its Subsidiaries, (ii) the
obligations of third-party insurers of the Borrower or any of its Subsidiaries
arising by virtue of the laws of any jurisdiction requiring third-party insurers
to obtain such letters of credit, or (iii) performance, payment, deposit or
surety obligations of the Borrower or any of its Subsidiaries, including with
respect to the obligations of Borrower to third party vendors, if required by
law or governmental rule or regulation or in accordance with custom and practice
in the industry.

"STATE AND LOCAL REAL PROPERTY DISCLOSURE REQUIREMENTS" means any
state or local laws requiring notification of the buyer of real property, or
notification, registration, or filing to or with any state or local agency,
prior to the sale of any real property or transfer of control of an
establishment, of the actual or threatened presence or release into the
environment, or the use, disposal, or handling of Hazardous Materials on, at,
under, or near the real property to be sold or the establishment for which
control is to be transferred.

"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of
December 31, 1996 among Holdings, KCSN, Heller and the Management Stockholders,
as amended as of the Effective Date.

"SUBJECT SECURITIES" has the meaning provided in the Stock Repurchase
Agreement.

"SUBSIDIARY" of any Person means and includes (a) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (b) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity interest at the time.

"SUBSIDIARY GUARANTEE" means the guarantee of the Borrower's
Obligations hereunder to be executed by each Restricted Subsidiary of the
Borrower, in the form attached hereto as Exhibit 9B.

"SUPPLEMENTAL LOAN COMMITMENT" means, with respect to each Bank, the
amount set forth below such Bank's name on Schedule A hereto directly below the
column entitled "Supplemental Loan", as same may be reduced from time to time
pursuant to Sections 2.01, 3.03 and/or 8.

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<PAGE>

"SUPPLEMENTAL PORTION" means, at any time, the portion of the Loan
Facility evidenced by the Total Supplemental Loan Commitment.

"SUPPLEMENTAL REVOLVING LOAN" is defined in Section 1.01(c).

"SUPPLEMENTAL REVOLVING LOAN COMMITMENT" means, as of any date, with
respect to each Bank, such Bank's Supplemental Loan Commitment, less (i) the
aggregate principal amount of Supplemental Term Loans then outstanding.

"SUPPLEMENTAL REVOLVING LOAN COMMITMENT TERMINATION DATE" means the
Business Day immediately preceding the Supplemental Revolving Loan Maturity
Date.

"SUPPLEMENTAL REVOLVING LOAN MATURITY DATE" means the last Business
Day of December, 2002

"SUPPLEMENTAL REVOLVING NOTE" is defined in Section 1.05(a)(iii).

"SUPPLEMENTAL TERM LOAN" is defined in Section 1.01(c).

"SUPPLEMENTAL TERM LOAN CLOSING DATE" is defined in Section 1.01(d).

"SUPPLEMENTAL TERM LOAN COMMITMENT" means, as of any date, with
respect to each Bank, such Bank's Supplemental Loan Commitment, less (i) the
aggregate principal amount of Supplemental Revolving Loans then outstanding and
(ii) the then outstanding Letters of Credit Usage related to the Supplemental
Portion of the Credit Facility.

"SUPPLEMENTAL TERM LOAN COMMITMENT TERMINATION DATE" means the last
Business Day of December, 2001.

"SUPPLEMENTAL TERM LOAN MATURITY DATE" means the last Business Day of
December, 2004.

"SUPPLEMENTAL TERM NOTE" is defined in Section 1.05(a)(iv).

"TARGET" is defined in the preamble to this Agreement.

"TAXES" means all taxes, levies, imposts, duties or other charges of
whatsoever nature imposed by any Governmental Authority, together with interest,
penalties and expenses payable or incurred in connection therewith, except that
such term shall not refer to any of the following:

(a) any taxes imposed by the United States or any political
subdivision thereof on the effectively connected net income of any Bank or
any franchise taxes imposed by any such jurisdiction;

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<PAGE>

(b) taxes imposed on the net income of, or franchise taxes imposed
upon, any Bank by the jurisdiction under the laws of which such Bank is
organized or by any political subdivision thereof;

(c) taxes imposed on the net income of such Bank's lending office,
and franchise taxes imposed on it, by the jurisdiction of such Bank's
lending office, or any political subdivision thereof;

(d) any taxes imposed on any Bank by Section 884(a) of the Code (and
any successor statute to Section 884(a)); and

(e) any United States withholding tax payable with respect to any
payments to such Bank under the laws (including, without limitation, any
treaty, ruling, judicial or administrative determination or regulation) in
effect on the Initial Date or as a result of the Bank's having voluntarily
changed the jurisdiction of its lending office from a jurisdiction in which
payments made to such Bank are exempt from United States withholding tax to
a jurisdiction in which such payments are not so exempt; PROVIDED, HOWEVER,
that the term "Taxes" shall include any United States withholding tax
payable or increased as a result of any change in any law, treaty, ruling,
judicial or administrative determination or regulation occurring after the
Initial Date.

"TERMINATION EVENT" means (a) a "reportable event" described in
Section 4043 of ERISA or in the regulations thereunder (excluding events for
which the requirement for notice of such reportable event has been waived by the
PBGC) with respect to a Title IV Plan, or (b) the withdrawal of the Borrower or
any of its ERISA Affiliates from a Title IV Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c)
the filing of a notice of intent to terminate a Title IV Plan or the treatment
of a Title IV Plan amendment as a termination under Section 4041 of ERISA, or
(d) the institution of proceedings by the PBGC to terminate a Title IV Plan or
to appoint a trustee to administer a Title IV Plan, or (e) any other event or
condition which might constitute reasonable and probable grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan, or (f) the complete or partial withdrawal (within
the meaning of Sections 4203 and 4205, respectively, of ERISA) of the Borrower
or any of its ERISA Affiliates from a Multiemployer Plan, or (g) the insolvency
or reorganization (within the meaning of Sections 4245 and 4241, respectively,
of ERISA) or termination of any Multiemployer Plan.

"TEST PERIOD" means, for any specified date, the shorter of (x) the
four consecutive complete calendar quarters last ended or (y) the period of all
complete calendar quarters since the Effective Date.

"TITLE IV PLAN" means any plan (other than a Multiemployer Plan)
described in Section 4021(a) of ERISA, and not excluded under Section 4021(b) of
ERISA, which is or has

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<PAGE>

been maintained by, or to which contributions are or have been made by,
Borrower or any of its ERISA Affiliates.

"TOTAL ACQUISITION TERM LOAN COMMITMENT" means the sum of the
Acquisition Term Loan Commitments of each of the Banks.

"TOTAL ACQUISITION UTILIZATION" means, at any date of determination,
the sum of the aggregate principal amount of all Acquisition Term Loans then
outstanding.

"TOTAL COMMITMENTS" means the sum of (a) the Total Revolving Loan
Commitments, (b) Total Acquisition Term Loan Commitments and (c) the Total
Supplemental Loan Commitment.

"TOTAL REVOLVER UTILIZATION" means, at any date of determination, the
sum of the aggregate principal amount of all Revolving Loans then outstanding
and all outstanding Letters of Credit issued under the Revolving Portion.

"TOTAL REVOLVING LOAN COMMITMENT" means the sum of the Revolving Loan
Commitments of each of the Banks.

"TOTAL SUPPLEMENTAL LOAN COMMITMENT" means the sum of the Supplemental
Loan Commitments of each of the Banks.

"TOTAL SUPPLEMENTAL REVOLVING LOAN COMMITMENT" means the sum of the
Supplemental Revolving Loan Commitments of each by the Banks.

"TOTAL SUPPLEMENTAL TERM LOAN COMMITMENT" means the sum of the
Supplemental Revolving Loan Commitments of each of the Banks.

"TOTAL SUPPLEMENTAL UTILIZATION" means, at any date of determination,
the sum of the aggregate principal amount of all Supplemental Revolving Loans,
all Supplemental Term Loans then outstanding and all outstanding Letters of
Credit issued under the Supplemental Portion.

"TRADEMARK SECURITY AGREEMENT" means the trademark security agreement
substantially in the form of Exhibit 10C.

"TYPE" of Loan means a Base Rate Loan or Reserve Adjusted Eurodollar
Loan.

"UCC" means the Uniform Commercial Code as in effect in the State of
New York.

"UCP" is defined in Section 1.13(k).

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<PAGE>

"UNRESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
that at the time of determination shall have been and shall continue to be
designated an Unrestricted Subsidiary. The Board of Directors of the Borrower
may, with the consent of the Administrative Agent, designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) which meets the
Unrestricted Subsidiary Conditions to be an Unrestricted Subsidiary; provided,
however, (x) the Administrative Agent may require that all or any portion of the
outstanding Revolving Loans, Acquisition Term Loans, Supplemental Revolving
Loans or Supplemental Term Loans be repaid in accordance with Section 3.03(j)
and/or that any or all of the Total Revolving Loan Commitment, Total Acquisition
Term Loan Commitment or Total Supplemental Loan Commitment be reduced by an
amount determined in the sole discretion of the Administrative Agent in view of
the reduction in revenue producing assets held by the Borrower and its
Restricted Subsidiaries and the corresponding reduction in Collateral caused by
the designation of such Unrestricted Subsidiary.

"UNRESTRICTED SUBSIDIARY CONDITIONS" means the following:

1. the relevant Unrestricted Subsidiary holds regular meetings of its
shareholder(s) and directors, keeps minutes of those meetings, elects
officers and observes all the formalities necessary to reflect its
status as a separate independent corporation;

2. the day to day affairs of the relevant Unrestricted Subsidiary are
administered by its officers, subject to the direction of its
directors;

3. the directors, management group and employees of the relevant
Unrestricted Subsidiary are different from the directors and
management group of the Borrower and its Restricted Subsidiaries;

4. the relevant Unrestricted Subsidiary maintains a separate bank account
and separate books from the Borrower and its Restricted Subsidiaries;

5. the relevant Unrestricted Subsidiary maintains its own billing and
receivables processes separate from those of the Borrower and its
Restricted Subsidiaries;

6. the relevant Unrestricted Subsidiary has its own financial reporting
system separate from the Borrower and its Restricted Subsidiaries and
its financial statements do not include the assets or liabilities of
the Borrower or its Restricted Subsidiaries;

7. the creditors of the relevant Unrestricted Subsidiary do not extend
credit to the Unrestricted Subsidiary on the basis of the financial
condition of the Borrower and/or its Restricted Subsidiaries and any
credit extended to such Unrestricted

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Subsidiary is based solely on the assets and liabilities of the
Unrestricted Subsidiary;

8. none of the Borrower or any of its Restricted Subsidiaries guarantee
or provide collateral for any obligation of the Unrestricted
Subsidiary and the Unrestricted Subsidiary does not guarantee or
provide collateral for any obligation of the Borrower or any of its
Restricted Subsidiaries;

9. the relevant Unrestricted Subsidiary has its own headquarters separate
from that of the Borrower and its Restricted Subsidiaries;

10. there are no loans, advances or other indebtedness between the
Unrestricted Subsidiary and any of the Borrower or its Restricted
Subsidiaries;

11. the Unrestricted Subsidiary maintains a separate business from the
Borrower and its Restricted Subsidiaries and its assets and
liabilities are segregated from those of the Borrower and its
Restricted Subsidiaries; and

12. the Unrestricted Subsidiary is either a separate taxable entity from
the Borrower and its Restricted Subsidiaries (for local, state,
federal and all other purposes) or shall have entered into a tax
sharing agreement with the Borrower and its Restricted Subsidiaries in
a form satisfactory to the Administrative Agent.

"UNUTILIZED ACQUISITION COMMITMENT" for any Bank at any time, means on
and after the Closing Date, the amount by which the sum of Acquisition Term Loan
Commitment of such Bank exceeds its portion of the Total Acquisition
Utilization.

"UNUTILIZED REVOLVER COMMITMENT" for any Bank at any time means, on
and after the Closing Date, the amount by which the sum of the Revolving Loan
Commitment of such Bank exceeds its portion of the Total Revolver Utilization.

"UNUTILIZED SUPPLEMENTAL COMMITMENT" for any Bank at any time means,
on and after the Closing Date, the amount by which the Supplemental Loan
Commitment of such Bank exceeds the portion of the Total Supplemental
Utilization.

"WHOLLY OWNED SUBSIDIARY" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' or nominees' qualifying shares, is
owned directly or indirectly by such Person.

"WRITTEN" or "IN WRITING" means any form of written communication or a
communication by means of telex, telecopier device, telegraph or cable.

SECTION 10. THE AGENT.

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10.01. APPOINTMENT. Each Bank hereby irrevocably designates and appoints
Indosuez as Administrative Agent, IBJS as Syndication Agent, and BKOB as
Documentation Agent of such Bank to act as specified herein and in the other
Credit Documents and each such Bank hereby irrevocably authorizes the Agents to
take such action on its behalf under the provisions of this Agreement and the
other Credit Documents and to exercise such powers and perform such duties as
are expressly delegated to the Agents by the terms of this Agreement and the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. The Agents agrees to act as such upon the express
conditions contained in this Section 10. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Agents shall not have any duties or
responsibilities, except those expressly set forth herein or in the other Credit
Documents, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against either Agent. The
provisions of this Section 10 are solely for the benefit of the Agents and the
Banks, and no Credit Party shall have any rights as a third party beneficiary of
any of the provisions hereof. In performing its functions and duties under this
Agreement, each Agent shall act solely as an Agent of the Banks and does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency or trust with or for any Credit Party.

10.02. DELEGATION OF DUTIES. The Agents may each execute any of its
duties under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Neither Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care except to the extent otherwise required by Section 10.03.

10.03. EXCULPATORY PROVISIONS. Neither Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement (except for its or such Person's own
gross negligence or willful misconduct) or (b) responsible in any manner to any
of the Banks for any recitals, statements, representations or warranties by any
of the Credit Parties or their respective officers contained in this Agreement,
any other Transaction Document or any Public Financing Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by each Agent under or in connection with, this Agreement or any
other Transaction Document or any Public Financing Document or for any failure
of any of the Credit Parties or their respective officers to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of any Credit Party.
Neither Agent shall be responsible to any Bank for the effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Credit Document or for any representations, warranties,
recitals or statements made herein or therein or made in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or

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made by such Agent to the Banks or by or on behalf of any Credit Party to
such Agent or any Bank or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.

10.04. RELIANCE BY THE AGENT. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Credit Parties), independent accountants and other
experts selected by the Administrative Agent. Each Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Credit Document unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate or it shall first be indemnified
to its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement and the other Credit Documents in accordance
with a request of the Required Banks (or to the extent specifically provided in
Section 11.11, all the Banks), and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Banks.

10.05. NOTICE OF DEFAULT. Neither Agent shall be deemed to have knowledge
of the occurrence of any Default or Event of Default, other than a default in
the payment of principal or interest on the Loans hereunder unless it has
received notice from a Bank or any Credit Party referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Agent shall give prompt notice thereof to the Banks. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks;
PROVIDED, HOWEVER, that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.

10.06. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS. Each Bank
expressly acknowledges that neither Agent nor any officers, directors,
employees, agents, attorneys-in-fact or affiliates of such Agent have made any
representations or warranties to it and that no act by such Agent hereinafter
taken, including any review of the affairs of any Credit Party, shall be deemed
to constitute any representation or warranty by such Agent to any Bank. Each
Bank represents to each Agent that it has, independently and without reliance
upon such Agent or any other Bank, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Credit Parties and made its own

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decision to make its Loans hereunder and enter into this Agreement and the
other agreements contemplated hereby. Each Bank also represents that it
will, independently and without reliance upon either Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Credit Parties. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the
Administrative Agent hereunder, neither Agent shall have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of any Credit Party which may come
into the possession of either such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.

10.07. INDEMNIFICATION. The Banks agree to indemnify each Agent in its
capacity as such or in any other representative capacity under any other Credit
Document ratably according to the sum of their aggregate Commitments and Loans,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Obligations) be imposed on,
incurred by or asserted against either Agent in its capacity as such, in any way
relating to or arising out of this Agreement or any other Credit Document, or
any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be taken by either or both
of the Agents under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by any Credit Party; PROVIDED,
HOWEVER, that no Bank shall be liable to either Agent for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from any
such Agent's gross negligence or willful misconduct. If any indemnity furnished
to either Agent for any purpose shall, in the opinion of such Agent, be
insufficient or become impaired, either Agent may call for additional indemnity
and cease, or not commence, to do the acts indemnified against until such
additional indemnity is furnished. The agreements in this Section 10.07 shall
survive the payment of all Obligations.

10.08. THE AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Agents and their
respective Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with any Credit Party and any Affiliate of any
Credit Party as though such Agent were not an Agent hereunder. With respect to
the Loans made by it and all Obligations owing to it, such Agent shall have the
same rights and powers under this Agreement as any Bank and may exercise the
same as though it were not an Agent, and the terms "Bank" and "Banks" shall
include each Agent in its individual capacity.

10.09. SUCCESSOR AGENT. Upon the acceptance of any appointment as an
Administrative Agent hereunder by a successor Administrative Agent, the term
"Administrative Agent" shall

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include such successor Administrative Agent effective upon its appointment,
and the resigning Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After the retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Section 10 shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.

10.10. RESIGNATION, TRANSFER BY AGENT.

(a) The Administrative Agent may resign from the performance of
all its functions and duties hereunder at any time by giving 30 Business
Days' prior written notice to the Borrower and the Banks. Such resignation
shall take effect upon the acceptance by a successor Administrative Agent
of appointment pursuant to Sections 10.10(b) and (c) or as otherwise
provided below.

(b) Upon any such notice of resignation of the Administrative
Agent, the Required Banks shall appoint a successor Administrative Agent
acceptable to the Borrower and which shall be an incorporated bank or trust
company or other qualified financial institution with operations in the
United States and total assets of at least $5 billion.

(c) If a successor Administrative Agent shall not have been so
appointed within said 30 Business Day period, the resigning Administrative
Agent with the consent of the Borrower shall then appoint a successor
Administrative Agent (which shall be an incorporated bank or trust company
or other qualified financial institution with operations in the United
States and total assets of at least $5 billion) who shall serve as a
successor Administrative Agent until such time, if any, as the Required
Banks appoint a successor Administrative Agent as provided above.

(d) If no successor Administrative Agent has been appointed
pursuant to Section 10.10(b) or (c) by the 30th Business Day after the date
such notice of resignation was given by the resigning Administrative Agent,
such Administrative Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of Administrative
Agent hereunder until such time, if any, as the Required Banks appoint a
successor Administrative Agent as provided above.

(e) Notwithstanding anything to the contrary contained in this
Section 10, Indosuez, as Administrative Agent, may transfer its rights and
obligations to perform all of its functions and duties hereunder to its
parent company or to any Affiliate of it or its parent company.

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10.11. SYNDICATION AGENT AND DOCUMENTATION AGENT. The Syndication Agent
and Documentation Agent, in such capacity, shall have no obligations, duties or
responsibilities, and shall incur no liabilities, under this Agreement or any
other Credit Document.

SECTION 11. MISCELLANEOUS.

11.01. PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (a) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agents in connection with the
negotiation, preparation, execution, syndication and delivery of the Credit
Documents and the documents and instruments referred to therein (in accordance
with the terms of the letter agreement between the Borrower and Indosuez dated
September 29, 1997), other than any expenses of Indosuez incurred after the
Closing Date solely in its capacity as one of the Banks hereunder, and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of Ropes & Gray and local counsel to
Indosuez) and of each of the Banks after the occurrence and during the
continuation of an Event of Default in connection with the enforcement of the
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and disbursements of counsel
for each of the Banks) with prior notice to the Borrower of the engagement of
any counsel, and hold each of the Banks harmless from and against any and all
reasonable fees and expenses of any appraisers or any consultants or other
advisors reasonably engaged by the Administrative Agent; (b) pay and hold each
of the Banks harmless from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters and save each of the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Bank) to pay such taxes; and (c) indemnify each Agent and each Bank, its
officers, directors, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses (including, without limitation, any and all losses, liabilities,
claims, damages or expenses arising under Environmental Laws except with regard
to any losses, costs, damages or expenses under Environmental Laws, excluding
such losses, costs, damages or expenses arising from or relating to acts or
omissions occurring after the Administrative Agent or any Bank takes possession
of, uses, operates, manages, controls or sells any Real Property provided,
however, that such exception shall apply only to the extent such losses, costs,
damages or expenses arise solely from the gross negligence, bad faith or willful
misconduct of the applicable Administrative Agent or any Bank or of the agents
of such Administrative Agent or any Bank) incurred by any of them as a result
of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not any Bank is a
party thereto) related to the entering into and/or performance of any Credit
Document or the use of the proceeds of any Loans hereunder or the consummation
of any other transactions contemplated in any Credit Document, including,
without limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).

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11.02. RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located) to
or for the credit or the account of any Credit Party against and on account of
the Obligations and liabilities of such Credit Party to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations of such Credit Party purchased by such
Bank pursuant to Section 11.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not such Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured. Notwithstanding the foregoing, the Banks
shall have no right of setoff as to the Put/Call Funds and shall not seek to
enjoin payments from the Put/Call Funds made pursuant to the Put/Call Option
Agreement or otherwise prevent the Borrower from honoring its obligations
thereunder; PROVIDED that nothing in the foregoing shall be construed to prevent
the Administrative Agent from exercising remedies against the Borrower and the
Borrower generally available under this Agreement or applicable law, including,
without limitation the commencement of a case under the Bankruptcy Code relative
to any Credit Party.

11.03. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and hand
delivered, telegraphed, telexed, telecopied, cabled or delivered:

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(a) If to the Borrower, to it at:

3478 Buskirk Avenue, Suite 260
Pleasant Hill, CA 94523
Attention: President

with a copy to each of the following:

Brownstein Hyatt Farber & Strickland, PC
410 Seventeenth Street
22nd Floor
Denver, CO 80202-4437
Attention: Steven Siegel, Esq.
Fax: (303) 623-1956

and

Kohlberg & Company, LLC
111 Radio Circle
Mt. Kisco, NY 10549
Attention: Samuel Frieder
Fax: (914) 241-7476

(b) if to any Bank, to it at its address specified on Schedule
11.03;

All such notices and communications shall, when hand delivered,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective the following Business Day when delivered to the telegraph company,
cable company or overnight courier, as the case may be, or when transmission is
confirmed, if by telex or telecopier, except that notices and communications to
the Administrative Agent shall not be effective until received by the
Administrative Agent.

11.04. BENEFIT OF AGREEMENT.

(a) This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto, all future holders of the
Notes, and their respective successors and assigns; PROVIDED, HOWEVER, that
the Borrower shall not assign or transfer any of its interests hereunder
without the prior written consent of the Banks; and PROVIDED, FURTHER, that
the rights of each Bank to transfer, assign or grant participation in

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its rights and/or obligations hereunder shall be limited as set forth below
in this Section 11.04; and PROVIDED, FURTHER, that nothing in this Section
11.04 shall prevent or prohibit any Bank from (i) pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such
Bank from such Federal Reserve Bank and (ii) granting participation in or
assignments of such Bank's Loans, Notes and/or Commitments hereunder to its
parent company and/or to any Affiliate of such Bank that is at least 50%
owned by such Bank or its parent company.

(b) Each Bank shall have the right to transfer, assign or grant
participation in all or any part of its remaining Loans, Notes and/or
Revolving Loan Commitments hereunder on the basis set forth below in this
Section 11.04. Subject to Section 11.04(e), each Bank may furnish any
information concerning the Borrower or any Subsidiary in the possession of
such Bank from time to time to assignees and participants (including
prospective assignees and participants).

(c) Each Bank, with the written consent of the Administrative
Agent, which consent shall not be unreasonably withheld may assign pursuant
to an Assignment Agreement substantially in the form of Exhibit 11.04(c)
hereto (the "ASSIGNMENT AGREEMENT") all or a portion of its Loans, Notes,
Revolving Loan Commitments, Acquisition Term Loan Commitments and/or
Supplemental Loan Commitments hereunder pursuant to this Section 11.04(c)
to one or more Eligible Assignees; PROVIDED, HOWEVER, that any assignment
pursuant to this Section 11.04(c)(i) shall be in a minimum aggregate
amount, for all Loans and Commitments assigned, of $10,000,000, and (ii)
shall not result in the Borrower incurring any obligation to pay additional
amounts as of the time of such assignment pursuant to Section 1.10(e), 1.11
or 3.05. Any assignment pursuant to this Section 11.04(c) will become
effective five Business Days after the Administrative Agent's receipt of
(i) a written notice in the form of Exhibit 11.04(c) executed by the
assigning Bank and the Eligible Assignee, and (ii) a processing and
recordation fee of $2,500 from the assigning Bank in connection with the
Administrative Agent's recording of such sale, assignment, transfer or
negotiation; PROVIDED, HOWEVER, that such fee shall only be payable if the
assignment is between a Bank and an Eligible Assignee that is not a Bank
prior to the assignment. Such assignment shall be recorded by the
Administrative Agent in the Register. The Borrower shall issue new Notes
to the assignee Bank or Eligible Assignee, as the case may be, in
conformity with Section 1.05 and the assignor shall return the old Notes to
the Borrower. Upon the effectiveness of any assignment in accordance with
this Section 11.04(c), the assignee, if not a Bank, will become a "Bank"
for all purposes of this Agreement and the other Credit Documents and, to
the extent of such assignment, the assigning Bank shall be relieved of its
obligations hereunder with respect to the Commitments being assigned. The
Administrative Agent shall maintain at its address specified in Exhibit
11.03 a copy of each Assignment Agreement delivered to and accepted by it
and a register in which it shall record the names and addresses of the
Banks and the Commitments of, and principal amount of the Loans owing to,
each Bank from time to time (the "REGISTER").

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The entries in the Register shall be conclusive and binding for all
purposes, absent demonstrable error, and the Borrower, the Administrative
Agent and the Banks may treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower, the
Administrative Agent or any Bank at any reasonable time and from time to
time upon reasonable prior notice.

(d) Each Bank may transfer, grant or assign participation in all
or any part of such Bank's Loans, Notes and/or Commitments hereunder
pursuant to this Section 11.04(d) to any Person; PROVIDED, HOWEVER, that
(i) such Bank shall remain a "Bank" for all purposes of this Agreement and
the transferee of such participation shall not constitute a Bank hereunder
and (ii) no participant under any such participation shall have rights to
approve any amendment to or waiver of this Agreement or any other Credit
Document except to the extent such amendment or waiver would (A) change the
scheduled final maturity date of any of the Loans, Notes, Revolving Loan
Commitments, Acquisition Term Loan Commitments or Supplemental Loan
Commitments in which such participant is participating or (B) reduce the
principal amount, interest rate or fees applicable to any of the Loans,
Notes or Revolving Loan Commitments in which such participant is
participating or postpone the payment of any interest or fees or (C)
release all or substantially all of the Collateral and PROVIDED, FURTHER,
that any participation pursuant to this Section 11.04(d) shall not result
in the Borrower paying additional amounts as of the time of such
participation pursuant to Section 1.10(e), 1.11 or 3.05. In the case of
any such participation, the participant shall not have any rights under
this Agreement or any of the other Credit Documents (the participant's
rights against the granting Bank in respect of such participation to be
those set forth in the agreement with such Bank creating such
participation) and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation; PROVIDED,
HOWEVER, that such participant shall be considered to be a "Bank" for
purposes of Sections 11.02 and 11.06(b).

(e) The Agents and the Banks agree to keep confidential (and to
cause their respective officers, directors, employees, agents,
representatives and counsel to keep confidential) all information,
materials and documents furnished by any Credit Party to the Agents or any
Bank (the "INFORMATION"). Notwithstanding the foregoing the Agents and
each Bank shall be permitted to disclose Information (i) to such of its
officers, directors, employees, agents, representatives and counsel as need
to know such Information in connection with its participation in any of the
transactions contemplated hereby or the administration of this Agreement;
(ii) to the extent required by applicable laws and regulations or by any
subpoena or similar legal process, or requested by any governmental agency
or authority; (iii) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this Agreement or any other
confidentiality agreement with respect thereto, (B) becomes available to
such Agent or such Bank on a non-confidential basis from a source other
than the Borrower or its

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Subsidiaries, officers, directors, employees, agents or representatives
or (C) was available to such Agent or such Bank on a non-confidential
basis prior to its disclosure to the Agent or such Bank by the Borrower or
any of its Subsidiaries; (iv) to the extent the Borrower or any of its
Subsidiaries shall have consented to such disclosure in writing; (v) in
connection with the sale of any Collateral pursuant to the provisions of
any of the Security Documents; (vi) in connection with any litigation or
claim concerning enforcement of the Obligations or arising under this
Agreement or any Credit Document or any related agreement; or (vii)
pursuant to Section 11.04(b); PROVIDED, HOWEVER, that prior to any such
disclosure under Section 11.04(b), each prospective Eligible Assignee or
participant shall enter into a written agreement with the assigning or
selling Bank to preserve the confidentiality of any Information to the
extent set forth in this Section 11.04(e).

(f) If the Borrower shall: (i) as a result of the requirements of
Section 1.01(b) or 1.11 of this Agreement, be required to pay to any Bank
the additional amounts referred to in such Sections at any time when all of
the Banks have not requested payment of such amounts; (ii) as a result of
the requirements of Section 3.07, be required to pay any Bank the Taxes
referred to in Section 3.07, or (iii) as a result of the failure of any
Bank to make available to the Administrative Agent such Bank's ratable
portion of any Borrowing, be required to repay to the Administrative Agent
such corresponding amount pursuant to Section 1.04(b), then, in each such
case, (A) the Borrower shall be entitled to designate an Eligible Assignee
to replace such Bank, (B) such Bank shall execute and deliver to such
Eligible Assignee an Assignment Agreement with respect to such Bank's
entire interest under this Agreement and the Notes, and (C) upon the
execution by such Eligible Assignee of such Assignment Agreement and
compliance with the requirements of Section 11.04(c), such Eligible
Assignee shall succeed to all of such Bank's rights and duties under this
Agreement; PROVIDED, HOWEVER, that notwithstanding anything to the contrary
in this Agreement, the Borrower shall be responsible to pay any and all
out-of-pocket expenses of any Bank replaced by the Borrower pursuant to
this Section 11.04(f) or of the Administrative Agent incurred by such Bank
or by the Administrative Agent, in either case incurred in connection with
the Borrower's replacement of any Bank pursuant to this Section 11.04(f).

11.05. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of
the Administrative Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and any Administrative Agent or any Bank shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which any Administrative
Agent or any Bank would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circum-

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stances or constitute a waiver of the rights of any Administrative Agent or
the Banks to any other or further action in any circumstances without notice
or demand.

11.06. PAYMENTS PRO RATA.

(a) The Administrative Agent agrees that promptly after its
receipt of each payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party, it shall distribute such payment to
the Banks pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received and in
accordance with the provisions hereof as to the application of prepayments.

(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents,
or otherwise) which is applicable to the payment of the principal of, or
interest on, the Loans, of a sum which with respect to the related sum or
sums received by other Banks is in a greater proportion than the total of
such Obligations then owed and due to such Bank bears to the total of such
Obligations then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for
cash without recourse or warranty from the other Banks an interest in the
Obligations of the respective Credit Party to such Banks in such amount as
shall result in a proportional participation by all of the Banks in such
amount; PROVIDED, HOWEVER, that if all or any portion of such excess amount
is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.

11.07. CALCULATIONS; COMPUTATIONS. Unless otherwise indicated, all
computations of interest and fees hereunder shall be made on the actual number
of days elapsed over a year of 365 days; PROVIDED, HOWEVER, that all
computations of Reserve Adjusted Eurodollar Loans and Commitment Fees shall be
made on the actual number of days elapsed over a year of 360 days.

11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; SERVICE OF
PROCESS.

(a) This Agreement and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with and be
governed by the laws of the State of New York applicable to contracts made
and to be performed wholly therein, without giving effect to principles of
conflicts of law. Any legal action or proceeding with respect to this
Agreement or any other Credit Document may be brought in the courts of the
State of New York or the United States for the Southern District of New
York, and, by execution and delivery of this Agreement, each Credit Party
hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each Credit Party designates and appoints

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CT Corporation System, with an address at 1633 Broadway, New York, New York
10019 and such other persons as may hereafter be selected by the Credit
Parties and shall irrevocably agree in writing to so serve, as their
administrative agent to receive on their behalf, service of all process
in any such proceedings in any such court, such service being hereby
acknowledged by each Credit Party to be effective and binding service in
every respect. A copy of such process so served shall be mailed by
registered mail to any Credit Parties at the address provided for the
Borrower in Section 11.03 of this Agreement except that unless otherwise
provided by applicable law, any failure to mail such copy shall not affect
the validity of service of process. If any agent appointed by the Credit
Parties refuses to accept service, the Credit Parties hereby agree that
service upon them by mail shall constitute sufficient notice. Nothing
herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of the Administrative Agent to
bring proceedings against any Credit Party in the courts of any other
jurisdiction.

(b) Each party hereto hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
Section 11.08(a) and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought
in any such court has been brought in an inconvenient forum.

11.09. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.

11.10. HEADINGS DESCRIPTIVE. The headings of the several Sections and
Subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

11.11. AMENDMENT OR WAIVER. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Required Banks; PROVIDED, HOWEVER, that no such change, waiver,
discharge or termination shall, without the consent of each affected Bank and
the Administrative Agent, (a) extend the scheduled final maturity date of any
Loan, or any portion thereof, or reduce the rate or extend the time of payment
of interest thereon or fees or reduce the principal amount thereof, or increase
the Commitments of any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment shall not constitute a change in the terms of
any Commitment of any Bank), (b) release all or substantially all of the
Collateral (except as expressly permitted by the Credit Documents), (c) amend,
modify or waive

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any provision of this Section, or Section 1.10, 1.11, 3.05, 8, 10.07, 11.01,
11.02, 11.04, 11.06, 11.07 or 11.12, (d) reduce any percentage specified in,
or otherwise modify, the definition of Required Banks or (e) consent to the
assignment or transfer by any Credit Party of any of its rights and
obligations under this Agreement. No provision of Section 11 may be amended
without the consent of the Administrative Agent.

11.12. SURVIVAL. All indemnities set forth herein including, without
limitation, in Section 1.11, 3.05, 9.07 or 11.01 shall survive the execution and
delivery of this Agreement and the making of the Loans, the repayment of the
Obligations and the termination of the Total Commitments.

11.13. DOMICILE OF LOANS. Each Bank may transfer and carry its Loans at,
to or for the account of any branch office, subsidiary or Affiliate of such
Bank; PROVIDED, HOWEVER, that any such transfer shall not result in the Borrower
paying additional amounts as of the time of such transfer pursuant to any
provision of any Credit Document.

11.14. WAIVER OF JURY TRIAL. Each of the parties to this Agreement hereby
irrevocably waives all rights to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement or the other Credit
Documents or the transactions contemplated hereby or thereby.

11.15. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.

11.16. REINSTATEMENT. If, at any time, all or part of any payment of the
Obligations made by the Borrower is rescinded or otherwise must be returned by
any Bank or the Administrative Agent for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of the Borrower), this Agreement shall
be reinstated as to the Obligations which were satisfied by the payment to be
rescinded or returned, all as though such payment had not been made.

-141-

<PAGE>

[Amended and Restated Credit Agreement]

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.

COLOR SPOT NURSERIES, INC.

By: /s/ Karla D. Vukelich
-------------------------------
Name:
Title:

CREDIT AGRICOLE INDOSUEZ
(formerly Banque Indosuez,
New York Branch)
as a Bank and as Administrative Agent

By: /s/ Kenneth Kencel
-------------------------------
Name: Kenneth J. Kencel
Title: First Vice President

By: /s/ Patricia Fizanel
-------------------------------
Name: Patricia Fizanel
Title: First Vice President

IBJ SCHRODER BANK & TRUST COMPANY,
as a Bank and as Syndication Agent

By: /s/ Mary McLaughlin
-------------------------------
Name: Mary McLaughlin
Title: Vice President

BANKBOSTON, N.A.
as a Bank and as Documentation Agent

By: /s/ Timothy M. Barns
-------------------------------
Name: Timothy M. Barns
Title: Division Executive

FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership
By: First Source Financial, Inc., its manager

By: /s/ Gary L. Francis
-------------------------------
Name: Gary L. Francis
Title: Senior Vice President

<PAGE>

CREDITANSTALT-BANKVEREIN

By /s/ Patrick J. Rounds
----------------------------
Name: Patrick J. Rounds
Title: Vice President

By /s/ Dennis O'Dowd
-----------------------------
Name: Dennis O'Dowd
Title: Chief Executive Officer

THE ING CAPITAL SENIOR SECURED
HIGH INCOME FUND, L.P.

By ING Capital Advisors, Inc.
as Investment Advisor

By: /s/ [ILLEGIBLE]
---------------------------
Name:
Title:

COMMERCIAL LOAN FUNDING
TRUST I

By: Lehman Commercial Paper, Inc.,
not in its individual capacity but as
Administrative Agent

By: /s/ Michele Swenson
-------------------------------
Name: Michele Swenson
Title: Authorized Signatory

-143-
<PAGE>

ING HIGH INCOME PRINCIPAL
PRESERVATION OFFERING, L.P.

By: ING Capital Advisers, Inc.,
its Investment Advisor

By: /s/ [ILLEGIBLE]
---------------------------
Name:
Title:

Total Revolving Loan Commitment: $40,000,000
Total Acquisition Term Loan Commitment: $75,000,000
Total Supplemental Loan Commitment: $35,000,000

-144-
<PAGE>

SCHEDULE A

LIST OF BANKS

Credit Agricole Indosuez
IBJ Schroder Bank & Trust Co.
BankBoston, N.A.

ASSIGNEE BANKS

First Source Financial, LLP
Creditanstalt-Bankverein
The ING Capital Senior Secured High Income Fund, L.P.
Indosuez Capital Funding II, Limited
Indosuez Capital Funding III, Limited
Commercial Loan Funding Trust I
ING High Income Principal Preservation Offering, L.P.

<PAGE>

SCHEDULE 11.03

BANK ADDRESSES

Mat Linett Merily McLaughlin Cherryl Carangelo
Credit Agricole Indosuez IBJ Schroder Bank & Trust Co. BankBoston, N.A.
1211 Avenue of the Americas One State Street 100 Federal Street
7th Floor New York, New York 10004 Boston, MA 02110
New York, New York 10036

* * * * * *

Michelle Swanson Patrick Rounds
Commercial Loan Funding Trust I Creditanstalt-Bankverein
Lehman Brothers 4 Embarcadero Center
Three World Financial Center, 10th Floor Suite 630
New York, New York 10285 San Francisco, CA 94111

Kathleen A. Lenarcic Janice Rackow
The ING Capital Senior Secured First Source Financial, Inc.
High Income Fund, L.P. 2850 West Golf Road, 5th Floor
ING High Income Principal Rolling Meadow, IL 60008
Preservation Offering, L.P.
ING Capital Advisors, Inc.
333 South Grand Avenue
Los Angeles, CA 90071

<PAGE>

Exhibit 11.1

COLORSPOT NURSERIES, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)

BASIC AND DILUTED LOSS PER SHARE

THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ACTUAL
Weighted average number of
common shares outstanding 6,937 6,767 6,933 6,769

Dilutive common equivalent shares from stock options
and warrants using the treasury stock method - - - -

Common equivalent shares from shares issued subject
to SAB No. 83 using the treasury stock method - 201 - 201
------------ ------------ ------------ ------------
Shares used in per share calculation 6,937 6,968 6,933 6,970
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Loss before extraordinary loss (3,039) (740) (6,730) (1,560)
Extraordinary loss (2,162) - (2,162) -
------------ ------------ ------------ ------------
Net loss (5,201) (740) (8,892) (1,560)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Loss per share before extraordinary loss ($0.44) ($0.11) ($0.97) ($0.22)
Extraordinary loss per share (0.31) - (0.31) -
------------ ------------ ------------ ------------
Net loss per share ($0.75) ($0.11) ($1.28) ($0.22)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

PROFORMA
Weighted average number of
common shares outstanding 6,937 8,830 6,940 8,833

Dilutive common equivalent shares from stock options
and warrants using the treasury stock method - - - -

Loss before extraordinary loss (3,039) (1,012) (7,319) (4,178)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Loss per share before extraordinary loss ($0.44) ($0.11) ($1.05) ($0.46)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 2ND
QUARTER FORM 10-Q FOR THE FISCAL YEAR 6/30/98 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-25-1997
<CASH> 352
<SECURITIES> 0
<RECEIVABLES> 25,254
<ALLOWANCES> 1,721
<INVENTORY> 56,499
<CURRENT-ASSETS> 80,846
<PP&E> 50,461
<DEPRECIATION> 4,483
<TOTAL-ASSETS> 211,980
<CURRENT-LIABILITIES> 58,101
<BONDS> 113,287
0
29,610
<COMMON> 12
<OTHER-SE> 13,728
<TOTAL-LIABILITY-AND-EQUITY> 211,980
<SALES> 64,190
<TOTAL-REVENUES> 64,190
<CGS> 43,647
<TOTAL-COSTS> 43,647
<OTHER-EXPENSES> 28,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,805
<INCOME-PRETAX> (13,460)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (2,162)
<CHANGES> 0
<NET-INCOME> (8,892)
<EPS-PRIMARY> (1.28)
<EPS-DILUTED> (1.28)

</TABLE>