CONSOLIDATED GRAPHICS INC /TX/
10-K, 1997-06-30
COMMERCIAL PRINTING
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

(MARK ONE)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (FEE REQUIRED)

         FOR THE FISCAL YEAR ENDED MARCH 31, 1997

                                       OR

[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD
         FROM __________ TO _____________.

                         COMMISSION FILE NUMBER 0-24068
                            ------------------------

                           CONSOLIDATED GRAPHICS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                      TEXAS                              76-0190827
          (STATE OR OTHER JURISDICTION         (IRS EMPLOYER IDENTIFICATION NO.)
        OF INCORPORATION OR ORGANIZATION)

             2210 WEST DALLAS STREET                        77019
                 HOUSTON, TEXAS                           (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (713) 529-4200
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities Registered pursuant to Section 12(g) of the Act:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

     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 [X]   No [_].

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

  The aggregate market value of the voting stock held by nonaffiliates of the
                         registrant as of May 31, 1997:

                  COMMON STOCK, $.01 PAR VALUE -- $425,218,487

  The number of shares outstanding of the issuer's common stock as of May 31,
                                     1997:

                   COMMON STOCK, $.01 PAR VALUE -- 12,460,615

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Proxy Statement for the Annual Shareholders'
Meeting to be held on or about July 30, 1997, to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, are incorporated by reference into Part III of this
Report. Such Proxy Statement, except for the parts therein which have been
specifically incorporated by reference, shall not be deemed "filed" for the
purposes of this report on Form 10-K.

================================================================================
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Consolidated Graphics, Inc. ("CGX" or the "Company"), headquartered in
Houston, Texas, is the leading printing industry consolidator in the United
States. Since its formation in 1985, the Company has expanded its operations to
include 19 printing companies in 15 markets. Each operation provides general
commercial printing services relating to the production of annual reports,
training manuals, product and capability brochures, direct mail pieces, catalogs
and other promotional material, all of which tend to be recurring in nature. One
of the Houston printing companies also provides financial printing services,
including the printing of registration statements, information statements and
quarterly and annual reports filed with the Securities and Exchange Commission
(the "SEC"), as well as official statements for municipal securities. Each
printing company operated by the Company has an established operating history
(ranging from 10 to 119 years), solid customer relationships and a strong
reputation for customer service, particularly with respect to responsiveness and
quality. The Company's customer list includes many major corporations, most of
which are headquartered in the markets in which the Company operates.

INDUSTRY BACKGROUND

     The printing industry is one of the largest and most fragmented industries
in the United States, with total annual sales estimated at $98 billion. The
printing services market includes general commercial printing, financial
printing, printing and publishing of books, newspapers and periodicals, quick
printing and production of business forms and greeting cards. Within the
printing services market, the Company serves a portion of the commercial and
financial printing sectors which had annual U.S. sales of $67 billion based on
the most recent industry data available.

     In 1996, 7,400 of the 37,000 commercial printing companies in the U.S. had
over 20 employees. While these operations are involved in various aspects of
printing, the identification of this large group of printing companies
contributed to the development of the Company's acquisition strategy described
below.

BUSINESS STRATEGY

     Due to the fragmented nature of the general commercial printing industry,
management believes an abundance of acquisition opportunities exist. The
commercial printing business is characterized by a significant number of locally
oriented, privately-held businesses, many of which tend to be viable acquisition
targets. Owners' impetus to sell their printing businesses result from various
causes, including the need to increase their personal financial liquidity, plans
to retire or a desire to access the financial capital and other operating
strengths the Company has to offer in order to grow the business. Because there
are relatively few buyers with adequate financing and management expertise who
desire to acquire these local printing companies, the Company has been and
expects to continue to be able to implement its acquisition strategy at prices
it considers to be attractive.

     The Company believes a large part of its success results from its ability
to combine the service and responsiveness of a locally oriented printing company
with the critical mass and economic advantages of a large company. The Company's
strategy is to continue acquiring these locally oriented printing companies
(generally having $2 million to $20 million in annual sales), to continually
enhance the competitiveness and profitability of each acquired company and to
develop a critical mass of companies in individual geographic markets.
Generally, each acquired company retains its identity and continues to operate
autonomously in maintaining and building relationships with buyers of printing
services in its market.

                                       1
<PAGE>
     The principal advantages of the Company's strategy are as follows:

      o   MARGIN IMPROVEMENT.  Through the use of company-wide master purchasing
          arrangements for principal supplies such as paper, plates, film and
          ink, each operating subsidiary can receive the benefit of volume
          discounts which may significantly impact its gross margin. The
          combined purchasing power also results in more favorable pricing for
          investments in technology and capital equipment. In addition,
          consolidating certain administrative services for insurance, employee
          benefits, safety and environmental programs, financial management and
          information systems can further improve operating margins.

      o   STRATEGIC COUNSEL.  Many of the acquisition candidates are
          privately-held businesses, which by their nature typically place heavy
          demands on the skills of the proprietor. The Company provides
          strategic counsel and professional management techniques to the
          management of its acquired companies in such areas as planning,
          organization, controls, accounting and finance and regulatory
          compliance, resulting in improved efficiency and competitive
          advantages.

      o   FLEXIBLE SERVICE.  The wide range of equipment capabilities of its
          operating subsidiaries provides CGX with greater flexibility to meet
          customer needs than is available to a company with a single operation.
          From time to time, to meet customers' needs, the various operating
          subsidiaries work together when an individual operation does not have
          the necessary equipment or capacity to perform a particular project.
          This allows an operating subsidiary to compete economically for
          business it might otherwise have been unable to obtain. Further,
          geographic concentration in the Houston and Denver markets permits the
          Company to offer the customers of its operating subsidiaries in those
          markets the capacity to handle large jobs on short notice.

      o   MANAGEMENT DEVELOPMENT.  The Company has historically been committed,
          beyond industry custom, to recruiting, training and developing recent
          college graduates as printing sales and management professionals.
          These professionals are a key factor contributing to the Company's
          ability to provide a high degree of quality customer service and
          maximize profits. The Company expects to implement its Management
          Development Program at all of its acquired companies.

     By taking advantage of the above benefits, the Company believes it has
become one of the lowest-cost producers of quality printing products in its
markets and has improved the operating margins of each printing company it has
acquired.

     In fiscal 1997, the Company entered three new regions and increased its
presence in two others. Together, the Company's operating subsidiaries provide
commerical printing services to the business communities in the Southwest,
Pacific Northwest, West Coast, Midwest, Mid-Atlantic and Northeast regions of
the United States. The Company plans to focus its future acquisition efforts on
further penetration into existing markets and expansion into other high-
potential metropolitan markets.

THE PRINTING COMPANIES

     The Company's 19 printing companies are all operated as wholly-owned
subsidiaries. The commercial printing business focuses on the production of a
wide range of marketing, investor relations and technical materials for a
variety of customers including corporations, mutual fund companies, advertising
agencies, graphic design firms and direct mail and catalog retailers. The
commercial printing business involves digital imaging, printing and distribution
of commercial and corporate documents, including training manuals, multicolor
product and capability brochures, direct mail pieces, catalogs and other
information requested by its customers and produced to their specifications.
Commercial printing also includes shareholder communications, which are prepared
at regular intervals, such as annual reports, interim reports and proxy
materials. Most of these projects are recurring in nature. In addition to
commercial printing, one operating subsidiary located in Houston also provides
financial printing. In its financial printing business, the Company typesets,
prints and distributes financial documents which

                                       2
<PAGE>
are used for specific business transactions, including registration statements,
information statements and quarterly and annual reports filed with the SEC.

     The following table lists the business name and location of the Company's
principal operating subsidiaries and the dates of their founding and acquisition
by the Company.

                                                      CALENDAR      FISCAL YEAR
                                                        YEAR         ACQUIRED
                NAME                 LOCATION         FOUNDED         BY CGX
- ------------------------------   ----------------     --------      -----------
Western Lithograph............   Houston                1960            1986
Grover Printing...............   Houston                1974            1988
Tewell Warren Printing........   Denver                 1962            1989
Chas. P. Young Company........   Houston                1953            1991
Gritz-Ritter Graphics.........   Denver                 1973            1995
The Jarvis Press..............   Dallas                 1951            1995
Frederic Printing.............   Denver                 1878            1995
Clear Visions.................   San Antonio            1981            1996
Heritage Graphics.............   Phoenix                1979            1996
Emerald City Graphics ........   Seattle                1981            1996
Precision Litho...............   San Diego              1981            1996
Tulsa Litho...................   Tulsa                  1935            1996
Bridgetown Printing...........   Portland               1902            1997
Garner Printing...............   Des Moines             1928            1997
Eagle Press...................   Sacramento             1987            1997
Mobility......................   Richmond               1969            1997
Theo Davis Sons ..............   Raleigh-Durham         1945            1997
Direct Color..................   Long Beach             1963            1997
Tucker Printers...............   Rochester              1960            1998

     Each of the Company's operating subsidiaries is autonomous, with its own
printing facilities and management, sales and accounting staff. Each operating
subsidiary maintains and develops its own customer relationships. In the process
of soliciting business, an operating subsidiary may compete with one or more of
its sister companies.

CUSTOMERS

     CGX is one of the leading general commercial printers in the United States.
Due to the project-oriented nature of customers' printing requirements, sales to
particular customers may vary significantly from year to year depending, among
other things, upon the number and size of their projects. During fiscal 1997,
the Company's top ten customers accounted for 17% of total sales, of which no
customer accounted for more than 4%.

MARKETING AND SALES

     The Company's business is service-oriented, and its primary marketing focus
is on responding rapidly to customer requirements and producing high quality
printed materials at competitive prices. Responsiveness is essential because of
the short lead time on most printing jobs handled by CGX. The Company's printing
operations are designed to maintain maximum flexibility to meet customer needs
both on a scheduled and an emergency basis. Each operating subsidiary targets
those printing jobs that its management believes will best utilize its equipment
and expertise profitably.

     The printing business requires a substantial amount of interaction with
customers, including personal sales calls, art work and computer disk reviews,
reviews of color and other proofs and "press checks" (customer approval of the
printed piece while it is being printed). Through its salespeople and other
management professionals, the Company maintains strict control of the printing
process from the

                                       3
<PAGE>
time a prospective customer is identified through the scheduling, prepress,
printing and postpress operations. Because of the costs involved and the level
of customer interaction, projects having small to medium size print runs, as
well as time-sensitive projects of any size, are almost always produced locally.
CGX also has a well-equipped financial printing operation used primarily by
customers located throughout Texas, but also on occasion by customers of sister
companies located outside of Texas.

     The Company employs over 100 salespeople, all of whom are knowledgeable
about the industry and the printing capabilities offered by the operations they
serve. The Company's sales philosophy stresses frequent sales calls on existing
customers and constant marketing for new customers. Management of CGX's
operating companies emphasizes to their customers the breadth and sophistication
of their company's printing capability, the speed and quality of its service and
the personal attention offered by their salespeople. In addition to soliciting
business from existing and prospective customers, the salespeople act as
liaisons between customers and those in charge of production and provide
technical advice and assistance to customers throughout the printing process.

OPERATIONS

     The Company provides service in all areas of commercial and financial
printing, including prepress, printing and postpress operations.

     Commercial prepress services involve photographically duplicating
mechanical images and/or digitally producing images, separating color images
into process colors, assembling films and burning film images onto plates.
Financial prepress goes a step further by preparing manuscript copy and
typesetting. The Company has electronic prepress operations at most of its
facilities.

     There are a number of different printing processes, each with its own
distinguishing qualities and appearance characteristics. The Company uses the
offset lithography process to provide the highest-quality, lowest-cost printed
products for most run lengths. Short- to medium-run commercial work generally is
printed on sheet-fed presses, while long-run commercial and financial printing
projects typically are printed on web presses. Presses may be single or
multicolor.

     Most of CGX's presses are large, sheet-fed, 40-inch presses, which are
typically capable of printing 16 pages of letter-sized finished product on a 28
by 40-inch sheet of paper with eight pages on each side (known as a 16-page
"signature"). The sheet-fed presses in all of the operating subsidiaries are
capable of simultaneously printing up to one, two, four, five or six colors. As
of May 31, 1997, the Company operated 76 sheet-fed presses capable of running at
standard press speeds of 6,000 to 18,000 sheets per hour.

     As of May 31, 1997, the Company operated eight web presses located at
certain of its Dallas, Houston, Sacramento and Seattle facilities. These presses
are higher production presses, which start with a roll of paper at one end,
print on both sides of the paper at maximum speeds of up to 50,000 32-page
signatures per hour and are also capable of folding, gluing, or perforating a
printed product.

     The postpress operations provided by the Company include cutting, folding,
binding and finishing. Warehousing, packaging and distribution services also are
critical elements in the printing process, and the Company is equipped to
provide these services by storing printed materials for its customers, handling
bulk shipments and mailing to meet customer needs. The Company utilizes courier
services to provide customers with pick-up and delivery services. Through its
membership in FPNet, The International Network of Independent Financial
Printers, the Company is able to expedite delivery of corporate and financial
documents to most major U.S. and Canadian cities and London, England.

     The Company's scheduling flexibility allows it to consistently react
swiftly to its customers' requirements. Because of the need for rapid production
of printing projects, from conception through delivery, the Company must
maintain physical plant and customer service staff which allow it to maximize
work loads when called upon to do so. Consequently, the Company's subsidiaries
do not always operate at full capacity.

                                       4
<PAGE>
     One of the most significant technological advancements in the commercial
printing industry in recent years has been in the computerization of the
prepress area. The Company believes its highly advanced electronic prepress
capabilities give it a competitive advantage in the marketplace. The Company has
a program to continually evaluate its electronic prepress needs and, perhaps
more importantly, the growing expectations of its customers in this area.
Pursuant to this program, the Company has added electronic prepress operations
to substantially all of its significant operations and expects to continually
upgrade the prepress area at its current printing operations and those likely to
be acquired in the future.

     The Company believes its prepress operations and most of its production and
postpress equipment are state-of-the-art. The remainder of its equipment is more
than adequate for producing products of the kind and in the quantities required
by the Company's customers. The Company continuously reviews its printing
equipment needs and evaluates advances in computer software, hardware and
peripherals, computer networking and telecommunication systems as they relate to
the Company's operations. During fiscal 1998, the Company anticipates spending
about $10 million in the aggregate for the purchase of additional equipment to
add production capacity and further streamline operations at many of its
operating subsidiaries.

MANAGEMENT DEVELOPMENT PROGRAM

     Management believes that the successful implementation of the Company's
growth strategy depends in part on its ability to continue to employ qualified,
well-trained, sales and management professionals. To address this need, the
Company in 1991 created the Consolidated Graphics Management Development Program
("Management Program"). For this program, the Company recruits, at the college
campus level, individuals management believes display the characteristics
necessary to lead one of the Company's operations at some future date. There are
70 persons who have graduated from or are currently participating in the
Management Program.

     The Company implemented the Management Program based on the premise that
traditional printing industry hiring and training practices were neither
sophisticated nor effective. Historically, printing companies hired either
non-industry experienced employees to whom they provided little or no formal
training, or those sales or management personnel with industry experience who
were unemployed at the time or lured by above-market wages.

     Management of the Company's operating subsidiaries devotes a great deal of
time and attention to the training of employees. Certain aspects of the
Management Program are specially tailored to the needs of each company. The
program is constantly being refined and improved based on the experiences of
recent participants and observations of training personnel. In recruiting for
the program, the Company targets recent college graduates, who typically do not
have a printing or graphics background, from major universities near its
operating subsidiaries.

     The Management Program is a three-year program divided into three distinct
phases; technical, managerial and on-the-job. The first phase includes a
one-week introduction to printing where participants learn the terminology of
the industry. It continues with an in-depth technical training in the
manufacturing process. The instruction is highly structured and includes
rotations in each department within the manufacturing process, including paper,
ink, prepress, press, bindery and shipping. Following the rotation through the
plant, the technical training shifts to the production office with introductions
to estimating, production planning, purchasing and customer service. The second
phase of the program focuses on operations management and selling. It consists
of a three-month rotation through several different areas, including production,
planning, purchasing, estimating, customer service and outside sales. During the
rotations through these departments, the participant performs job requirements
as stipulated by the program's required activities.

     The final phase begins after the participant has been with the Company for
two years. At this point, the participant departs on a career path, either
production or sales, dictated by the participant's strengths and the individual
company's needs. Training continues on-the-job for both career paths. In

                                       5
<PAGE>
operations management, participants work in the key areas of production,
assuming increased responsibility in purchasing, customer service and production
planning. In sales, participants begin accompanying experienced sales
professionals on sales calls, attending advanced sales meetings and identifying,
qualifying and obtaining new customers.

     The Company does not have employment contracts with participants in its
training program. Nevertheless, the Company believes it has been able to retain
program participants by offering compensation comparable to that attainable from
other local printing companies and by providing what the Company considers to be
greater opportunities for advancement than may be available at its competitors.
There can be no assurance, however, that the Company will be able to attract or
retain program participants in the future.

     While other printing companies may offer sales and management training to
their employees, management believes the Company is the only printing company of
its size offering a highly focused, comprehensive and extensive training program
and opportunities for upward mobility. The participants in the Management
Program are monitored by and receive guidance from each operating company
president as part of their training. The participants are highly motivated and
bring an increased level of professionalism and performance to the Company's
sales and management team.

PURCHASING AND RAW MATERIALS

     The Company purchases various materials, including paper, prepress
supplies, ink, chemicals, solvents, glue and wire, from a number of national and
local suppliers. CGX uses a two-tiered approach to purchasing which recognizes
the economies associated with its size while maintaining the local efficiencies
and time sensitivity associated with its role as a service organization. Master
purchasing arrangements are negotiated centrally with major suppliers and
manufacturers and communicated to the operating companies. The operating
subsidiaries then order the goods and services needed in accordance with the
terms set forth in the master purchasing arrangements, if applicable, or on a
local basis. The master purchasing arrangements are reviewed regularly. The
operating companies provide input on market conditions, local supplier service
and product developments which enable the Company to continually maximize the
benefits of its master purchasing arrangements.

     PAPER.  The majority of the Company's paper supply is distributed through
merchant organizations. There are four merchant organizations that are
considered national in scope and numerous regional organizations that serve one
or more of CGX's operating companies. CGX's arrangements are made with both
mills, which produce the paper, and their merchants and typically provide for
volume-related discounts.

     PREPRESS SUPPLIES.  Prepress supplies consist of film, plates and proofing
materials. While there are a limited number of key manufacturers of these
materials, CGX generally purchases its prepress supplies through regional
dealers. Volume-related discounts and incentive arrangements are obtained from
manufacturers based on purchases from the regional dealers.

COMPETITION

     The Company competes with a substantial number of other commercial and
financial printers, some of which are subsidiaries or divisions of companies
having greater financial resources than those of the Company. Because of the
nature of CGX's business, most of the Company's competition is confined to
individual local printing markets. The major competitive factors in the
Company's commercial printing business are the extent and quality of customer
service and the quality of finished products and price. Customer service often
is dependent on production and distribution capabilities and availability of
equipment which is appropriate in size and function for a given project. In
addition, competition in the commercial and financial printing areas is based
upon the ability to perform the services described with speed and accuracy.
Price and the quality of supporting services are also important in this regard.
The Company believes it competes effectively on all of these bases.

                                       6
<PAGE>
EMPLOYEES

     At May 31, 1997, the Company had a total of 1,417 employees throughout its
organization. Currently, four of the Company's operating subsidiaries have
individual collective bargaining agreements with a portion of their respective
workforce:

Western Lithograph                            Houston, TX
Bridgetown Printing                           Portland, OR
Garner Printing                               Des Moines, IA
Eagle Press                                   Sacramento, CA

     The Company believes that its relations with its employees, including those
covered by the collective bargaining agreements, are satisfactory.

EXECUTIVE OFFICERS OF THE COMPANY

     Set forth below are the executive officers of the Company, together with
their positions and ages:

         NAME              AGE                     POSITION
- ------------------------   ----  -----------------------------------------------
Joe R. Davis............    54   President, Chief Executive Officer and Director
Mary K. Collins.........    40   Senior Vice President
G. Christopher Colville.    39   Vice President -- Mergers and Acquisitions,
                                   Chief Financial and Accounting Officer

     JOE R. DAVIS has been the President and Chief Executive Officer of the
Company since he founded it in 1985. Prior to forming CGX, Mr. Davis was
formerly employed by a division of International Paper Company. He had also
previously served as a partner of Arthur Andersen LLP, an accounting firm, where
he was active in the mergers and acquisition program. Mr. Davis is a certified
public accountant.

     MARY K. COLLINS joined the Company in September 1992, as Vice
President -- Finance and Administration. She was appointed to her current
position in January 1996. Ms. Collins also serves as Secretary of the Company.
Prior to her employment by the Company, she was employed for 13 years by Arthur
Andersen LLP, most recently as a manager, where she specialized in accounting,
auditing and business systems consulting. Ms. Collins is a certified public
accountant.

     G. CHRISTOPHER COLVILLE joined the Company in September 1994 as Vice
President -- Mergers and Acquisitions and was appointed to the additional
position of Chief Financial and Accounting Officer in January 1996. For three
years prior thereto, he served as the Financial Accounting and Reporting Manager
for Trident NGL Holding, Inc. Prior to that position, he was employed with
Arthur Andersen LLP, most recently as an audit manager. Mr. Colville is a
certified public accountant.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

     The Company is subject to the environmental laws and regulations of the
United States and the applicable state and local laws and regulations concerning
emissions into the air, discharges into waterways and the generation, handling
and disposal of waste materials. The printing business generates substantial
quantities of inks, solvents and other waste products requiring disposal under
the numerous federal, state and local laws and regulations relating to the
environment. The Company typically recycles waste paper and contracts for the
removal of waste products. The Company believes it is in material compliance
with all applicable air quality, waste disposal and other environmental-related
rules and regulations, as well as with other general employee health and safety
laws and regulations. No significant capital expenditures for environmental
control facilities are anticipated for the remainder of the current fiscal year
and the succeeding fiscal year. There can be no assurance, however, that future
changes in such laws and regulations will not have a material effect on the
Company's operations.

                                       7
<PAGE>
ITEM 2.  PROPERTIES AND FACILITIES

     The Company's principal facilities as of March 31, 1997 are described in
the table below. All of the listed facilities contain office, production and
storage space. In addition, the facilities at one operation have an expanded
customer service area. All facilities leases are with unaffiliated third parties
except for the lease in Vista, California, which is leased from the former owner
and current president of one of the Company's operating subsidiaries.

                                                                    APPROXIMATE
                                                                  BUILDING SPACE
              LOCATION                                             (SQUARE FEET)
- ------------------------------------------------------------------   ----------
OWNED
     2210 W. Dallas, Houston, Texas ..............................      200,000
     1616 McGowen, Houston, Texas ................................       70,000
     4335 Directors Row, Houston, Texas ..........................       40,000
     5829 Beverly Hill, Houston, Texas ...........................       23,000
     14701 E. 38th Avenue, Aurora, Colorado ......................      110,000
     4710 Lipan Street, Denver, Colorado .........................       20,000
     9112 Viscount Row, Dallas, Texas ............................       25,000
     9118 Diplomacy Row, Dallas, Texas ...........................       17,000
     2926 N. 33rd Avenue, Phoenix, Arizona .......................       21,200
     1697 N.E. 53rd Avenue, Des Moines, Iowa .....................       38,000
     8111 37th Avenue, Sacramento, California ....................       21,000
     6701 Janway Road, Richmond, Virginia ........................       22,000
     Hwy 97 West, Zebulon, North Carolina ........................       24,000
                                                                     ----------
                                                                        631,200
                                                                     ==========
LEASED
     5595 Arapahoe Road, Boulder, Colorado .......................       18,000
     9109 Premier Row, Dallas, Texas .............................       25,000
     121 Interpark Boulevard, No. 801, San Antonio, Texas ........       42,000
     2926 N. 33rd Avenue, Phoenix, Arizona .......................        8,800
     2223 68th Avenue South, Kent, Washington ....................       33,000
     1185 Joshua Way, Vista, California ..........................       48,000
     2201 South Rosedale, Tulsa, Oklahoma ........................       35,000
     424 N.W. 14th Avenue, Portland, Oregon ......................       18,000
     1672 N.E. 53rd Avenue, Des Moines, Iowa .....................        9,200
     8131 37th Avenue, Sacramento, California ....................        8,300
     3090 Airport Way, Long Beach, California ....................       30,000
     8590 San Ford, Richmond, Virginia ...........................       10,000
                                                                     ----------
                                                                        285,300
                                                                     ==========

     In addition to the 631,200 square feet of owned property described above,
the Company also owns a 63,000 square-foot building in Houston, Texas. The
Company leases 44,000 square feet of this facility to a third party under a
lease expiring in 2003. The remaining space in this facility is used by the
Company for storage. Of the 110,000 square-feet owned in Aurora, Colorado,
approximately 35,000 is leased to a third-party under a lease expiring in 2001.
Two of the Houston facilities and one of the Denver facilities listed in the
above table are encumbered by mortgages, as further discussed in

                                       8
<PAGE>
the Notes to Consolidated Financial Statements included elsewhere in this Form
10-K. The Company believes its facilities are suitable for their present and
intended purposes and are more than adequate for the Company's current level of
operations.

ITEM 3.  LEGAL PROCEEDINGS

     From time to time the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company
maintains insurance coverage against potential claims in an amount which it
believes to be adequate. In a case styled ALEJANDRO ROBLES V. CONSOLIDATED
GRAPHICS, INC. ET AL. involving a claim by the plaintiff pertaining to a sales
commission contract, the State of Texas 14th Court of Appeals recently affirmed
the favorable judgement of the lower court. All other litigation in which the
Company is currently involved is not believed by management to be significant to
the Company's financial position or results of operations. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, the Company does not believe the ultimate outcome of any of these
matters will have a material adverse effect on its business or financial
position.

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

     None.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     The Company's common stock is traded on the New York Stock Exchange
(symbol: CGX). Prior to January 29, 1997, the Company's common stock was listed
on the Nasdaq National Market (symbol: COGI). As of May 31, 1997, there were 92
shareholders of record and, based on security position listings, the Company
believes that it has in excess of 6,280 beneficial owners.

     The table below reflects the range of the high and low sales prices for the
Company's common stock by quarter, after the effect of a two-for-one split on
January 10, 1997.

    FISCAL 1997 -- QUARTER ENDED:       HIGH     LOW
- -------------------------------------   -----    ---
June 30, 1996........................   13 3/8    8 5/16
September 30, 1996...................   12 3/4    9 1/8
December 31, 1996....................   29       11 3/8
March 31, 1997.......................   34 1/4   24 1/2

    FISCAL 1996 -- QUARTER ENDED:       HIGH     LOW
- -------------------------------------   -----    ---
June 30, 1995........................    7 5/8    5 3/4
September 30, 1995...................   10 3/4    6 7/8
December 31, 1995....................   13 1/16  10 1/8
March 31, 1996.......................   13        8 1/8

     The Company currently intends to retain all future earnings to finance the
continuing development of its business and does not anticipate paying cash
dividends on the common stock in the foreseeable future. Any payment of cash
dividends in the future will depend upon the financial condition, future loan
covenants, capital requirements and earnings of the Company, as well as other
factors the Board of Directors may deem relevant.

                                       9
<PAGE>
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                         YEAR ENDED MARCH 31
                                       -------------------------------------------------------
                                          1997        1996       1995       1994       1993
                                       -----------  ---------  ---------  ---------  ---------
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>          <C>        <C>        <C>        <C>
INCOME STATEMENT DATA:
Sales................................  $   144,082  $  85,133  $  57,166  $  48,643  $  28,851
Cost of sales........................      100,197     61,237     39,821     33,916     19,347
                                       -----------  ---------  ---------  ---------  ---------
     Gross profit....................       43,885     23,896     17,345     14,727      9,504
Selling expenses.....................       14,223      8,532      5,731      4,923      3,153
General and administrative
  expenses...........................       11,330      6,873      4,313      3,469      2,312
Restructuring charge(1)..............       -           1,500      -          -          -
                                       -----------  ---------  ---------  ---------  ---------
     Operating income................       18,332      6,991      7,301      6,335      4,039
Interest expense, net................        2,305        860        427      1,018        705
                                       -----------  ---------  ---------  ---------  ---------
     Income before income taxes......       16,027      6,131      6,874      5,317      3,334
Income taxes.........................        5,927      2,146      2,392      1,806      1,232
                                       -----------  ---------  ---------  ---------  ---------
     Net income......................       10,100      3,985      4,482      3,511      2,102
Dividends on redeemable preferred
  stock..............................       -           -             45        210         35
Accretion in value of redeemable
  preferred stock and warrant........                   -          -            347      -
                                       -----------  ---------  ---------  ---------  ---------
     Net income available to common
        shareholders.................  $    10,100  $   3,985  $   4,437  $   2,954  $   2,067
                                       ===========  =========  =========  =========  =========
Fully diluted earnings per share from
  continuing operations(2)...........  $       .81  $     .36  $     .45  $     .45  $     .36
                                       ===========  =========  =========  =========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                              MARCH 31
                                       -------------------------------------------------------
                                          1997        1996       1995       1994       1993
                                       -----------  ---------  ---------  ---------  ---------
                                                           (IN THOUSANDS)
<S>                                    <C>          <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Working capital......................  $    22,080  $  18,855  $  13,797  $   7,918  $   5,593
Property and equipment, net..........       85,643     50,591     35,504     19,910     18,659
Total assets.........................      135,720     87,809     60,288     36,809     34,674
Long-term debt, net of current
  portion............................       39,321     20,105      8,820     13,470     13,828
Redeemable preferred stock and
  warrant............................       -           -          -          3,347      3,000
Common shareholders' equity..........  $    66,447  $  49,876  $  38,170   $  8,981   $  6,027
</TABLE>
- ------------

(1) Relates to direct and incremental costs associated with the merger of two of
    the Company's Houston subsidiaries, the net effect of which was to reduce
    net income available to common shareholders by $975 after-tax and fully
    diluted earnings per share from continuing operations by $.09.

(2) Restated for two-for-one stock split on January 10, 1997.

                                       10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

     This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Readers are cautioned that all
forward-looking statements involve risks and uncertainties, including those
created by general market conditions, competition and the possibility that
events may occur which limit the ability of the Company to maintain or improve
its operating results or execute its primary growth strategy of acquiring
additional companies. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could be inaccurate, and there can therefore be no assurance that the
forward-looking statements included herein will prove to be accurate. The
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.

GENERAL

     The Company's sales are derived from the production and sale of customized
printed materials by its operating companies. All of the Company's operating
subsidiaries provide commercial printing services. In addition, one of its
Houston companies also provides financial printing services. Each operating
company has its own sales, estimating, customer service, prepress, production,
postpress and accounting departments. The Company's headquarters, located in
Houston, provides centralized cash management, financial reporting and certain
administrative services to all of the subsidiaries.

     The Company's strategy is to generate sales and profits through
acquisitions and internal growth. The Company provides acquired companies cost
savings through master purchasing arrangements, access to technology and
capital, strategic counsel and a commitment to training through a unique,
comprehensive management development program. As a result, operating income
margins and efficiencies at acquired companies, which may be lower than those of
the Company at the date of acquisition, typically improve as the Company's
operational strategies are fully implemented.

     The Company's consolidated financial results in a given period may be
affected by the timing and magnitude of acquisitions. The Company's consolidated
operating income margins in the periods immediately following a significant
acquisition (or series of acquisitions) may be lower than historically reported
consolidated margins depending upon the timing and extent to which an acquired
company is able to adapt to and implement the Company's management practices.

     The Company competes in the general commercial and financial printing
sectors, which are characterized by individual orders from customers for
specific printing projects rather than long-term contracts, with continued
engagement for successive jobs dependent upon, among other things, the
customer's satisfaction with the services provided. As such, the Company is
unable to predict, for more than a few weeks in advance, the number, size and
profitability of printing jobs in a given period. Consequently, the timing and
size of projects received in any quarter could have a significant impact on
financial results in that quarter.

                                       11
<PAGE>
RESULTS OF OPERATIONS

     The following table sets forth the Company's historical income statements
and certain percentage relationships based thereon for the periods indicated:

<TABLE>
<CAPTION>
                                                                           AS A PERCENTAGE OF SALES
                                                                        -------------------------------
                                             YEAR ENDED MARCH 31              YEAR ENDED MARCH 31
                                       -------------------------------  -------------------------------
                                         1997       1996       1995       1997       1996       1995
                                       ---------  ---------  ---------  ---------  ---------  ---------
                                                (IN MILLIONS)
<S>                                    <C>        <C>        <C>            <C>        <C>        <C>
Sales................................  $   144.1  $    85.1  $    57.1      100.0%     100.0%     100.0%
Cost of sales........................      100.2       61.2       39.8       69.5       71.9       69.7
                                       ---------  ---------  ---------  ---------  ---------  ---------
     Gross profit....................       43.9       23.9       17.3       30.5       28.1       30.3
Selling expenses.....................       14.2        8.5        5.7        9.9       10.0       10.0
General and administrative expenses..       11.4        6.9        4.3        7.9        8.1        7.5
Restructuring charge.................     --            1.5         --         --        1.8         --
                                       ---------  ---------  ---------  ---------  ---------  ---------
     Operating income................       18.3        7.0        7.3       12.7        8.2       12.8
Interest expense, net................        2.3        0.9        0.4        1.6        1.0         .7
                                       ---------  ---------  ---------  ---------  ---------  ---------
     Income before income taxes......       16.0        6.1        6.9       11.1        7.2       12.1
Income taxes.........................        5.9        2.1        2.4        4.1        2.5        4.2
                                       ---------  ---------  ---------  ---------  ---------  ---------
     Net income......................  $    10.1  $     4.0  $     4.5        7.0%       4.7%       7.9%
                                       =========  =========  =========  =========  =========  =========
</TABLE>

     Acquisitions in fiscal 1997 and 1996 are the primary cause of the absolute
increases in revenues and expenses since fiscal 1995. The following sets forth
the Company's "1996 Acquisitions" and "1997 Acquisitions" and indicates the
month when each company was acquired.

FISCAL 1996 ACQUISITIONS:
Clear Visions .......................   August 1995
Heritage Graphics ...................   September 1995
Emerald City Graphics ...............   February 1996
Precision Litho .....................   February 1996
Tulsa Litho .........................   March 1996
FISCAL 1997 ACQUISITIONS:
Bridgetown Printing..................   June 1996
Garner Printing......................   July 1996
Eagle Press .........................   July 1996
Mobility ............................   October 1996
Theo Davis Sons .....................   January 1997
Direct Color.........................   January 1997

     The 1996 Acquisitions affected 1996 results, as compared to 1995, for the
portion of the year after their respective dates of acquisition and affected
1997 results, as compared to 1996, because they were under ownership for a full
fiscal year. Similarly, the 1997 Acquisitions affected 1997 results, as compared
to 1996, for the portion of the fiscal year after the respective dates of
acquisition. All of the Company's acquisitions have been accounted for under the
purchase method of accounting.

FISCAL 1997 COMPARED WITH FISCAL 1996

     Sales increased 69% to $144.1 million in 1997 from $85.1 million in 1996
primarily due to the effects of the 1996 Acquisitions and the 1997 Acquisitions
(together, the "1996/97 Acquired Companies"). A net increase in sales
attributable to internal growth at the Company's other operating companies,
partially offset by lower web printing sales resulting from and immediately
prior to the

                                       12
<PAGE>
consolidation of certain Houston operations in late 1996, also contributed to
the overall increase in 1997 sales.

     Gross profit increased 84% in 1997 to $43.9 million from $23.9 million in
1996, primarily due to the addition of the 1996/97 Acquired Companies. Gross
profit as a percentage of sales increased to 30.5% in 1997 from 28.1% in 1996.
This increase is attributable to operating efficiencies the Company is gaining
through economies of scale, including its master purchasing arrangements,
investment in equipment and technologies and a reduction in lower-margin web
printing sales.

     Selling expenses increased 67% to $14.2 million in 1997 from $8.5 million
in 1996 due to increased sales levels as discussed above. Selling expenses as a
percentage of sales improved slightly to 9.9% in 1997 from 10.0% in 1996.

     General and administrative expenses increased 65% to $11.4 million in 1997
from $6.9 million in 1996, primarily due to the addition of the 1996/97 Acquired
Companies and an increase in the Company's corporate staffing. In 1997, the
Company increased its corporate staff in order to focus the resources necessary
to quickly implement the benefits of its master purchasing arrangements and
other operating efficiencies at the 1996/97 Acquired Companies. General and
administrative expenses as a percentage of sales improved to 7.9% in 1997 from
8.1% for 1996 primarily because the increased sales contributed by the 1996/97
Acquired Companies and internal growth was greater than the corresponding
increase in overhead necessary to sustain such increased sales levels.

     Interest expense increased to $2.3 million in 1997 from $.9 million in 1996
due to additional borrowings under the Company's revolving credit facility to
finance the cash portions of the purchase price of the 1996/97 Acquired
Companies, debt assumed in connection therewith, and debt incurred to finance
certain capital expenditures.

     Effective income tax rates reflect an increase from 35% in 1996 to 37% in
1997 due to the Company's growth by acquisition into states with higher income
tax rates than those states in which the Company previously had operations.

FISCAL 1996 COMPARED WITH FISCAL 1995

     Sales increased 49% to $85.1 million in 1996 from $57.1 million in 1995 due
to the effects of the 1995 Acquisitions and the 1996 Acquisitions (together, the
"1995/96 Acquired Companies"), partially offset by lower sales immediately
prior to and following the merger of two of the Company's Houston based
operations.

     The merger of the operations (Gulf Printing into Western Lithograph) was
precipitated by the cancellation of a significant printing contract by SBC
Communications, Inc. and affiliates ("SBC") in December 1994. As a result,
Gulf Printing was unable to meet management's revenue and profit margin
expectations. The merger of Gulf Printing into Western Lithograph has improved
profit margins through reduced administrative costs and improved utilization of
printing capacity.

     Gross profit increased 38% to $23.9 million in 1996 from $17.3 million in
1995 due primarily to gross profit contributed by the 1995/96 Acquired
Companies. Gross profit as a percentage of sales decreased to 28.1% in 1996 from
30.3% in 1995. The decline in gross profit percentage was attributable primarily
to the marginal performance of Gulf Printing prior to the merger of its
operations into Western Lithograph and the lower profit margins of the 1996
Acquisitions.

     Selling expenses increased $2.8 million to $8.5 million during 1996 from
$5.7 million in 1995. The effect of the 1995/96 Acquired Companies accounted for
substantially all of the increase. Selling expenses as a percentage of sales
remained constant at 10.0%.

     General and administrative expenses increased 60% to $6.9 million in 1996
from $4.3 million in 1995 due primarily to the general and administrative
expenses attributable to the 1995/1996 Acquired Companies and a general increase
in overhead attributable to the need to manage the Company's overall growth. A
higher level of general and administrative expenses carried over by the 1995/96

                                       13
<PAGE>
Acquired Companies plus the increase in general corporate overhead contributed
to the increase in general and administrative expenses as a percentage of sales.

     The Company recorded a $1.5 million restructuring charge during the quarter
ended December 31, 1995 to provide for the costs associated with the merger of
the operations of Gulf Printing into Western Lithograph.

     Interest expense increased to $.9 million in 1996 from $.7 million in 1995
due primarily to additional debt outstanding during 1996. The increase in the
Company's debt was attributable to borrowings under the Company's revolving
credit facility to finance the 1996 Acquisitions, together with debt issued or
assumed in connection with such acquisitions.

     Effective income tax rates increased slightly to 35.0% in 1996 from 34.8%
in 1995, reflecting primarily increased state income taxes attributable to the
Company's expansion into states with higher income tax rates than the state of
Texas.

LIQUIDITY AND CAPITAL RESOURCES

  LIQUIDITY

     The Company's primary cash requirements are for working capital, capital
expenditures and acquisitions. Working capital, excluding the initial working
capital contributed by acquisitions, decreased $.5 million in 1997 and increased
$4.0 million and $5.1 million for 1996 and 1995, respectively. Cash utilized for
capital expenditures, which relate primarily to the purchase of new equipment at
the operating companies, was $10.2 million, $6.0 million and $2.4 million in
1997, 1996 and 1995, respectively. Cash utilized by the Company to complete
acquisitions during 1997, 1996 and 1995, inclusive of the retirement of a
portion of the associated assumed debt, totalled $17.5 million, $10.2 million
and $14.5 million, respectively. In total, the Company's cash requirements for
working capital, capital expenditures and acquisitions were $27.2 million, $20.2
million and $22.0 million for 1997, 1996 and 1995, respectively.

     The Company financed its 1997 and 1996 capital requirements through
internally generated funds, external financing and seller financing. Financing
of the Company's 1995 capital requirements occurred through internally generated
funds, external financing and proceeds from the Company's initial public
offering. The Company has generated cash flow from operations (net income from
continuing operations plus depreciation, amortization and deferred tax
provision) since its inception. Cash flow generated from operations was $16.9
million, $9.3 million and $9.1 million in 1997, 1996 and 1995, respectively.
Cash flow from operations has exceeded the Company's cash requirements for
working capital and equipment capital expenditures in each of the past three
fiscal years.

     In addition to cash expended on its acquisitions, the Company also issued
355,560 and 849,316 shares of its common stock in connection with certain
acquisitions in 1997 and 1996, respectively, and is contingently obligated at
certain times and under certain circumstances to issue for up to three years, a
total of 140,000 shares of its common stock for all periods in the aggregate.

  CAPITAL RESOURCES

     On June 5, 1997, the Company entered into a $100 million revolving credit
agreement (the "Credit Agreement") with a six-member banking group. This
Credit Agreement, which matures on May 31, 2000, replaces the Company's $25
million revolving credit arrangement (the "Terminated Agreement"), which had
been increased by amendment to $35 million in October 1996 and $50 million in
March 1997. On March 31, 1997, outstanding borrowings under the Terminated
Agreement were $28.7 million and were subject to an interest rate of 6.6% per
annum. On June 10, 1997, all remaining loans outstanding and any accrued and
unpaid interest owed pursuant to the Terminated Agreement were repaid in full
from proceeds of borrowings under the Credit Agreement.

     Loans outstanding under the Credit Agreement are unsecured and accrue
interest, at the Company's option, at (1) the London Interbank Offered Rate
(LIBOR) plus .50% to 1.50% based upon the

                                       14
<PAGE>
Company's Debt to Pro Forma EBITDA ratio as defined, redetermined quarterly, or
(2) an alternate base rate based upon the bank's prime lending rate or Federal
Funds effective rate. The Credit Agreement also provides for a commitment fee on
available but unused amounts ranging from .10% to .35% per annum. On June 10,
1997, loans outstanding under the Credit Agreement were subject to interest
rates ranging from 6.25% to 6.50% per annum.

     The covenants in the Credit Agreement, among other things, limit the
Company's ability to (i) incur secured indebtedness or pledge assets as
collateral in excess of certain levels, (ii) merge, consolidate with or acquire
other companies where the total consideration paid is above certain levels,
(iii) change its primary business, (iv) pay dividends above certain levels, (v)
dispose of assets outside the normal course of business in excess of 10% of the
Company's total tangible assets, and (vi) make capital expenditures (exclusive
of expenditures related to company acquisitions) in excess of 300% of
depreciation. The Company believes that the covenants in the Credit Agreement
pertaining to restrictions on acquisitions of other companies do not adversely
affect its acquisition strategy and that, if necessary, the Company would likely
be able to obtain appropriate waivers. The Company must also meet certain
financial tests defined in the Credit Agreement, including maintaining a defined
Minimum Net Worth and achieving specific ratios of Debt to Capitalization, Debt
to Pro Forma EBITDA and Fixed Charge Coverage. The Company is currently in
compliance with all financial tests and other covenants set forth in the Credit
Agreement. In addition, as of March 31, 1997 and through the date terminated,
the Company was in compliance with all financial tests and other covenants set
forth in the Terminated Agreement.

     Pursuant to an agreement between the Company and Komori America Corporation
(the "Komori Agreement"), the Company installed three new printing presses in
the second quarter of fiscal 1997. The Komori Agreement requires that the
Company take delivery of at least one additional press, resulting in a total
capital commitment of approximately $10 million for the purchase of the four
presses. The Komori Agreement further provides certain volume purchase
incentives and financing options under which the Company may, but is not
obligated to, purchase up to $50 million of printing presses over its term. The
Company has exercised the financing option in connection with the purchase of
the first three presses, resulting in a long-term obligation of $6.6 million at
March 31, 1997. The terms of the financing provide for monthly principal and
interest payments through 2006 at a fixed interest rate of 8.25%. Payment of the
Company's obligations is secured by the purchased presses. The Company is
subject to no significant financial covenants or restrictions in connection with
these obligations. The Company expects to install the fourth press to be
purchased under the Komori Agreement in the first quarter of fiscal 1998.

     The Company's remaining debt obligations generally consist of mortgages,
capital leases and promissory notes, some of which contain financial covenants
and restrictions. The most significant of these place certain restrictions on
future borrowings and acquisitions above specified levels. The Company believes
these restrictions do not adversely affect its acquisition strategy.

     In June 1994, the Company completed an initial public offering of 4,207,304
shares of common stock, restated to reflect a two-for-one stock split on January
10, 1997, for net proceeds of $21.3 million. The Company used $9.7 million of
such proceeds to retire two term notes. The remaining proceeds were used to
complete acquisitions made during 1995.

     Significant immediate and future cash requirements for additional
acquisitions of businesses and purchases of property and equipment will be
financed by new indebtedness, most likely from borrowings under the Credit
Agreement.

     Subsequent to March 31, 1997, the Company completed the acquisition of
Tucker Printers in Rochester, New York, and announced the signing of a
non-binding letter of intent to acquire The Etheridge Company in Grand Rapids,
Michigan.

     The Company expects that cash flow from operations will finance its 1998
equipment capital expenditures of approximately $10.0 million.

                                       15
<PAGE>
     There can be no assurances that the Company will be able to acquire
additional companies on acceptable terms in the future. In addition, there can
be no assurance that the Company will be able to establish, maintain or increase
profitability of an entity once it has been acquired.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 128 "Earnings per Share"("EPS") which
supersedes Accounting Principles Board Opinion No. 15. SFAS No. 128 specifies
the computation, presentation and disclosure requirements for earnings per share
in order to simplify its computation and to make the U.S. standards more
comparable to international standards.

     SFAS No. 128 is effective for both interim and annual periods after
December 15, 1997. The Company will adopt SFAS No. 128 in the third quarter of
fiscal 1998. Upon adoption all prior period EPS data presented must be restated
to conform with the new statement. Management does not expect that the adoption
will have a material effect on the Company's EPS calculation.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of the Company, together with the
report thereon of Arthur Andersen LLP dated June 11, 1997, including the
information required by Item 302 of Regulation S-K, are set forth on pages F-1
through F-16 hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                       16
<PAGE>
                                    PART III

     The information called for by "Item 10. Directors and Executive Officers
of the Registrant" (except for the information regarding executive officers
which is included in Part I hereof as "Item 1. Business -- Executive Officers
of the Company"), "Item 11. Executive Compensation", "Item 12. Security
Ownership of Certain Beneficial Owners and Management", and "Item 13. Certain
Relationships and Related Transactions", is hereby incorporated by reference to
the Company's Proxy Statement for its Annual Meeting of Shareholders (presently
scheduled to be held July 30, 1997) to be filed with the SEC pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)  FINANCIAL STATEMENTS:
       See the Index to Consolidated Financial Statements on page F-1 hereof.

(a)(2)  FINANCIAL STATEMENT SCHEDULES:
       Schedules of the Company and its subsidiaries are omitted because of the
absence of the conditions under which they are required or because the required
       information is included in the financial statements or notes thereto.

(a)(3)  EXHIBITS:

            *3.1     --   Restated Articles of Incorporation of the Company
                          filed with the Secretary of State of the State of
                          Delaware on July 27, 1995 (Consolidated Graphics, Inc.
                          Form 10-Q (June 30, 1994) SEC File No. 0-24068,
                          Exhibit 4(a)).
            *3.2     --   By-Laws of the Company, dated as of May 31, 1995
                          (Consolidated Graphics, Inc. Form 10-K (March 31,
                          1995) SEC File No. 0-24068, Exhibit 3.2).
            *4.1     --   Registration Rights Agreement by and among
                          Consolidated Graphics, Inc., James R. Cook and Herbert
                          J. Blackinton dated as of February 15, 1996.
            *4.2     --   Registration Rights Agreement by and among
                          Consolidated Graphics, Inc. and Dennis Rampe dated as
                          of February 23, 1996.
            *4.3     --   Registration Rights Agreement by and among
                          Consolidated Graphics, Inc., Robert Garner, B. C.
                          (Bernie) Nevins, Gerald Ross, Thomas Kruger and John
                          W. Duro, dated as of July 3, 1996.
           *10.1     --   Amended and Restated Loan Agreement by and between
                          Consolidated Graphics, Inc. and NationsBank of Texas
                          N.A. dated as of November 7, 1994 (Consolidated
                          Graphics, Inc. Form 10-Q (September 30, 1994) SEC File
                          No. 0-24068, Exhibit 10(a)).
           *10.2     --   Revolving Promissory Note by and between Consolidated
                          Graphics, Inc. and NationsBank of Texas, N.A., dated
                          as of November 7, 1994 (Consolidated Graphics, Inc.
                          Form 10-Q (September 30, 1994) SEC File No. 0-24068,
                          Exhibit 10(b)).
           *10.3     --   Amended and Restated Loan Agreement by and between
                          Consolidated Graphics, Inc. and NationsBank of Texas,
                          N.A., dated as of August 23, 1995 (Consolidated
                          Graphics, Inc. Form 10-Q (September 30, 1995) SEC File
                          No. 0-24068, Exhibit 10(a)).
           *10.4     --   Revolving Promissory Note by and between Consolidated
                          Graphics, Inc. and NationsBank of Texas, N.A. dated as
                          of August 23, 1995 (Consolidated Graphics, Inc. Form
                          10-Q (September 30, 1995) SEC File No. 0-24068,
                          Exhibit 10(b)).

                                       17
<PAGE>
           *10.5     --   Amended and Restated Loan Agreement by and between
                          Consolidated Graphics, Inc. and NationsBank of Texas,
                          N.A., dated as of October 21, 1996 (Consolidated
                          Graphics, Inc. Form 10-Q (September 30, 1996) SEC File
                          No. 0-24068, Exhibit 10.1).
           *10.6     --   Revolving Promissory Note by and between Consolidated
                          Graphics, Inc. and NationsBank of Texas, N.A. dated as
                          of October 21, 1996 (Consolidated Graphics, Inc. Form
                          10-Q (September 30, 1996) SEC File No. 0-24068,
                          Exhibit 10.2).
           *10.7     --   Amended and Restated Loan Agreement by and between
                          Consolidated Graphics, Inc. and NationsBank of Texas,
                          N.A. dated as of October 29, 1996 (Consolidated
                          Graphics, Inc. Form 10-Q (September 30, 1996) SEC File
                          No. 0-24068, Exhibit 10.3).
            10.8     --   Revolving Credit Agreement among Consolidated
                          Graphics, Inc. and Texas Commerce Bank National
                          Association as Agent and BankOne of Texas, N.A. as
                          Co-agent, dated as of June 5, 1997.
           *10.9     --   Assignment and Assumption Agreement by and between
                          Jarvis Acquisition Co., The Jarvis Press, Inc.,
                          Consolidated Graphics, Inc. and Phoenixcor, Inc. dated
                          as of October 14, 1994 (Consolidated Graphics, Inc.
                          Form 10-Q (September 30, 1994) SEC File No. 0-24068,
                          Exhibit 10(c)).
           *10.10    --   Asset Purchase Agreement dated as of October 14, 1994
                          by and among Jarvis Acquisition Co., as the Purchaser,
                          Consolidated Graphics, Inc., as the Parent, The Jarvis
                          Press, Inc., as the Seller and Peter B. White, Paul
                          Lasiter, Michael C. Regan and Dennis Sholl, as the
                          Interest Holders (Consolidated Graphics, Inc. Form 8-K
                          (October 14, 1994) SEC File No. 0-24068, Exhibit 1).
           *10.11    --   Stock Purchase Agreement dated as of October 21, 1994
                          by and among Consolidated Graphics, Inc., as the
                          Purchaser, and John Frederic Printing Company, as the
                          Seller and Randall C. Frederic, as an accommodating
                          party (Consolidated Graphics, Inc. Form 8-K (October
                          14, 1994) SEC File No. 0-24068, Exhibit 3).
           *10.12    --   Stock Purchase Agreement by and among Consolidated
                          Graphics, Inc. and James R. Cook and Herbert J.
                          Blackinton as the stockholders of Emerald City
                          Graphics, Inc. dated as of February 15, 1996
                          (Consolidated Graphics, Inc. Form 8-K filed February
                          29, 1996, Exhibit 1).
           *10.13    --   Stock Purchase Agreement by and among Consolidated
                          Graphics, Inc., Precision Litho, Melson Leasing LLC
                          and Dennis Rampe and Jeannine Rampe, as the equity
                          interest holders in Precision Litho and Melson Leasing
                          LLC dated as of February 23, 1996 (Consolidated
                          Graphics, Inc. Form 8-K filed February 29, 1996,
                          Exhibit 3).
           *10.14    --   Agreement and Plan of Reorganization by and among
                          Consolidated Graphics, Inc., Garner Acquisition Co.,
                          Garner Publishing Company and the stockholders of
                          Garner Publishing Company, dated as of July 3, 1996
                          (Consolidated Graphics, Inc. Form 8-K filed July 18,
                          1996).
           *10.15    --   Plan of Merger by and between Garner Publishing
                          Company and Garner Acquisition Co. dated as of July
                          3, 1996 (Consolidated Graphics, Inc. Form 8-K filed
                          July 18, 1996).
           *10.16    --   Asset Purchase Agreement by and among Consolidated
                          Graphics, Inc., Consolidated Eagle Press, Inc. and
                          John Ross dated as of July 12, 1996 (Consolidated
                          Graphics, Inc. Form 8-K filed July 24, 1996).
           *10.17    --   Purchase and Sale Contract between John D. Ross and
                          Rosemary Ross and Consolidated Properties II, Inc. as
                          of July 12, 1996 (Consolidated Graphics, Inc. Form 8-K
                          filed July 24, 1996).
           *10.18    --   1994 Consolidated Graphics, Inc. Long-Term Incentive
                          Plan (Consolidated Graphics, Inc. Registration
                          Statement on Form S-1 (Reg. No. 33-77468), Exhibit
                          10.14).

                                       18
<PAGE>
           *10.19    --   Form of Indemnification Agreement together with a
                          schedule identifying the directors and officers
                          parties to such agreement (Consolidated Graphics, Inc.
                          Registration Statement on Form S-1 (Reg. No.
                          33-77468), Exhibit 10.15).
            21       --   List of Subsidiaries.
            23       --   Consent of Arthur Andersen LLP.
            24       --   Powers of Attorney.

- ------------
*    Incorporated by reference.

(b)  REPORTS ON FORM 8-K:

     (1)  Form 8-K filed January 8, 1997 in connection with the press release
          issued on January 8, 1997 regarding the Company's filing of an
          application to list its common stock on the New York Stock Exchange.

     (2)  Form 8-K, filed January 16, 1997 in connection with the press release
          issued on January 14, 1997 regarding the completion of the
          acquisitions of Direct Color and Theo Davis Sons.

     (3)  Form 8-K, filed January 29, 1997 in connection with the press release
          issued on January 29, 1997 regarding the announcement of the Company's
          third quarter results.

     (4)  Form 8-K, filed February 13, 1997 in connection with the press release
          issued on February 13, 1997 regarding the letter of intent to acquire
          Tucker Printers of Rochester, New York.

     (5)  Form 8-K, filed February 26, 1997 in connection with the press release
          issued on February 26, 1997 regarding the letter of intent to acquire
          Litho Industries of Raleigh-Durham, North Carolina.

     (6)  Form 8-K, filed April 4, 1997 in connection with the press release
          issued on April 3, 1997 regarding the completion of the acquisition of
          Tucker Printers.

     (7)  Form 8-K, filed April 30, 1997 in connection with the press release
          issued on April 30, 1997 regarding the announcement of the Company's
          fourth quarter results and the termination of the letter of intent to
          acquire Litho Industries.

     (8)  Form 8-K, filed May 7, 1997 in connection with the press release
          issued on May 7, 1997 regarding the letter of intent to acquire The
          Etheridge Company of Grand Rapids, Michigan.

     (9)  Form 8-K, filed June 11, 1997 in connection with the press release
          issued on June 10, 1997 regarding the Company's new $100 million
          revolving credit agreement with a six-member banking group.

                                       19
<PAGE>
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF OF THE UNDERSIGNED, THEREUNDER DULY AUTHORIZED, IN THE CITY OF
HOUSTON, STATE OF TEXAS ON THE 30TH DAY OF JUNE, 1997.

                                          CONSOLIDATED GRAPHICS, INC.

                                          By: /s/: JOE R. DAVIS
                                                   JOE R. DAVIS
                                          PRESIDENT, CHIEF EXECUTIVE OFFICER
                                                        AND
                                          CHAIRMAN OF THE BOARD OF DIRECTORS

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.

        SIGNATURE                          TITLE                       DATE
- ---------------------------   ---------------------------------    -------------

     /s/:JOE R. DAVIS            President, Chief Executive
       JOE R. DAVIS                 Officer and Director           June 30, 1997
                                (Principal Executive Officer)

/s/:G. CHRISTOPHER COLVILLE     Vice President -- Mergers and
  G. CHRISTOPHER COLVILLE     Acquisitions; Chief Financial and    June 30, 1997
                                     Accounting Officer

    LARRY J. ALEXANDER*                   Director
    LARRY J. ALEXANDER

     BRADY F. CARRUTH*                    Director
     BRADY F. CARRUTH

    CLARENCE C. COMER*                    Director
     CLARENCE C. COMER

      GARY L. FORBES*                     Director
      GARY L. FORBES

       W.D. HAWKINS*                      Director
       W. D. HAWKINS

     JAMES H. LIMMER*                     Director
      JAMES H. LIMMER

     THOMAS E. SMITH*                     Director
      THOMAS E. SMITH

       HUGH N. WEST*                      Director
       HUGH N. WEST

   * By:/s/:JOE R. DAVIS
       JOE R. DAVIS                                                June 30, 1997
     Attorney-in-Fact

                                       20
<PAGE>
                             FINANCIAL SUPPLEMENT TO
          ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 1997

                           CONSOLIDATED GRAPHICS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----
Report of Independent Public Accountants .................................  F-2

Consolidated Balance Sheets at March 31, 1997 and 1996 ...................  F-3

Consolidated Income Statements for the Years Ended March 31, 1997,
  1996 and 1995 ..........................................................  F-4

Consolidated Statements of Shareholders' Equity for the Years
  Ended March 31, 1997, 1996 and 1995 ....................................  F-5

Consolidated Statements of Cash Flows for the Years Ended March 31, 1997,
  1996 and 1995 ..........................................................  F-6

Notes to Consolidated Financial Statements ...............................  F-7

                                       F-1
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Consolidated Graphics, Inc.:

We have audited the accompanying consolidated balance sheets of Consolidated
Graphics, Inc. (a Texas corporation) and subsidiaries as of March 31, 1997 and
1996, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended March 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Consolidated Graphics, Inc. and
subsidiaries as of March 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
June 11, 1997

                                      F-2
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
                          CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                              MARCH 31
                                                     ---------------------------
                                                         1997           1996
                                                     ------------   ------------
               ASSETS

CURRENT ASSETS:
     Cash and cash equivalents ...................   $      3,636   $      3,086
     Accounts receivable, net ....................         29,347         19,317
     Inventories .................................          8,679          8,023
     Prepaid expenses ............................          1,434          1,077
                                                     ------------   ------------
           Total current assets ..................         43,096         31,503
PROPERTY AND EQUIPMENT, net ......................         85,643         50,591
GOODWILL, net ....................................          6,085          5,015
OTHER ASSETS .....................................            896            700
                                                     ------------   ------------
                                                     $    135,720   $     87,809
                                                     ============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Current portion of long-term debt ...........   $      2,623   $      1,221
     Accounts payable ............................          8,399          5,719
     Accrued liabilities .........................          9,927          5,648
     Income taxes payable ........................             67             60
                                                     ------------   ------------
           Total current liabilities .............         21,016         12,648
LONG-TERM DEBT, net of current
  portion ........................................         39,321         20,105
DEFERRED INCOME TAXES ............................          8,936          5,180
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
     Common stock, $.01 par value; 20,000,000
       shares authorized; 12,450,430 and
       11,854,720 issued and outstanding .........            124            118
     Additional paid-in capital ..................         39,168         32,703
     Retained earnings ...........................         27,155         17,055
                                                     ------------   ------------
           Total shareholders' equity ............         66,447         49,876
                                                     ------------   ------------
                                                     $    135,720   $     87,809
                                                     ============   ============

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
                         CONSOLIDATED INCOME STATEMENTS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                 YEAR ENDED MARCH 31
                                     ------------------------------------------
                                         1997           1996           1995
                                     ------------   ------------   ------------

SALES .............................  $    144,082   $     85,133   $     57,166

COST OF SALES .....................       100,197         61,237         39,821
                                     ------------   ------------   ------------

     Gross profit .................        43,885         23,896         17,345

SELLING EXPENSES ..................        14,223          8,532          5,731

GENERAL AND ADMINISTRATIVE EXPENSES        11,330          6,873          4,313

RESTRUCTURING CHARGE ..............          --            1,500           --
                                     ------------   ------------   ------------

     Operating income .............        18,332          6,991          7,301

INTEREST EXPENSE ..................         2,330            876            680

INTEREST INCOME ...................           (25)           (16)          (253)
                                     ------------   ------------   ------------

     Income before income taxes ...        16,027          6,131          6,874

INCOME TAXES ......................         5,927          2,146          2,392
                                     ------------   ------------   ------------

NET INCOME ........................        10,100          3,985          4,482

DIVIDENDS ON REDEEMABLE
  PREFERRED STOCK .................          --             --               45
                                     ------------   ------------   ------------
NET INCOME AVAILABLE TO
  COMMON SHAREHOLDERS .............  $     10,100   $      3,985   $      4,437
                                     ============   ============   ============
PRIMARY EARNINGS PER SHARE
  OF COMMON STOCK .................  $        .81   $        .36   $        .46
                                     ============   ============   ============
FULLY DILUTED EARNINGS PER
  SHARE OF COMMON STOCK ...........  $        .81   $        .36   $        .45
                                     ============   ============   ============

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                           COMMON STOCK       ADDITIONAL
                                        ------------------     PAID-IN      RETAINED
                                        SHARES     AMOUNT      CAPITAL      EARNINGS      TOTAL
                                        -------    -------    ----------    ---------   ---------
<S>                                      <C>        <C>        <C>           <C>        <C>
BALANCE, March 31, 1994..............     5,597     $  56      $    292      $  8,633   $   8,981
     Dividends on redeemable
        preferred
        stock........................                -            -               (45)        (45)
     Conversion of preferred stock...     1,119        11         3,336         -           3,347
     Common stock offering, net......     4,207        42        21,305         -          21,347
     Exercise of stock options.......        10      -               58         -              58
     Net income......................      -         -            -             4,482       4,482
                                        -------    -------    ----------    ---------   ---------
BALANCE, March 31, 1995..............    10,933       109        24,991        13,070      38,170
     Common stock
        issuance -- acquisition......       849         8         7,211         -           7,219
     Exercise of stock options.......        72         1           501         -             502
     Net income......................      -         -            -             3,985       3,985
                                        -------    -------    ----------    ---------   ---------
BALANCE, March 31, 1996..............    11,854       118        32,703        17,055      49,876
     Common stock
        issuance -- acquisition             356         4         4,130         -           4,134
     Exercise of stock options.......       240         2         2,335         -           2,337
     Net income......................      -         -            -            10,100      10,100
                                        -------    -------    ----------    ---------   ---------
BALANCE, March 31, 1997..............    12,450     $ 124      $ 39,168      $ 27,155   $  66,447
                                        =======    =======    ==========    =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                YEAR ENDED MARCH 31
                                       -------------------------------------
                                          1997         1996         1995
                                       -----------  -----------  -----------
OPERATING ACTIVITIES:
Net income...........................  $    10,100  $     3,985  $     4,482
Adjustments to reconcile net income
  to net cash provided by operating
  activities --
     Depreciation and amortization...        5,814        3,782        4,089
     Deferred tax provision..........        1,029        1,555          499
     Noncash portion of restructuring
        charge.......................       -             1,123       -
     Changes in assets and
        liabilities, net of effects
        of acquisitions --
           Accounts receivable.......       (2,307)        (124)         965
           Inventories...............          822         (469)      (3,341)
           Prepaid expenses..........         (237)        (655)         (76)
           Other assets..............         (173)          85           22
           Accounts payable and
             accrued liabilities.....          113       (2,136)      (3,354)
           Income taxes payable......        1,290         (713)         661
                                       -----------  -----------  -----------
                Net cash provided by
                   operating
                   activities........       16,451        6,433        3,947
                                       -----------  -----------  -----------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of
  cash acquired......................      (17,468)     (10,181)     (14,492)
Purchases of property and
  equipment..........................      (10,196)      (6,014)      (2,423)
Proceeds from disposition of
  assets.............................          741          536           38
Payments from significant
  shareholder........................       -            -               534
                                       -----------  -----------  -----------
                Net cash used in
                   investing
                   activities........      (26,923)     (15,659)     (16,343)
                                       -----------  -----------  -----------
FINANCING ACTIVITIES:
Proceeds from revolving credit
  agreement..........................       73,707       34,420       11,050
Payments on revolving credit
  agreement..........................      (61,307)     (23,120)      (7,050)
Payments on long-term debt...........       (2,740)      (1,197)     (13,359)
Proceeds from common stock offering,
  net................................       -            -            21,347
Proceeds from exercise of stock
  options and other..................        1,362          502           13
                                       -----------  -----------  -----------
                Net cash provided by
                   financing
                   activities........       11,022       10,605       12,001
                                       -----------  -----------  -----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS...................          550        1,379         (395)
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR..................        3,086        1,707        2,102
                                       -----------  -----------  -----------
CASH AND CASH EQUIVALENTS AT END OF
  YEAR...............................  $     3,636  $     3,086  $     1,707
                                       ===========  ===========  ===========

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1.  BUSINESS:

     Consolidated Graphics, Inc. (the "Company") is a consolidator in the
highly fragmented commercial printing industry. At March 31, 1997, the Company
operated 18 printing companies in 14 markets. Each acquired operation provides
general commercial printing services relating to the production of such
documents as annual reports, training manuals, product and capability brochures,
catalogs, direct mail pieces and other promotional material, all of which tend
to be recurring in nature. One of its Houston printing companies also provides
financial printing services, including the printing of registration statements,
information statements and quarterly and annual reports filed with the
Securities and Exchange Commission, as well as official statements for municipal
securities.

2.  SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION:

  ACCOUNTING POLICIES

     The accounting policies of the Company reflect industry practices and
conform to generally accepted accounting principles. The more significant of
such accounting policies are described below.

     Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of Consolidated Graphics, Inc., and its wholly
owned subsidiaries. All intercompany balances and transactions have been
eliminated.

     Use of Estimates -- The preparation of the accompanying consolidated
financial statements requires the use of certain estimates by management in
determining the Company's assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

     Revenue Recognition and Accounts Receivable -- The Company recognizes
revenue upon delivery of each job. Losses, if any, on jobs are recognized at the
earliest date such amount is determinable. The Company derives the majority of
its revenues from sales and services to a broad and diverse group of customers
with no individual customer accounting for more than 10% of the Company's
revenues during the years ended March 31, 1997, 1996 and 1995. The Company
maintains an allowance for doubtful accounts based upon the expected
collectibility of trade accounts receivable. Accounts receivable in the
accompanying consolidated balance sheets are reflected net of allowance for
doubtful accounts of $1,241 and $926 at March 31, 1997 and 1996, respectively.
Accounts receivable are generally not collateralized.

     Inventories -- Inventories are valued at the lower of cost or market
utilizing the first-in, first-out method for raw materials and the specific
identification method for work in progress and finished goods. The carrying
values of inventories are set forth below:

                                                MARCH 31
                                          --------------------
                                            1997       1996
                                          ---------  ---------
Raw materials...........................  $   2,735  $   4,455
Work in progress........................      4,533      2,954
Finished goods..........................      1,411        614
                                          ---------  ---------
                                          $   8,679  $   8,023
                                          =========  =========

     Goodwill -- Goodwill is amortized by the straight line method over the
estimated benefit period but, in any event, not in excess of 40 years.
Accumulated amortization of goodwill totalled $154 and $20 at March 31, 1997 and
1996, respectively.

                                      F-7
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

     Supplemental Cash Flow Information -- The consolidated statements of cash
flows provide information about changes in cash and exclude the effect of
noncash transactions. For purposes of the consolidated statements of cash flows,
the Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Interest paid during
the years ended March 31, 1997, 1996 and 1995 was $2,299, $876 and $679,
respectively. Income tax payments, net of refunds during the years ended March
31, 1997, 1996 and 1995 were $3,287, $1,700 and $1,232, respectively.
Significant noncash transactions during fiscal 1997 include debt of $6,835
incurred by the Company to finance the purchase of three printing presses, the
assumption of debt of $2,616 and $7 in connection with the acquisition of Garner
Printing ("Garner") and Bridgetown Printing ("Bridgetown"), respectively,
and the issuance of a note for $1,500 in connection with the acquisition of
Direct Color. The Company also issued common stock valued at $4,134 as
consideration related to its acquisition of Garner. During fiscal 1996, the
Company issued notes or assumed debt of $1,143 and issued common stock of the
Company valued at $7,219 in connection with its acquisitions of Precision Litho
("Precision") and Emerald City Graphics ("Emerald"), respectively.

     Acquisitions -- All acquisitions have been accounted for as purchases.
Operations of the companies and businesses acquired have been included in the
accompanying consolidated financial statements from their respective dates of
acquisition. The allocation of purchase price to the assets and liabilities
acquired is based on estimates of fair market value. The allocation of purchase
price in connection with certain of the acquisitions in fiscal 1997 may be
revised when additional information concerning asset and liability valuations is
obtained.

     Recent Accounting Pronouncements -- Effective April 1, 1996, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." Accordingly, in the event that facts and circumstances
indicate that property and equipment or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the asset is
compared to the asset's carrying amount to determine if a write-down to market
value is necessary. Adoption of this standard did not have a material effect on
the financial position or results of operation of the Company.

     In 1996, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share,"("EPS") which supersedes Accounting Principles Board
Opinion No. 15. SFAS No. 128 specifies the computation, presentation and
disclosure requirements for earnings per share in order to simplify its
computation and to make the U.S. standards more comparable to international
standards.

     SFAS No. 128 is effective for both interim and annual periods ending after
December 15, 1997. The Company will adopt SFAS No. 128 in the third quarter of
fiscal 1998. Upon adoption all prior period EPS data presented must be restated
to conform with the new statement. Management does not expect that the adoption
will have a material effect on the Company's EPS calculation.

  OTHER INFORMATION

     Accrued Liabilities -- The significant components of accrued liabilities
were $3,319 of accrued wages and related expenses, $1,266 of other accrued taxes
and $5,342 of other accruals as of March 31, 1997. As of March 31, 1996, the
significant components of accrued liabilities were $1,702 of accrued wages and
related expenses, $1,027 of other accrued taxes and $2,919 of other accruals.

     Stock Split -- On December 18, 1996, the Company declared a stock dividend
to effect a two-for-one split of the Company's common stock for shareholders of
record on December 31, 1996, payable

                                      F-8
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

on January 10, 1997. The accompanying financial statements have been adjusted to
reflect the split for all periods presented.

     Earnings Per Share -- Primary earnings per share are calculated by dividing
net income available to common shareholders by the weighted average number of
common shares and common share equivalents outstanding. For the year ended March
31, 1997, the weighted average shares outstanding were 12,410,994, which
includes 245,009 common stock equivalents representing the dilutive effect of
outstanding stock options. For the years ended March 31, 1996 and 1995, the
effect of common stock equivalents was not significant and the weighted average
shares outstanding were 11,068,360 and 9,720,742, respectively.

     On a fully diluted basis, both net income available to common shareholders
and shares outstanding for the year ended March 31, 1995, are adjusted to assume
the conversion of the redeemable preferred stock and warrant (see Note 8) from
the date of issue, resulting in 9,969,134 shares outstanding for such period.

     Related Party Transactions -- Prior to 1994, the Company advanced a
significant shareholder amounts which were repaid in full by such shareholder in
1995. During 1996, in connection with the purchase of a printing company, the
Company entered into a real estate lease agreement and purchase option with that
company's former owner and current president under terms the Company believes
are comparable to market rates.

     Restructuring Charge -- In December 1995 the Company merged the operations
of two of its Houston subsidiaries. The Company recorded a restructuring charge
of $1,500 ($975 after-tax), which included $377 of direct and incremental costs
associated with the merger and certain pre-existing contractual obligations,
with the remainder recorded as an impairment of inventory.

     Credit Risk and Fair Value of Financial Instruments -- Financial
instruments which potentially subject the Company to concentrations of credit
risk are primarily cash and cash equivalents and trade receivables. It is the
Company's practice to place its cash and cash equivalents in high-quality
financial institutions. SFAS No. 107, "Disclosures about Fair Values of
Financial Instruments," and SFAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," require the disclosure of
the fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to estimate
fair value. The Company's long-term debt is composed primarily of a floating
rate revolving credit agreement; accordingly, the Company believes the fair
value of its liabilities is the same as the notional value in all material
respects.

     Certain reclassifications have been made to fiscal 1996 and 1995 amounts to
conform to the current year presentation.

3.  ACQUISITIONS

     The Company completed the following acquisitions in fiscal 1997:

     In June 1996, the Company acquired for $2,400 substantially all of the
assets and assumed the liabilities of Bridgetown in Portland, Oregon. The
Company immediately thereafter paid $1,519 to retire substantially all of the
outstanding debt of Bridgetown.

     In July 1996, the Company acquired in a merger transaction all of the
issued and outstanding capital stock of Garner in Des Moines, Iowa. The Company
issued 355,560 shares of its common stock valued at $11.625 per share to the
Garner shareholders as consideration in the acquisition.

                                      F-9
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

     In July 1996, the Company acquired for $2,778 substantially all of the
assets and assumed the liabilities of Eagle Press ("Eagle") in Sacramento,
California. The Company immediately thereafter paid $1,202 to retire all of the
outstanding debt of Eagle.

     In October 1996, the Company acquired for $1,076 substantially all of the
assets and assumed the liabilities of Mobility in Richmond, Virginia. The
Company immediately thereafter paid $2,118 to retire all of the outstanding debt
of Mobility.

     In January 1997, the Company acquired all of the issued and outstanding
capital stock of Theo Davis Sons in Raleigh-Durham, North Carolina and Direct
Color in Long Beach, California. The Company paid cash of $300 to the Theo Davis
Sons' shareholders and, immediately following the acquisition, retired Theo
Davis Sons' outstanding debt for $960. The Company paid cash of $1,950 to the
shareholder of Direct Color and, immediately following the acquisition, retired
Direct Color's outstanding debt for $1,500. The Company also issued a note for
$1,500 in connection with the transaction.

     In May 1996, Tulsa Litho, an indirect wholly-owned subsidiary of the
Company, entered into voluntary reorganization proceedings. At that time, the
Company's investment in, and obligations with respect to, Tulsa Litho were
nominal and Tulsa Litho's operations were not material to the Company's
operations as a whole. In November 1996, a plan of reorganization was approved
pursuant to which the Company paid $2,653 to purchase the secured obligations of
Tulsa Litho from its lenders and paid $50 to discharge Tulsa Litho's
pre-petition liabilities.

     During fiscal 1996, the Company acquired Clear Visions, Heritage Graphics,
Emerald, Precision and Tulsa Litho for a combined total of $11,157 in cash.
Additionally, the Company issued 849,316 shares of its common stock valued at
$8.50 per share to the selling shareholders of Emerald as consideration in the
acquisition.

     The following table sets forth pro forma information assuming that for the
year ended March 31, 1997, the acquisitions in fiscal 1997 were completed on
April 1, 1996, and for the year ended March 31, 1996, each of the acquisitions
in fiscal 1996 and 1997, occurred on April 1, 1995. Certain acquisitions involve
contingent consideration which is not included in the pro forma information
provided below. However, management believes that if all agreed-upon contingent
consideration was paid in full, it would not materially affect the pro forma
financial results.

                                                         YEAR ENDED MARCH 31
                                                    ----------------------------
                                                        1997            1996
                                                    ------------    ------------
Sales ..........................................    $    170,200    $    168,300
Net income available to common shareholders ....          11,300          10,400
Earnings per share of common stock .............    $        .91    $        .85

     The preceding pro forma financial information does not purport to be
indicative of the Company's financial position or results of operations that
would have occurred had the transactions been completed at the beginning of the
periods presented, nor do such statements purport to indicate the Company's
results of operations at any future date or for any future period.

     Subsequent to March 31, 1997, the Company completed the acquisition of
Tucker Printers in Rochester, New York and announced the signing of a nonbinding
letter of intent to acquire The Etheridge Company in Grand Rapids, Michigan.

                                      F-10
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

4.  PROPERTY AND EQUIPMENT:

     Property and equipment are stated at cost. The cost of major renewals and
betterments is capitalized; repairs and maintenance costs are expensed when
incurred. Upon retirement or sale, the cost of the assets disposed of and the
related accumulated depreciation are removed from the accounts, with any
resultant gain or loss being reflected in income. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets.

     The following is a summary of the Company's property and equipment and
their estimated useful lives as of:

                                             MARCH 31
                                       --------------------      ESTIMATED
             DESCRIPTION                 1997       1996       LIFE IN YEARS
- -------------------------------------  ---------  ---------    -------------
Land.................................  $   4,213  $   3,683        -
Buildings and leasehold
  improvements.......................     15,485     11,021        15-40
Printing presses and equipment.......     76,146     43,140         7-20
Computer equipment and software......      4,077      2,415          2-5
Furniture, fixtures and other........      3,163      2,091          5-7
                                       ---------  ---------
                                         103,084     62,350
Less accumulated depreciation and
  amortization.......................    (17,441)   (11,759)
                                       ---------  ---------
                                       $  85,643  $  50,591
                                       =========  =========

5.  LONG-TERM DEBT:

     The following is a summary of the Company's long-term debt instruments as
of:

                                                             MARCH 31
                                                  -----------------------------
                                                      1997             1996
                                                  ------------     ------------
Revolving credit agreement ...................    $     28,700     $     16,300
Equipment notes ..............................           9,060            1,629
Real estate notes ............................           1,976            2,203
Acquisition notes ............................           2,188            1,143
Other ........................................              20               51
                                                  ------------     ------------
                                                        41,944           21,326
                   Less current portion ......          (2,623)          (1,221)
                                                  ------------     ------------
                                                  $     39,321     $     20,105
                                                  ============     ============

     On August 23, 1995, the Company entered into a $25 million revolving credit
agreement (the "Terminated Agreement") with a bank which replaced an existing
agreement which was due to expire in November 1996. In October 1996 and March
1997, the Company amended the Terminated Agreement, increasing its loan
availability to $35 million and $50 million, respectively. Loans outstanding
under the Terminated Agreement accrued interest at the London Interbank Offered
Rate plus .625% to 1.75% based on the Company's Funded Debt to EBITDA ratio as
defined in the Terminated Agreement, redetermined quarterly. Loans outstanding
under the Terminated Agreement at March 31, 1997, accrued interest at an
effective rate of 6.6% per annum.

     On June 5, 1997, the Company entered into a new $100 million revolving
credit agreement (the "Credit Agreement") with a six-member banking group.
This Credit Agreement, which matures on May 31, 2000, replaces the Company's $50
million Terminated Agreement. On June 10, 1997, all

                                      F-11
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

remaining loans outstanding and any accrued and unpaid interest owed pursuant to
the Terminated Agreement were repaid in full from proceeds of borrowings under
the Credit Agreement. As of March 31, 1997, and through the date terminated, the
Company was in compliance with all financial tests and other covenants set forth
in the Terminated Agreement.

     Loans outstanding under the Credit Agreement are unsecured and accrue
interest, at the Company's option, at (1) the London Interbank Offered Rate
(LIBOR) plus .50% to 1.50% based upon the Company's Debt to Pro Forma EBITDA
ratio as defined, redetermined quarterly, or (2) an alternate base rate based
upon the bank's prime lending rate or Federal Funds effective rate. The Credit
Agreement also provides for a commmitment fee on available but unused amounts
ranging from .10% to .35% per annum. On June 10, 1997, loans outstanding under
the Credit Agreement were subject to interest rates of 6.25% to 6.50% per annum.

     The covenants in the Credit Agreement, among other things, limit the
Company's ability to (i) incur secured indebtedness or pledge assets as
collateral in excess of certain levels, (ii) merge, consolidate with or acquire
other companies where the total consideration paid is above certain levels,
(iii) change its primary business, (iv) pay dividends above certain levels, (v)
dispose of assets outside the normal course of business in excess of 10% of the
Company's total tangible assets, and (vi) make capital expenditures (exclusive
of expenditures related to company acquisitions) in excess of 300% of
depreciation. The Company must also meet certain financial tests defined in the
Credit Agreement, including maintaining a defined Minimum Net Worth and
achieving specific ratios of Debt to Capitalization, Debt to Pro Forma EBITDA
and Fixed Charge Coverage.

     The equipment notes consist of (i) term loans payable to certain financial
institutions, bearing interest at 8.5% to 9.4% and maturing at various times
during fiscal 1999 to fiscal 2003, and (ii) term loans payable to Komori America
Corporation pertaining to the purchase of three printing presses during fiscal
1996, each of which provide for fixed monthly principal and interest payments
through 2006 at a fixed rate of 8.25%.

     The real estate notes consist of two mortgages payable to an insurance
company and a term note payable to an individual. The mortgage notes bear
interest at 2.55% over the 30-day commercial paper rate (8.08% at March 31,
1997) and mature in fiscal 2002 and fiscal 2003, respectively. The term note
bears interest at prime (8.25% at March 31, 1997) and matures in fiscal 2009.

     The acquisition notes were issued in connection with the acquisition of
Precision in February 1996 and Direct Color in January 1997. Each note bears
interest at 6% and requires monthly principal and interest payments. The
Precision notes mature in fiscal 1999 and the Direct Color note matures in
fiscal 2002.

     The principal payment requirements by fiscal year under the Company's debt
agreements are $2,623 in 1998, $30,880 in 1999, $1,330 in 2000, $1,397 in 2001,
$1,321 in 2002 and $4,393 thereafter.

     In addition to the covenants under the Credit Agreement, the Company's
other debt agreements contain certain covenants, the most significant of which
places certain restrictions on future borrowings and acquisitions above
specified levels. The Company is also required to maintain certain financial
ratios, minimum equity balances and key man life insurance on the majority
shareholder.

                                      F-12
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

6.  INCOME TAXES:

     Provision for income taxes is composed of the following:

                                             YEAR ENDED MARCH 31
                                       -------------------------------
                                         1997       1996       1995
                                       ---------  ---------  ---------
Current..............................  $   4,898  $     591  $   1,893
Deferred.............................      1,029      1,555        499
                                       ---------  ---------  ---------
                                       $   5,927  $   2,146  $   2,392
                                       =========  =========  =========

     A reconciliation of the statutory federal income tax rate to the effective
tax rate follows:

                                             YEAR ENDED MARCH 31
                                       -------------------------------
                                         1997       1996       1995
                                       ---------  ---------  ---------
Federal income tax, statutory rate...       34.0%      34.0%      34.0%
State and other......................        3.0        1.0         .8
                                       ---------  ---------  ---------
Income tax, effective rate...........       37.0%      35.0%      34.8%
                                       =========  =========  =========

     Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The components of the net
deferred income tax liability are as follows:

                                                  MARCH 31
                                       -------------------------------
                                         1997       1996       1995
                                       ---------  ---------  ---------
Property and equipment...............  $  10,566  $   6,421  $   3,402
Other................................     (1,630)    (1,241)      (567)
                                       ---------  ---------  ---------
Net deferred income tax liability....  $   8,936  $   5,180  $   2,835
                                       =========  =========  =========

7.  COMMITMENTS AND CONTINGENCIES:

     Operating lease commitments for facilities and equipment require fiscal
year minimum annual payments of $1,081 for 1998, $623 for 1999, $587 for 2000,
$544 for 2001, $303 for 2002 and $930 thereafter. Total rent expense was $1,128,
$414 and $222 for the years ended March 31, 1997, 1996 and 1995, respectively.

     On March 22, 1994, the Company indemnified and released SBC Communications,
Inc. ("SBC") from, among other matters, all obligations other than certain
employment matters and a printing services contract under the purchase and sale
agreement with respect to the Company's acquisition of a commercial printing
operation from SBC in February 1993. To ensure payment of the Company's
performance under this arrangement, the Company has established a $3,500 letter
of credit for the benefit of SBC, which will be maintained until September 1997,
or until the expiration of the applicable federal law regarding limitations of
actions, whichever is longer.

     The Company is contingently obligated at certain times and under certain
circumstances to issue, for all periods in the aggregate, up to a total of
140,000 shares of its common stock pursuant to its acquisitions of Emerald and
Precision. The Company is obligated to pay $250 to the former owners of
Bridgetown, payable over five years in equal installments on each anniversary of
the acquisition closing date. The Company is also contingently obligated at
certain times and under certain conditions to pay up to $2,400 under various
earn-out agreements pursuant to the acquisitions of Garner and Eagle.

                                      F-13
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

     The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. Management believes, based on discussions with
its legal counsel, that the outcome of these legal actions will not have a
material adverse effect upon the consolidated financial position and results of
operations of the Company.

8.  CAPITAL STOCK AND STOCK OPTIONS:

INITIAL PUBLIC OFFERING

     In June 1994 the Company completed an initial public offering of 3,840,000
shares of common stock for proceeds of $19,600, net of expenses, and upon the
exercise of the underwriters' overallotment option in July 1994, issued an
additional 367,304 shares of common stock for proceeds of $1,700, net of
expenses (collectively, the Offering). The Company used $9,700 of such proceeds
to retire two term notes and used the remaining $11,600 for general corporate
purposes, including working capital and acquisitions in the printing industry.

INCENTIVE PLAN

     In March 1994 the Company approved the adoption of the Consolidated
Graphics, Inc. Long-Term Incentive Plan (the "Plan"), under which employees of
the Company and its subsidiaries and certain nonemployee members of the Board of
Directors have been or may be granted rights to purchase shares of common stock
of the Company at a price not less than the market price of the stock at the
date of grant. Options granted pursuant to the Plan may either be incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, or non-qualified stock options. Options granted under the Plan
vest over a period of time based on the nature of the grants and as defined in
the individual grant agreements. The vesting period for options granted under
the Plan is generally five years, except for certain options granted to
employees in connection with the Offering, which are all currently exercisable
and expire on June 9, 2004. In August 1996 the shareholders of the Company
approved the reservation of an additional 1,200,000 shares of common stock of
the Company for issuance pursuant to the Plan. At March 31, 1997, a total of
1,612,950 shares were reserved for issuance, of which 818,600 shares were
reserved for options which had not been granted.

     The Company accounts for the Plan under the provisions and related
interpretations of APB No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense or liability is recognized for such options
in the accompanying financial statements.

     The following table sets forth the option transactions for the Plan:

<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED MARCH 31
                                       -------------------------------------------------------------------------
                                                1997                      1996                     1995
                                       -----------------------   -----------------------   ---------------------
                                                     WEIGHTED                  WEIGHTED                WEIGHTED
                                                      AVERAGE                   AVERAGE                 AVERAGE
                                                     EXERCISE                  EXERCISE                EXERCISE
                                         SHARES        PRICE       SHARES        PRICE      SHARES       PRICE
                                       -----------   ---------   -----------   ---------   ---------   ---------
<S>                                       <C>         <C>            <C>         <C>         <C>         <C>
Outstanding at April 1...............      571,800    $   6.05       410,000     $5.71        --         $ --
     Granted.........................      502,000       12.29       269,500      6.62       434,400      5.71
     Exercised.......................     (239,750)       5.98       (72,300)     5.69       (10,000)     5.75
     Forfeited.......................      (39,700)       8.04       (35,400)     7.31       (14,400)     5.63
                                       -----------               -----------               ---------
Outstanding at March 31..............      794,350        9.91       571,800      6.05       410,000      5.71
                                       ===========               ===========               =========
Shares exercisable at March 31.......      233,865    $   8.52       322,944     $5.83       218,352     $5.75
                                       ===========               ===========               =========
</TABLE>
                                      F-14
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

     Had the Company used the fair value-based method of accounting prescribed
by SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123")
for the Plan beginning on April 1, 1995, and charged compensation expense
against income over the vesting period based on the fair value of options at the
date of grant, net income and earnings per share of Common Stock would have been
reduced to the following pro forma amounts:

                                               1997                  1996
                                        ------------------    ------------------
                                           AS        PRO         AS        PRO
                                        REPORTED    FORMA     REPORTED    FORMA
                                        --------    ------    --------    ------
Net income...........................   $ 10,100    $9,431     $ 3,985    $3,559
Earnings per share...................   $    .81    $  .77     $   .36    $  .32

     The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not require disclosure for
periods prior to fiscal 1996. Additional awards in future years are anticipated.

     The weighted-average grant date fair value of options granted during 1997
and 1996 was $7.40 and $4.46, respectively. The weighted-average grant date fair
value of options was determined by using the fair value of each option grant,
utilizing the Black-Scholes option-pricing model and the following key
assumptions:

                                         1997       1996
                                       ---------  ---------
Dividend yield.......................          0%         0%
Expected volatility..................       64.5%      77.7%
Risk-free interest rate..............        6.3%       6.6%
Expected life........................        5.0 yrs    5.4 yrs.

     The Black-Scholes model used by the Company to calculate option values, as
well as other currently accepted option valuation models, were developed to
estimate the fair value of freely tradeable, fully transferable options without
vesting and/or trading restrictions, which significantly differ from the
provisions associated with the Company's stock option awards. These models also
require highly subjective assumptions, including future stock price volatility
and expected time until exercise, which greatly affect the calculated values.
Accordingly, management does not believe this model provides a reliable single
measure of the fair value of the Company's stock option awards.

REDEEMABLE PREFERRED STOCK

     The Company is authorized by its Articles of Incorporation to issue up to
5,000,000 shares of $1.00 par value preferred stock. On January 29, 1993, the
Company sold 3,000,000 shares of Series A $1.00 par value preferred stock with a
liquidation preference of $3,000 and also sold, for a nominal amount, a warrant
to purchase shares of common stock from January 1999 through January 2003. The
Series A preferred stock was converted into 1,119,300 shares of common stock and
the warrant was cancelled immediately prior to the initial closing of the
Offering and substantially all obligations, other than certain registration
rights with respect to securities of the Company, were eliminated. Following the
conversion of the Series A preferred stock into common stock, the Company
eliminated the Series A preferred stock from its Articles of Incorporation.
Accordingly, the Company currently has authorized and available for issuance
5,000,000 shares of $1.00 par value preferred stock.

                                      F-15
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

9.  UNAUDITED QUARTERLY FINANCIAL DATA:

     The following table contains selected quarterly financial data from the
consolidated income statements for each quarter of fiscal 1997 and 1996. The
Company believes this information reflects all normal recurring adjustments
necessary for a fair presentation of the information for the periods presented.
The operating results for any quarter are not necessarily indicative of results
for any future period.

                                       4TH        3RD        2ND        1ST
                                     QUARTER    QUARTER    QUARTER    QUARTER
                                    ---------  ---------  ---------  ---------
                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL 1997:
Sales.............................  $  43,187  $  38,186  $  34,451  $  28,258
Gross profit......................     13,411     11,795     10,587      8,092
Net income........................      3,203      2,792      2,432      1,673
Earnings per common share.........  $     .25  $     .22  $     .20  $     .14
FISCAL 1996:
Sales.............................  $  24,092  $  22,255  $  19,308  $  19,478
Gross profit......................      6,651      6,138      5,619      5,488
Net income........................      1,180        294      1,352      1,159
Earnings per common share.........  $     .10  $     .03  $     .12  $     .11

     Earnings per share are computed independently for each of the quarters
presented. Therefore the sum of the quarterly earnings per share may not equal
the annual earnings per share.

                                      F-16


                                                                    EXHIBIT 10.8

                                 LOAN AGREEMENT

                     ($100,000,000 REVOLVING LOAN FACILITY)

                            DATED AS OF JUNE 4, 1997

                                      AMONG

                          CONSOLIDATED GRAPHICS, INC.,
                                  AS BORROWER,

                    TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
                            AS AGENT AND AS A LENDER,

                              BANKONE, TEXAS, N.A.,
                          AS CO-AGENT AND AS A LENDER,

                                       AND

                       THE OTHER LENDERS NOW OR HEREAFTER
                                 PARTIES HERETO
<PAGE>
                                TABLE OF CONTENTS

                                                                          PAGE

1.    DEFINITIONS............................................................1
      1.1     CERTAIN DEFINED TERMS..........................................1
      1.2     MISCELLANEOUS.................................................18

2.    COMMITMENTS AND LOANS.................................................18
      2.1     LOANS.........................................................18
      2.2     LETTERS OF CREDIT.............................................18
      2.3     TERMINATIONS OR REDUCTIONS OF  COMMITMENTS....................22
      2.4     COMMITMENT FEES...............................................22
      2.5     SEVERAL OBLIGATIONS...........................................22
      2.6     NOTES.........................................................23
      2.7     USE OF PROCEEDS...............................................23

3.    BORROWINGS, PAYMENTS, PREPAYMENTS AND INTEREST OPTIONS................23
      3.1     BORROWINGS....................................................23
      3.2     PREPAYMENTS...................................................24
      3.3     INTEREST OPTIONS..............................................24
      3.4     CAPITAL ADEQUACY..............................................29
      3.5     LIMITATION ON CHARGES; SUBSTITUTE LENDERS; NON-DISCRIMINATION.29

4.    PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.......................30
      4.1     PAYMENTS......................................................30
      4.2     PRO RATA TREATMENT............................................31
      4.3     CERTAIN ACTIONS, NOTICES, ETC.................................32
      4.4     NON-RECEIPT OF FUNDS BY AGENT.................................32
      4.5     SHARING OF PAYMENTS, ETC......................................33

5.    CONDITIONS PRECEDENT..................................................34
      5.1     INITIAL LOANS AND LETTERS OF CREDIT...........................34
      5.2     ALL LOANS AND LETTERS OF CREDIT...............................35

6.    REPRESENTATIONS AND WARRANTIES........................................36
      6.1     ORGANIZATION..................................................36
      6.2     FINANCIAL STATEMENTS..........................................36
      6.3     ENFORCEABLE OBLIGATIONS; AUTHORIZATION........................36
      6.4     OTHER DEBT....................................................37
      6.5     LITIGATION....................................................37
<PAGE>
      6.6     TITLE.........................................................37
      6.7     TAXES.........................................................37
      6.8     REGULATIONS G, U AND X........................................37
      6.9     SUBSIDIARIES..................................................37
      6.10    NO UNTRUE OR MISLEADING STATEMENTS............................37
      6.11    ERISA.........................................................37
      6.12    INVESTMENT COMPANY ACT........................................38
      6.13    PUBLIC UTILITY HOLDING COMPANY ACT............................38
      6.14    SOLVENCY......................................................38
      6.15    FISCAL YEAR...................................................38
      6.16    COMPLIANCE....................................................38
      6.17    ENVIRONMENTAL MATTERS.........................................38

7.    AFFIRMATIVE COVENANTS.................................................38
      7.1     TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC..................39
      7.2     FINANCIAL STATEMENTS AND INFORMATION..........................39
      7.3     FINANCIAL TESTS...............................................40
      7.4     INSPECTION....................................................40
      7.5     FURTHER ASSURANCES............................................40
      7.6     BOOKS AND RECORDS.............................................40
      7.7     INSURANCE.....................................................40
      7.8     NOTICE OF CERTAIN MATTERS.....................................41
      7.9     ERISA INFORMATION AND COMPLIANCE..............................41
      7.10    PRINCIPAL SUBSIDIARIES........................................42
      7.11    LIEN RELEASES.................................................43

8.    NEGATIVE COVENANTS....................................................43
      8.1     BORROWED MONEY INDEBTEDNESS...................................43
      8.2     LIENS.........................................................44
      8.3     CONTINGENT LIABILITIES........................................46
      8.4     MERGERS AND CONSOLIDATIONS....................................46
      8.5     DISPOSITION OF ASSETS.........................................46
      8.6     REDEMPTION, DIVIDENDS AND DISTRIBUTIONS.......................46
      8.7     NATURE OF BUSINESS............................................47
      8.8     TRANSACTIONS WITH RELATED PARTIES.............................47
      8.9     LOANS AND INVESTMENTS.........................................47
      8.10    ORGANIZATIONAL DOCUMENTS......................................48
      8.11    UNFUNDED LIABILITIES..........................................48
      8.12    CAPITAL EXPENDITURES..........................................48
      8.13    ACQUISITIONS..................................................48

9.    DEFAULTS..............................................................48
      9.1     EVENTS OF DEFAULT.............................................48

                                      ii
<PAGE>
      9.2     RIGHT OF SETOFF...............................................51
      9.3     COLLATERAL ACCOUNT............................................52
      9.4     PRESERVATION OF SECURITY FOR UNMATURED REIMBURSEMENT
              OBLIGATIONS...................................................52
      9.5     REMEDIES CUMULATIVE...........................................52

10.   AGENT.................................................................52
      10.1    APPOINTMENT, POWERS AND IMMUNITIES............................52
      10.2    RELIANCE......................................................54
      10.3    DEFAULTS......................................................54
      10.4    MATERIAL WRITTEN NOTICES......................................54
      10.5    RIGHTS AS A LENDER............................................54
      10.6    INDEMNIFICATION...............................................55
      10.7    NON-RELIANCE ON AGENT AND OTHER LENDERS.......................55
      10.8    FAILURE TO ACT................................................55
      10.9    RESIGNATION OR REMOVAL OF AGENT...............................56
      10.10   NO PARTNERSHIP................................................56

11.   MISCELLANEOUS.........................................................57
      11.1    WAIVER........................................................57
      11.2    NOTICES.......................................................57
      11.3    EXPENSES, ETC.................................................57
      11.4    INDEMNIFICATION...............................................58
      11.5    AMENDMENTS, ETC...............................................58
      11.6    SUCCESSORS AND ASSIGNS........................................59
      11.7    LIMITATION OF INTEREST........................................61
      11.8    SURVIVAL......................................................62
      11.9    CAPTIONS......................................................63
      11.10   COUNTERPARTS..................................................63
      11.11   GOVERNING LAW.................................................63
      11.12   SEVERABILITY..................................................63
      11.13   TAX FORMS.....................................................63
      11.14   CONFLICTS BETWEEN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.63

EXHIBITS
      A - Request for Extension of Credit
      B - Rate Designation Notice
      C - Note
      D - Assignment and Acceptance
      E - Compliance Certificate
      F - Subsidiaries as of the Effective Date (Showing Principal Subsidiaries)

                                     iii
<PAGE>
                                 LOAN AGREEMENT

      THIS LOAN AGREEMENT is made and entered into as of June 4, 1997 (the
"EFFECTIVE DATE"), by and among CONSOLIDATED GRAPHICS, INC., a Texas corporation
(together with its permitted successors, herein called the "BORROWER"); each of
the lenders which is or may from time to time become a party hereto
(individually, a "LENDER" and, collectively, the "LENDERS"), TEXAS COMMERCE BANK
NATIONAL ASSOCIATION ("TCB"), a national banking association, as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"AGENT"), and BANKONE, TEXAS, N.A., a national banking association, as co-agent
for the Lenders.

      The parties hereto agree as follows:

1.    DEFINITIONS.

      1.1   CERTAIN DEFINED TERMS.

      Unless a particular term, word or phrase is otherwise defined or the
context otherwise requires, capitalized terms, words and phrases used herein or
in the Loan Documents (as hereinafter defined) have the following meanings (all
definitions that are defined in this Agreement in the singular have the same
meanings when used in the plural and VICE VERSA):

      ACCOUNTS, GENERAL INTANGIBLES and INVENTORY shall have the respective
meanings assigned to them in the Uniform Commercial Code enacted in the State of
Texas in force on the Effective Date.

      ADDITIONAL INTEREST means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Loan Documents (other than interest on
the Notes at the Stated Rate) which, under applicable laws, are or may be deemed
to constitute interest on the indebtedness evidenced by the Notes.

      ADJUSTED LIBOR means, with respect to each Interest Period applicable to a
LIBOR Borrowing, a rate per annum equal to the quotient, expressed as a
percentage, of (a) LIBOR with respect to such Interest Period divided by (b)
1.0000 minus the Eurodollar Reserve Requirement in effect on the first day of
such Interest Period.

      AFFILIATE means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "CONTROL"
(including "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.

                                      1
<PAGE>
      AGREEMENT means this Loan Agreement, as it may from time to time be
amended, modified, restated or supplemented.

      ANNUAL FINANCIAL STATEMENTS means the annual financial statements of a
Person, including all notes thereto, which statements shall include a balance
sheet as of the end of such fiscal year and an income statement and a statement
of cash flows for such fiscal year, all setting forth in comparative form the
corresponding figures from the previous fiscal year, all prepared in conformity
with GAAP in all material respects, and accompanied by the opinion of
independent certified public accountants of recognized national standing, which
shall state that such financial statements present fairly in all material
respects the financial position of such Person and, if such Person has any
Subsidiaries, its consolidated Subsidiaries as of the date thereof and the
results of its operations for the period covered thereby in conformity with
GAAP. Such annual financial statements of Borrower shall be accompanied by a
certificate of such accountants that in making the appropriate audit and/or
investigation in connection with such report and opinion, such accountants did
not become aware of any Default relating to the financial tests set forth in
SECTION 7.3 hereof that had not been waived by Lenders or, if in the opinion of
such accountants any such Default exists, a description of the nature and status
thereof.

      APPLICATIONS means all applications and agreements for Letters of Credit,
or similar instruments or agreements, in Proper Form, now or hereafter executed
by any Person in connection with any Letter of Credit now or hereafter issued or
to be issued under the terms hereof at the request of any Person. To the extent
that any Application contains provisions granting liens or security interests
not granted in the Loan Agreement or contains events of default waivers, and
cure periods (or fails to provide cure periods as provided in the Loan
Agreement) which are more restrictive than those contained in the Loan
Agreement, the provisions of the Loan Agreement shall control.

      ASSIGNMENT AND ACCEPTANCE shall have the meaning ascribed to such term in
SECTION 11.6 hereof.

      BANKRUPTCY CODE means the United States Bankruptcy Code, as amended, and
any successor statute.

      BASE RATE means for any day a rate per annum equal to the lesser of (a)
the greater of (1) the Prime Rate for that day and (2) the Federal Funds Rate
for that day plus 1/2 of 1% or (b) the Ceiling Rate. If for any reason Agent
shall have determined (which determination shall create a rebuttable presumption
as to the accuracy thereof) that it is unable to ascertain the Federal Funds
Rate for any reason, including, without limitation, the inability or failure of
Agent to obtain sufficient quotations in accordance with the terms hereof (and
in such event, Agent shall furnish written evidence to Borrower showing how
Agent made such determination), the Base Rate shall, until the circumstances
giving rise to such inability no longer exist, be the lesser of (a) the Prime
Rate or (b) the Ceiling Rate.

                                      2
<PAGE>
      BASE RATE BORROWING means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.

      BORROWED MONEY 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 similar
instruments, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such Person to creditors
for raw materials, inventory, services and supplies and deferred payments for
services to employees and former employees incurred in the ordinary course of
such Person's business), (v) all capital lease obligations of such Person, (vi)
all obligations of others secured by any lien on property or assets owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (vii) Interest Rate Risk Indebtedness of such Person (to the
extent treated as Indebtedness under GAAP), (viii) all obligations of such
Person in respect of outstanding letters of credit issued for the account of
such Person and (ix) all guarantees of such Person of any of the foregoing.

      BUSINESS DAY means any day other than a day on which commercial banks are
authorized or required to close in Houston, Texas.

      CAPITAL EXPENDITURES means, with respect to any Person for any period,
expenditures in respect of fixed or capital assets by such Person, including
capital lease obligations incurred during such period (to the extent not already
included), which would be reflected as additions to Property, plant or equipment
on a balance sheet of such Person and its consolidated Subsidiaries, if any,
prepared in accordance with GAAP; but EXCLUDING expenditures during such period
for the repair or replacement of any fixed or capital asset which was destroyed
or damaged, in whole or in part, to the extent financed by the proceeds of an
insurance policy maintained by such Person. Capital Expenditures shall not
include Permitted Investments or the assets owned by any Person acquired by way
of a Permitted Investment or assets comprising substantially all of an entire
business which is acquired by the applicable Person.

      CEILING RATE means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable federal or Texas (or any
jurisdiction whose usury laws are deemed to apply to the Notes or any other Loan
Documents despite the intention and desire of the parties to apply the usury
laws of the State of Texas) laws permits the higher interest rate, stated as a
rate per annum. On each day, if any, that Chapter One establishes the Ceiling
Rate, the Ceiling Rate shall be the "indicated rate ceiling" (as defined in
Chapter One) for that day. Agent may from time to time, as to current and future
balances, implement any other ceiling under Chapter One by notice to Borrower,
if and to the extent permitted by Chapter One. Without notice to Borrower or any
other person or entity, the Ceiling Rate shall automatically fluctuate upward
and downward as and in the amount by which such maximum nonusurious rate of
interest permitted by applicable law fluctuates.

                                      3
<PAGE>
      CHANGE OF CONTROL means a change resulting when any Unrelated Person or
any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons thereof (in each case also constituting
Unrelated Persons) shall at any time either (i) Beneficially Own more than 50%
of the aggregate voting power of all classes of Voting Stock of Borrower or (ii)
succeed in having sufficient of its or their nominees elected to the Board of
Directors of Borrower such that such nominees, when added to any existing
directors remaining on the Board of Directors of Borrower after such election
who is an Affiliate or Related Person of such Person or Group, shall constitute
a majority of the Board of Directors of Borrower. As used herein (a)
"BENEFICIALLY OWN" means "beneficially own" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, or any successor provision thereto;
PROVIDED, HOWEVER, that, for purposes of this definition, a Person shall not be
deemed to Beneficially Own securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's Affiliates
until such tendered securities are accepted for purchase or exchange; (b)
"GROUP" means a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended; (c) "UNRELATED PERSON" means at any time any Person
other than Borrower or any Subsidiary of Borrower and other than any trust for
any employee benefit plan of Borrower or any Subsidiary of Borrower; (d)
"RELATED PERSON" of any Person shall mean any other Person owning (1) 5% or more
of the outstanding common stock of such Person or (2) 5% or more of the Voting
Stock of such Person; and (e) "VOTING STOCK" of any Person shall mean capital
stock of such Person which ordinarily has voting power for the election of
directors (or persons performing similar functions) of such Person, whether at
all times or only so long as no senior class of securities has such voting power
by reason of any contingency.

      CHAPTER ONE means Chapter One of Title 79, Texas Revised Civil Statutes,
1925, as amended.

      CODE means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.

      COMMITMENT FEE PERCENTAGE means (i) on any day prior to August 1, 1997,
0.20% and (ii) on and after August 1, 1997, the applicable per annum percentage
set forth at the appropriate intersection in the table shown below, based on the
Debt to Pro Forma Consolidated EBITDA Ratio as of the last day of the most
recently ended fiscal quarter of Borrower calculated by Agent as soon as
practicable after receipt by Agent of all financial reports required under this
Agreement with respect to such fiscal quarter (including a Compliance
Certificate), to be effective as of the first day of the month following the
date that such financial reports are required to be delivered hereunder:

           DEBT TO PRO FORMA               COMMITMENT
      CONSOLIDATED EBITDA RATIO           FEE PERCENTAGE

      Greater than 2.75                      0.35

                                      4
<PAGE>
      Greater than 2.50 but
      less than or equal to 2.75             0.30

      Greater than 2.25 but
      less than or equal to 2.50             0.25

      Greater than 1.50 but
      less than or equal to 2.25             0.20

      Greater than 1.00 but
      less than or equal to 1.50             0.15

      Less than or equal to 1.00             0.10

      COMPLIANCE CERTIFICATE shall have the meaning given to it in SECTION 7.2
hereof.

      CONSOLIDATED EBITDA means, without duplication, for any period the
Consolidated Net Income of Borrower PLUS, to the extent deducted in calculating
Consolidated Net Income, depreciation, amortization, other non-cash items,
Interest Expense, and provisions for income taxes.

      CONSOLIDATED NET INCOME means for any period for which the amount thereof
is to be determined the net income (or net losses) of Borrower and its
Subsidiaries on a consolidated basis as determined in accordance with GAAP after
deducting, to the extent included in computing said net income and without
duplication, (i) the income (or deficit) of any Person (other than a Subsidiary)
in which Borrower or any of its Subsidiaries has any ownership interest, except
to the extent that any such income has been actually received by Borrower or
such Subsidiary in the form of cash dividends or similar cash distribution, (ii)
any income (or deficit) of any other Person accrued prior to the date it becomes
a Subsidiary of Borrower or merges into or consolidates with Borrower or a
Subsidiary of Borrower, (iii) the gain or loss (net of any tax effect) resulting
from the sale of any capital assets (other than sales in the ordinary course of
business), (iv) any gains or losses or other income which is non-recurring or
extraordinary, (v) income resulting from the write-up of any assets, and (vi)
any portion of the net income of any Subsidiaries of Borrower which is not
available for distribution.

      CONTROLLED GROUP means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with Borrower, are treated as a single employer under Section
414 of the Code.

      CORPORATION means any corporation, limited liability company, partnership,
joint venture, joint stock association, business trust and other business
entity.

                                      5
<PAGE>
      COVER for Letter of Credit Liabilities shall be effected by paying to
Agent immediately available funds, to be held by Agent in a collateral account
maintained by Agent at its Principal Office and collaterally assigned as
security for the financial accommodations extended pursuant to this Agreement
using documentation reasonably satisfactory to Agent, in the amount required by
any applicable provision hereof. Such amount shall be retained by Agent in such
collateral account until such time as in the case of the Cover being provided
pursuant to SECTIONS 2.2(A) or 9.3 hereof, the applicable Letter of Credit shall
have expired and the Reimbursement Obligations, if any, with respect thereto
shall have been fully satisfied; PROVIDED, HOWEVER, that at such time if a
Default or Event of Default has occurred and is continuing, Agent shall not be
required to release such amount in such collateral account until such Default or
Event of Default shall have been cured or waived.

      DEBT TO CAPITALIZATION RATIO means, as of the end of any fiscal quarter,
the ratio of (a) Indebtedness as of such date to (b) Total Capitalization as of
such date.

      DEBT TO PRO FORMA CONSOLIDATED EBITDA RATIO means, as of the end of any
fiscal quarter, the ratio of (a) Indebtedness as of such date to (b) Pro Forma
Consolidated EBITDA for the 12 months ending on such date.

      DEFAULT means an Event of Default or an event which with notice or lapse
of time or both would, unless cured or waived, become an Event of Default.

      DOLLARS and $ means lawful money of the United States of America.

      EARNINGS AVAILABLE FOR FIXED CHARGES means, for any period for which the
amount thereof is to be determined, Consolidated Net Income of the applicable
Person for such period, plus, to the extent deducted in the determination of
Consolidated Net Income and without duplication with items included in the
adjustments to GAAP net income in the determination of Consolidated Net Income,
(i) provisions for income taxes, (ii) Interest Expense, plus (iii) lease
expense.

      ENVIRONMENTAL CLAIM means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "ENVIRONMENTAL CLAIM" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.

                                      6
<PAGE>
      ENVIRONMENTAL LIABILITIES includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.

      ENVIRONMENTAL PERMIT means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.

      ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.

      EURODOLLAR RATE means for any day during an Interest Period for a LIBOR
Borrowing a rate per annum equal to the lesser of (a) the sum of (1) the
Adjusted LIBOR in effect on the first day of such Interest Period plus (2) the
applicable Margin Percentage in effect on the first day of such Interest Period
or (b) the Ceiling Rate. Each Eurodollar Rate is subject to adjustments for
reserves, insurance assessments and other matters as provided for in SECTION 3.3
hereof.

      EURODOLLAR RESERVE REQUIREMENT means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to "Eurocurrency liabilities," as
currently defined in Regulation D. Each determination of the Eurodollar Reserve
Requirement by Agent shall create a rebuttable presumption as to the accuracy
thereof, and may be computed using any reasonable averaging and attribution
method.

      EVENT OF DEFAULT shall have the meaning assigned to it in SECTION 9
hereof.

      FEDERAL FUNDS RATE means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any such day which is a
Business Day, the average of the quotations for such day on such transactions
received by

                                        7
<PAGE>
Agent from three Federal funds brokers of recognized standing selected by Agent
in its sole and absolute discretion.

      FIXED CHARGE COVERAGE RATIO means, as of the end of any fiscal quarter,
the ratio of (a) Earnings Available for Fixed Charges for the 12 months ending
on such day to (b) Fixed Charges for such 12-month period.

      FIXED CHARGES means, for any period for which the amount thereof is to be
determined, the sum of Interest Expenses, lease expense, and Permitted Dividends
by Borrower.

      FUNDING LOSS means, with respect to (a) Borrower's payment of principal of
a LIBOR Borrowing on a day other than the last day of the applicable Interest
Period; (b) Borrower's failure to borrow a LIBOR Borrowing on the date specified
by Borrower; (c) Borrower's failure to make any prepayment of the Loans (other
than Base Rate Borrowings) on the date specified by Borrower, or (d) any
cessation of a Eurodollar Rate to apply to the Loans or any part thereof
pursuant to SECTION 3.3, in each case whether voluntary or involuntary, any
loss, expense, penalty, premium or liability actually incurred by any Lender
(including but not limited to any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender to
fund or maintain a Loan), but excluding loss of margin or profit for the period
after such payment or failure to borrow or prepay and excluding losses resulting
from the gross negligence or willful misconduct of the applicable Lender.

      GAAP means, as to a particular Person, such accounting practice as, in the
opinion of independent certified public accountants of recognized national
standing regularly retained by such Person, conforms at the time to generally
accepted accounting principles, consistently applied for all periods after the
Effective Date so as to present fairly the financial condition, and results of
operations and cash flows, of such Person. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board,
all reports and financial statements required hereunder may be prepared in
accordance with such change so long as Borrower provides to Agent such
disclosures of the impact of such change as Agent may reasonably require. No
such change in any accounting principle or practice shall, in itself, cause a
Default or Event of Default hereunder (but Borrower, Agent and Lenders shall
negotiate in good faith to replace any financial covenants hereunder to the
extent such financial covenants are affected by such change in accounting
principle or practice).

      GOVERNMENTAL AUTHORITY means any foreign governmental authority, the
United States of America, any State of the United States, and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over
Agent, any Lender, any Obligor or their respective Property.

      GUARANTIES means, collectively, (i) the Guaranties dated concurrently
herewith executed by each of the current Principal Subsidiaries of Borrower in
favor of Agent, for the

                                      8
<PAGE>
benefit of Lenders, and (ii) any and all other guaranties hereafter executed in
favor of Agent, for the benefit of Lenders, relating to the Obligations, as any
of them may from time to time be amended, modified, restated or supplemented.

      HAZARDOUS SUBSTANCE means petroleum products, and any hazardous or toxic
waste or substance defined or regulated as such from time to time by any law,
rule, regulation or order described in the definition of "Requirements of
Environmental Law".

      INDEBTEDNESS means, for any Person, (i) all obligations of such Person for
Borrowed Money Indebtedness or which has been incurred in connection with the
acquisition of property and (ii) preferred stock having a mandatory redemption
prior to the maturity of the Obligations. Earnouts shall not be treated as
Indebtedness except to the extent required under GAAP.

      INTEREST EXPENSE means, for any Person, the sum of (i) all interest on
Indebtedness paid or payable (including the portion of rents payable under
capital leases allocable to interest) plus (ii) all debt discount and expense
amortized or required to be amortized during such period.

      INTEREST OPTIONS means the Base Rate and each Eurodollar Rate, and
"INTEREST OPTION" means any of them.

      INTEREST PAYMENT DATES means (a) FOR BASE RATE BORROWINGS, July 1, 1997
and the first Business Day following each March 31, June 30, September 30 and
December 31 thereafter prior to the Revolving Loan Maturity Date and the
Revolving Loan Maturity Date; and (b) FOR LIBOR BORROWINGS, the end of the
applicable Interest Period (and if such Interest Period exceeds three months'
duration, quarterly, commencing on the first quarterly anniversary of the first
day of such Interest Period) and the Revolving Loan Maturity Date.

      INTEREST PERIOD means, for each LIBOR Borrowing, a period commencing on
the date such LIBOR Borrowing began and ending on the numerically corresponding
day which is, subject to availability as set forth in SECTION 3.3(C)(III), 1, 2,
3 or 6 months thereafter, as Borrower shall elect in accordance herewith;
PROVIDED, (1) unless Agent shall otherwise consent, no Interest Period with
respect to a LIBOR Borrowing shall commence on a date earlier than one (1)
Business Day after this Agreement shall have been fully executed; (2) any
Interest Period with respect to a LIBOR Borrowing which would otherwise end on a
day which is not a LIBOR Business Day shall be extended to the next succeeding
LIBOR Business Day, unless such LIBOR Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding LIBOR
Business Day; (3) any Interest Period with respect to a LIBOR Borrowing which
begins on the last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last LIBOR Business Day of the
appropriate calendar month; (4) no Interest Period for a Loan shall ever extend
beyond the Revolving Loan Maturity Date, and (5) Interest Periods shall be
selected by Borrower in such a manner that the Interest Period with respect to
any portion of the Loans which shall become due shall not extend beyond such due
date.

                                      9
<PAGE>
      INTEREST RATE RISK AGREEMENT means an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by Borrower for the purpose of reducing Borrower's
exposure to interest rate fluctuations and not for speculative purposes, as it
may from time to time be amended, modified, restated or supplemented.

      INTEREST RATE RISK INDEBTEDNESS means all obligations and Indebtedness of
Borrower with respect to the program for the hedging of interest rate risk
provided for in any Interest Rate Risk Agreement.

      INVESTMENT means the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, transfer of Property (other
than transfers in the ordinary course of business) or capital contribution to,
or the incurring of any liability (other than trade accounts payable arising in
the ordinary course of business), contingently or otherwise, in respect of the
Indebtedness of, any Person; PROVIDED, HOWEVER, that the purchase by Borrower or
any of its Subsidiaries of any Indebtedness of Borrower or any of its
Subsidiaries for the purpose of retiring such Indebtedness shall not be deemed
to be an Investment.

      ISSUER means the issuer (or, where applicable, each issuer) of a Letter of
Credit under this Agreement.

      LEGAL REQUIREMENT means any law, statute, ordinance, decree, requirement,
order, judgment, rule, or regulation (or interpretation of any of the foregoing)
of, and the terms of any license or permit issued by, any Governmental
Authority, whether presently existing or arising in the future.

      LETTER OF CREDIT shall have the meaning assigned to such term in SECTION
2.2 hereof.

      LETTER OF CREDIT LIABILITIES means, at any time and in respect of any
Letter of Credit, the sum of (i) the amount available for drawings under such
Letter of Credit PLUS (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit. For the purpose of determining at any time the
amount described in clause (i), in the case of any Letter of Credit payable in a
currency other than Dollars, such amount shall be converted by Agent to Dollars
by any reasonable method, and such converted amount shall be conclusive and
binding, absent manifest error.

      LIBOR means, for each Interest Period for any LIBOR Borrowing, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
appearing on Telerate Page 3750 (or if such Telerate Page shall not be
available, any successor or similar service as may be selected by Agent and
Borrower as the London interbank rate for deposits in United States dollars) as
of 10:00 a.m., Houston, Texas time (or as soon thereafter as practicable) on the
day two LIBOR Business Days prior to the first day of such Interest Period for
deposits in United States dollars having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the LIBOR
Borrowing to which such Interest Period relates. If none

                                      10
<PAGE>
of such Telerate Page 3750 nor any successor or similar service is available,
then "LIBOR" shall mean, with respect to any Interest Period for any applicable
LIBOR Borrowing, the rate of interest per annum, rounded upwards, if necessary,
to the nearest 1/100th of 1%, quoted by Agent at or before 10:00 a.m., Houston,
Texas time (or as soon thereafter as practicable), on the date two LIBOR
Business Days before the first day of such Interest Period, to be the arithmetic
average of the prevailing rates per annum at the time of determination and in
accordance with the then existing practice in the applicable market, for the
offering to Agent by one or more prime banks selected by Agent in its sole
discretion, in the London interbank market, of deposits in United States dollars
for delivery on the first day of such Interest Period and having a maturity
equal to the length of such Interest Period and in an amount equal (or as nearly
equal as may be) to the LIBOR Borrowing to which such Interest Period relates.
Each determination by Agent of LIBOR shall create a rebuttable presumption as to
the accuracy thereof, and may be computed using any reasonable averaging and
attribution method.

      LIBOR BORROWING means each portion of the principal balance of the Loans
at any time bearing interest at a Eurodollar Rate.

      LIBOR BUSINESS DAY means a Business Day on which transactions in United
States dollar deposits between lenders may be carried on in the London interbank
market.

      LIEN means any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions and other title exceptions.

      LOANS means the loans provided for by SECTION 2.1 hereof.

      LOAN DOCUMENTS means, collectively, this Agreement, the Notes, the
Guaranties, all Applications, the Notice of Entire Agreement, all instruments,
certificates and agreements now or hereafter executed or delivered by any
Obligor to Agent or any Lender pursuant to any of the foregoing or in connection
with the Obligations or any commitment regarding the Obligations, and all
amendments, modifications, renewals, extensions, increases and rearrangements
of, and substitutions for, any of the foregoing.

      MAJORITY LENDERS means Lenders having greater than 66-2/3% of the
Revolving Loan Commitments or, if the Revolving Loan Commitments are terminated,
Lenders having greater than 66-2/3% of the outstanding Loans.

      MARGIN PERCENTAGE means, on any day prior to August 1, 1997, 0.75% and on
and after August 1, 1997, the applicable per annum percentage set forth at the
appropriate intersection in the table shown below, based on the Debt to Pro
Forma Consolidated EBITDA Ratio as of the last day of the most recently ended
fiscal quarter of Borrower calculated by Agent as soon as practicable after
receipt by Agent of all financial reports required under this Agreement with

                                      11
<PAGE>
respect to such fiscal quarter (including a Compliance Certificate), to be
effective as of the first day of the month following the date that such
financial reports are required to be delivered hereunder:

      DEBT TO PRO FORMA                   LIBOR BORROWINGS
      CONSOLIDATED EBITDA RATIO           MARGIN PERCENTAGE

      Greater than 2.75                      1.50

      Greater than 2.50 but
      less than or equal to 2.75             1.25

      Greater than 2.25 but
      less than or equal to 2.50             1.125

      Greater than 2.00 but
      less than or equal to 2.25             1.00

      Greater than 1.75 but
      less than or equal to 2.00             0.875

      Greater than 1.50 but
      less than or equal to 1.75             0.75

      Greater than 1.00 but
      less than or equal to 1.50             0.625

      Less than or equal to 1.00             0.50

      MATERIAL ADVERSE EFFECT means relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), resulting in (i) a material adverse
effect on the financial condition, business, operations, or assets of Borrower
and its Subsidiaries, on a consolidated basis, from those reflected in the
financial statements furnished to Agent referred to in SECTION 6.2 hereof or
from the facts represented or warranted in this Agreement or any other Loan
Document, (ii) a material impairment of the ability of Borrower and its
Subsidiaries, on a consolidated basis, to perform their obligations under the
Loan Documents or (iii) a material impairment of the validity or enforceability
of the Loan Documents the result of which is a material adverse effect on the
ability of Lenders to collect the Obligations when due.

      NOTES shall have the meaning assigned to such term in SECTION 2.6 hereof.

                                      12
<PAGE>
      NOTICE OF ENTIRE AGREEMENT means a notice of entire agreement, in Proper
Form, executed by Borrower, each other Obligor and Agent, as the same may from
time to time be amended, modified, supplemented or restated.

      OBLIGATIONS means, as at any date of determination thereof, the sum of the
following: (i) the aggregate principal amount of Loans outstanding hereunder on
such date, PLUS (ii) the aggregate amount of the outstanding Letter of Credit
Liabilities hereunder on such date, PLUS (iii) all other outstanding
liabilities, obligations and indebtedness of any Obligor under any Loan Document
on such date.

      OBLIGORS means Borrower, each Person (other than Agent or a Lender) now or
hereafter executing a Guaranty and each Principal Subsidiary of Borrower.

      ORGANIZATIONAL DOCUMENTS means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership and with respect to a trust, the instrument
establishing such trust; in each case including any and all modifications
thereof as of the date of the Loan Document referring to such Organizational
Document and any and all future modifications thereof.

      PAST DUE RATE means, on any day, a rate per annum equal to the lesser of
(i) the Ceiling Rate for that day or (ii) the Base Rate plus two percent (2%).

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

      PERMITTED DIVIDENDS means dividends permitted under the terms of SECTION
8.6 hereof.

      PERMITTED INVESTMENT means Investments permitted under the terms of
SECTION 8.9 hereof.

      PERMITTED LIENS means Liens permitted under the provisions of SECTION 8.2
hereof.

      PERSON means any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.

      PLAN means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code and is either (a) maintained by Borrower or any member of the Controlled
Group for employees of Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.

                                      13
<PAGE>
      PRIME RATE means, on any day, the prime rate for that day as determined
from time to time by TCB. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate or a favored rate, and TCB, Agent
and each Lender disclaims any statement, representation or warranty to the
contrary. TCB, Agent or any Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.

      PRINCIPAL OFFICE means the principal office of Agent, presently located at
712 Main Street, Houston, Harris County, Texas 77002.

      PRINCIPAL SUBSIDIARIES means (i) the Subsidiaries listed on EXHIBIT F
hereto under the heading "Principal Subsidiaries", (ii) any newly acquired or
created Subsidiary if (1) the assets of such Subsidiary exceed 5% of Borrower's
consolidated assets (in each case, as of the end of the fiscal quarter during
which the applicable Subsidiary is acquired) or (2) such Subsidiary's allocable
share of Consolidated EBITDA exceeds 5% of Consolidated EBITDA (in each case,
for the four quarters ending on the last day of the fiscal quarter during which
the applicable Subsidiary is acquired and the applicable Subsidiary's allocable
share calculated as if it had been a Subsidiary for all of such period) and
(iii) any other Subsidiary which has been designated by Borrower as being a
Principal Subsidiary in accordance with SECTION 7.10 hereof and which has
executed and delivered a Guaranty.

      PRO FORMA CONSOLIDATED EBITDA means, for any period for which the amount
thereof is to be determined, Consolidated EBITDA of Borrower plus (or minus),
without duplication, the allocable share of Consolidated EBITDA, including such
adjustments necessary to present on a pro forma basis, for such period of any
Person acquired during such period (calculated as if such Person had been a
Subsidiary for all of such period). Borrower shall furnish to Agent supporting
calculations for Pro Forma Consolidated EBITDA and such other information as
Agent may reasonably request to determine the accuracy of such calculation.

      PROPER FORM means in form reasonably satisfactory to Agent.

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

      QUALIFIED SUBSIDIARY means any Subsidiary in which Borrower owns, directly
or indirectly, not less than 80% of the equity interests of such Subsidiary.

      QUARTERLY DATES means the last day of each March, June, September and
December, PROVIDED that if any such date is not a Business Day, then the
relevant Quarterly Date shall be the next succeeding Business Day.

      QUARTERLY FINANCIAL STATEMENTS means the quarterly financial statements of
a Person, which statements shall include a balance sheet as of the end of such
fiscal quarter, an income statement for the period ended on such fiscal quarter
and for the fiscal year to date and a

                                      14
<PAGE>
statement of cash flows for the fiscal year to date, subject to normal year-end
adjustments, all setting forth in comparative form the corresponding figures as
of the end of and for the corresponding fiscal quarter of the preceding year,
prepared in accordance with GAAP in all material respects except that such
statements are condensed and exclude detailed footnote disclosures and certified
by the chief financial officer or other authorized officer of such Person as
fairly presenting, in all material respects, the financial position of such
person as of such date.

      RATE DESIGNATION DATE means that Business Day which is (a) in the case of
Base Rate Borrowings, 11:00 a.m., Houston, Texas time, on the date of such
borrowing and (b) in the case of LIBOR Borrowings, 11:00 a.m., Houston, Texas
time, on the date three LIBOR Business Days preceding the first day of any
proposed Interest Period.

      RATE DESIGNATION NOTICE means a written notice substantially in the form
of EXHIBIT B.

      REGULATION D means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and includes any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.

      REGULATORY CHANGE means with respect to any Lender, any change on or after
the date of this Agreement in any Legal Requirement (including, without
limitation, Regulation D) or the adoption or making on or after such date of any
interpretation, directive or request applying to a class of lenders including
such Lender under any Legal Requirements (whether or not having the force of
law) by any Governmental Authority.

      REIMBURSEMENT OBLIGATIONS means, as at any date, the obligations of
Borrower then outstanding, or which may thereafter arise, in respect of Letters
of Credit under this Agreement, to reimburse the applicable Issuers for the
amount paid by such Issuers in respect of any drawing under such Letters of
Credit, which obligations shall at all times be payable in Dollars
notwithstanding any such Letter of Credit being payable in a currency other than
Dollars.

      REQUEST FOR EXTENSION OF CREDIT means a request for extension of credit
duly executed by the chief executive officer, chief financial officer, any vice
president or treasurer of Borrower or any other officer of Borrower duly
authorized in writing by Borrower, appropriately completed and substantially in
the form of EXHIBIT A attached hereto.

      REQUIREMENTS OF ENVIRONMENTAL LAW means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation

                                      15
<PAGE>
of the manufacture, processing, distribution in commerce, use, discharge or
storage of Hazardous Substances.

      REVOLVING LOAN AVAILABILITY PERIOD means, for each Revolving Loan Lender,
the period from and including the Effective Date to (but not including) the
Revolving Loan Termination Date.

      REVOLVING LOAN LENDER means each Lender with (i) prior to the Revolving
Loan Termination Date, a Revolving Loan Commitment and (ii) on and after the
Revolving Loan Termination Date, any outstanding Revolving Loan Obligations.

      REVOLVING LOAN COMMITMENT means, as to any Lender, the obligation, if any,
of such Lender to make Loans and incur or participate in Letter of Credit
Liabilities in an aggregate principal amount at any one time outstanding up to
(but not exceeding) the amount, if any, set forth opposite such Lender's name on
the signature pages hereof under the caption "Revolving Loan Commitment", or
otherwise provided for in an Assignment and Acceptance Agreement (as the same
may be reduced from time to time pursuant to SECTION 2.3 hereof).

      REVOLVING LOAN COMMITMENT PERCENTAGE means, as to any Revolving Loan
Lender, the percentage equivalent of a fraction the numerator of which is the
amount of such Lender's Revolving Loan Commitment and the denominator of which
is the aggregate amount of the Revolving Loan Commitments of all Lenders.

      REVOLVING LOAN MATURITY DATE means the maturity of the Notes, May 31,
2000. Upon written request from Borrower at any time after November 30, 1999 but
prior to February 28, 2000 (and thereafter annually within the same three month
period), Agent shall make request on the Lenders for approval to a one (1) year
extension of the Revolving Loan Maturity Date; PROVIDED, HOWEVER, that no such
extension shall be effective without the unanimous written consent of the
Lenders, which may be given or denied in their sole discretion, with or without
cause.

      REVOLVING LOAN OBLIGATIONS means, as at any date of determination thereof,
the sum of the following (determined without duplication): (i) the aggregate
principal amount of Loans outstanding hereunder PLUS (ii) the aggregate amount
of the Letter of Credit Liabilities hereunder.

      REVOLVING LOAN TERMINATION DATE means the earlier of (a) the Revolving
Loan Maturity Date or (b) the date specified by Agent in accordance with SECTION
9.1 hereof.

      SECRETARY'S CERTIFICATE means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation as to (a) the resolutions
of the Board of Directors of such corporation authorizing the execution,
delivery and performance of the documents to be executed by such corporation;
(b) the incumbency and signature of the officer of such corporation
such

                                      16
<PAGE>
executing documents on behalf of such corporation, and (c) the Organizational
Documents of such corporation.

      STATED RATE means the effective weighted per annum rate of interest
applicable to the Loans; PROVIDED, that if on any day such rate shall exceed the
Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling Rate on
that day and on each day thereafter until the total amount of interest accrued
at the Stated Rate on the unpaid principal balances of the Notes plus the
Additional Interest equals the total amount of interest which would have accrued
if there had been no Ceiling Rate. If the Notes mature (or are prepaid) before
such equality is achieved, then, in addition to the unpaid principal and accrued
interest then owing pursuant to the other provisions of the Loan Documents,
Borrower promises to pay on demand to the order of the holder of each Note
interest in an amount equal to the excess (if any) of (a) the lesser of (i) the
total interest which would have accrued on such Note if the Stated Rate had been
defined as equal to the Ceiling Rate from time to time in effect and (ii) the
total interest which would have accrued on such Note if the Stated Rate were not
so prohibited from exceeding the Ceiling Rate, over (b) the total interest
actually accrued on such Note to such maturity (or prepayment) date. Without
notice to Borrower or any other Person, the Stated Rate shall automatically
fluctuate upward and downward in accordance with the provisions of this
definition.

      STOCKHOLDERS' EQUITY means the consolidated stockholders' equity of
Borrower and its Subsidiaries determined in accordance with GAAP.

      SUBSIDIARY means, as to a particular parent Corporation, any Corporation
of which more than 50% of the indicia of equity rights (whether outstanding
capital stock or otherwise) is at the time directly or indirectly owned by, such
parent Corporation.

      TAXES shall have the meaning ascribed to it in SECTION 4.1(D).

      TEXAS CREDIT CODE means Title 79, Texas Revised Civil Statutes, 1925, as
amended.

      TOTAL CAPITALIZATION means the sum of, without duplication, the
Indebtedness of Borrower and its Subsidiaries, on a consolidated basis,
preferred stock and the consolidated stockholders' equity (including paid-in
capital and retained earnings) of Borrower and its Subsidiaries, determined in
accordance with GAAP.

      UNFUNDED LIABILITIES means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent actuarial valuation report for such
Plan, but only to the extent that such excess represents a potential liability
of any member of the Controlled Group to the PBGC or a Plan under Title IV of
ERISA. With respect to multi-employer Plans, the term "Unfunded Liabilities"
shall also include asserted withdrawal liability under Section 4201 of ERISA to
all multi-employer Plans

                                      17
<PAGE>
to which Borrower or any member of a Controlled Group for employees of Borrower
contributes in the event of complete withdrawal from such plans.

      1.2 MISCELLANEOUS. The words "HEREOF," "HEREIN," and "HEREUNDER" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement. The term "ANNUALIZED"
as used herein shall mean the multiplication of the applicable amount for any
given period by a fraction, the numerator of which is 365 and the denominator of
which is the number of days elapsed in such period.

2.    COMMITMENTS AND LOANS.

      2.1 LOANS. Each Lender severally agrees, subject to all of the terms and
conditions of this Agreement (including, without limitation, SECTIONS 5.1 AND
5.2 hereof), to make Loans to Borrower, from time to time on or after the
Effective Date and during the Revolving Loan Availability Period, in an
aggregate principal amount at any one time outstanding (including its Revolving
Loan Commitment Percentage of all Letter of Credit Liabilities at such time) up
to but not exceeding such Lender's Revolving Loan Commitment Percentage of the
aggregate of the Revolving Loan Commitments. Subject to the conditions in this
Agreement, any such Loan repaid prior to the Revolving Loan Termination Date may
be reborrowed pursuant to the terms of this Agreement; PROVIDED, that any and
all such Loans shall be due and payable in full at the end of the Revolving Loan
Availability Period. Borrower, Agent and the Lenders agree that Chapter 15 of
the Texas Credit Code shall not apply to this Agreement, the Revolving Notes or
any Revolving Loan Obligation. The aggregate of all Loans to be made by the
Lenders in connection with a particular borrowing shall be equal to an integral
multiple of $100,000.

      2.2   LETTERS OF CREDIT.

      (a) LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, and on the condition that aggregate Letter of Credit Liabilities
shall never exceed $10,000,000, (i) Borrower shall have the right to, in
addition to Loans provided for in SECTION 2.1 hereof, utilize the Revolving Loan
Commitments from time to time during the Revolving Loan Availability Period by
obtaining the issuance of standby letters of credit for the account of Borrower
if Borrower shall so request in the notice referred to in SECTION 2.2(B)(I)
hereof (such standby letters of credit as any of them may be amended,
supplemented, extended or confirmed from time to time, being herein collectively
called the "LETTERS OF CREDIT)" and (ii) TCB agrees to issue such Letters of
Credit. Upon the date of the issuance of a Letter of Credit, the applicable
Issuer shall be deemed, without further action by any party hereto, to have sold
to each Revolving Loan Lender, and each such Lender shall be deemed, without
further action by any party hereto, to have purchased from the applicable
Issuer, a participation, to the extent of such Lender's Revolving Loan
Commitment Percentage, in such Letter of Credit and the related Letter of Credit
Liabilities, which participation shall terminate on the earlier of the
expiration date of such Letter of Credit or the Revolving Loan Termination Date.
No Letter of Credit shall have an expiration date later than one year from date
of issuance. Any Letter of Credit that

                                      18
<PAGE>
shall have an expiration date after the end of the Revolving Loan Availability
Period shall be subject to Cover or backed by a standby letter of credit in form
and substance, and issued by a Person, acceptable to Agent in its sole
discretion. TCB or, with the prior approval of Borrower and Agent, another
Lender shall be the Issuer of each Letter of Credit.

      (b) ADDITIONAL PROVISIONS. The following additional provisions shall apply
to each Letter of Credit:

            (i) Borrower shall give Agent notice requesting each issuance of a
      Letter of Credit hereunder as provided in SECTION 4.3 hereof and shall
      furnish such additional information regarding such transaction as Agent
      may reasonably request. Upon receipt of such notice, Agent shall promptly
      notify each Revolving Loan Lender of the contents thereof and of such
      Lender's Revolving Loan Commitment Percentage of the amount of such
      proposed Letter of Credit.

            (ii) No Letter of Credit may be issued if after giving effect
      thereto the sum of (A) the aggregate outstanding principal amount of Loans
      plus (B) the aggregate Letter of Credit Liabilities would exceed the
      aggregate of the Revolving Loan Commitments. On each day during the period
      commencing with the issuance of any Letter of Credit and until such Letter
      of Credit shall have expired or been terminated, the Revolving Loan
      Commitment of each Revolving Loan Lender shall be deemed to be utilized
      for all purposes hereof in an amount equal to such Lender's Revolving Loan
      Commitment Percentage of the amount then available for drawings under such
      Letter of Credit (or any unreimbursed drawings under such Letter of
      Credit).

            (iii) Upon receipt from the beneficiary of any Letter of Credit of
      any demand for payment thereunder, Agent shall promptly notify Borrower
      and each Lender as to the amount to be paid as a result of such demand and
      the payment date therefor. If at any time prior to the earlier of the
      expiration date of a Letter of Credit or the Revolving Loan Termination
      Date any Issuer shall have made a payment to a beneficiary of a Letter of
      Credit in respect of a drawing under such Letter of Credit, each Revolving
      Loan Lender will pay to Agent immediately upon demand by such Issuer at
      any time during the period commencing after such payment until
      reimbursement thereof in full by Borrower, an amount equal to such
      Lender's Revolving Loan Commitment Percentage of such payment, together
      with interest on such amount for each day from the date of demand for such
      payment (or, if such demand is made after 11:00 a.m. Houston time on such
      date, from the next succeeding Business Day) to the date of payment by
      such Lender of such amount at a rate of interest per annum equal to the
      Federal Funds Rate for such period. To the extent that it is ultimately
      determined that the Borrower is relieved of its obligation to reimburse
      the applicable Issuer because of such Issuer's gross negligence or willful
      misconduct in determining that documents received under any applicable
      Letter of Credit comply with the terms thereof, the applicable Issuer
      shall be

                                      19
<PAGE>
      obligated to refund to the paying Lenders all amounts paid to such Issuer
      to reimburse Issuer for the applicable drawing under such Letter of
      Credit.

            (iv) Borrower shall be irrevocably and unconditionally obligated
      forthwith to reimburse Agent, on the date on which the Agent notifies
      Borrower of the date and amount of any payment by the Issuer of any
      drawing under a Letter of Credit, for the amount paid by any Issuer upon
      such drawing, without presentment, demand, protest or other formalities of
      any kind, all of which are hereby waived. Such reimbursement may, subject
      to satisfaction of the conditions in SECTIONS 5.1 and 5.2 hereof and to
      the aggregate of the Revolving Loan Commitments (after adjustment in the
      same to reflect the elimination of the corresponding Letter of Credit
      Liability), be made by the borrowing of Loans. Agent will pay to each
      Revolving Loan Lender such Lender's Revolving Loan Commitment Percentage
      of all amounts received from Borrower for application in payment, in whole
      or in part, of the Reimbursement Obligation in respect of any Letter of
      Credit, but only to the extent such Lender has made payment to Agent in
      respect of such Letter of Credit pursuant to CLAUSE (III) above.

            (v) Borrower will pay to Agent at the Principal Office for the
      account of each Revolving Loan Lender a letter of credit fee with respect
      to each Letter of Credit equal to the greater of (x) $500 or (y) the then
      current Margin Percentage for LIBOR Borrowings multiplied by the daily
      average amount available for drawings under each Letter of Credit (and
      computed on the basis of the actual number of days elapsed in a year
      composed of 360 days), in each case for the period from and including the
      date of issuance of such Letter of Credit to and including the date of
      expiration or termination thereof, such fee to be due and payable
      quarterly in arrears. Agent will pay to each Revolving Loan Lender,
      promptly after receiving any payment in respect of letter of credit fees
      referred to in this CLAUSE (V), an amount equal to the product of such
      Lender's Revolving Loan Commitment Percentage TIMES the amount of such
      fees.

            (vi) The issuance by the applicable Issuer of each Letter of Credit
      shall, in addition to the conditions precedent set forth in SECTION 5
      hereof, be subject to the conditions precedent (A) that such Letter of
      Credit shall be in such form and contain such terms as shall be reasonably
      satisfactory to Agent, and (B) that Borrower shall have executed and
      delivered such Applications and other instruments and agreements relating
      to such Letter of Credit as Agent shall have reasonably requested and are
      not inconsistent with the terms of this Agreement. In the event of a
      conflict between the terms of this Agreement and the terms of any
      Application, the terms hereof shall control.

            (vii) Issuer will send to the Borrower and each Lender, immediately
      upon issuance of any Letter of Credit issued by Issuer or any amendment
      thereto, a true and correct copy of such Letter of Credit or amendment.

                                      20
<PAGE>
      (c) INDEMNIFICATION; RELEASE. Borrower hereby indemnifies and holds
harmless Agent, each Revolving Loan Lender and each Issuer from and against any
and all claims and damages, losses, liabilities, costs or expenses which Agent,
such Lender or such Issuer may incur (or which may be claimed against Agent,
such Lender or such Issuer by any Person whatsoever), REGARDLESS OF WHETHER
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES,
in connection with the execution and delivery of any Letter of Credit or
transfer of or payment or failure to pay under any Letter of Credit; PROVIDED
that Borrower shall not be required to indemnify any party seeking
indemnification for any claims, damages, losses, liabilities, costs or expenses
to the extent, but only to the extent, caused by (i) the willful misconduct or
gross negligence of the party seeking indemnification, or (ii) the failure by
the party seeking indemnification to pay under any Letter of Credit after the
presentation to it of a request required to be paid under applicable law.
Borrower hereby releases, waives and discharges Agent, each Revolving Loan
Lender and each Issuer from any claims, causes of action, damages, losses,
liabilities, reasonable costs or expenses which may now exist or may hereafter
arise, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
OF THE INDEMNIFIED PARTIES, by reason of or in connection with the failure of
any other Revolving Loan Lender to fulfill or comply with its obligations to
Agent, such Lender or such Issuer, as the case may be, hereunder (but nothing
herein contained shall affect any rights Borrower may have against such
defaulting Lender); PROVIDED that Borrower shall not be required to indemnify
any party seeking indemnification for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of the party seeking indemnification, or
(ii) the failure by the party seeking indemnification to pay under any Letter of
Credit after the presentation to it of a request required to be paid under
applicable law. Nothing in this SECTION 2.2(C) is intended to limit the
obligations of Borrower under any other provision of this Agreement.

      (d) ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a result of
any Regulatory Change there shall be imposed, modified or deemed applicable any
tax (other than any tax based on or measured by net income), reserve, special
deposit or similar requirement against or with respect to or measured by
reference to Letters of Credit issued or to be issued hereunder or
participations in such Letters of Credit, and the result shall be to increase
the cost to any Revolving Loan Lender of issuing or maintaining any Letter of
Credit or any participation therein, or materially reduce any amount receivable
by any Revolving Loan Lender hereunder in respect of any Letter of Credit or any
participation therein (which increase in cost, or reduction in amount
receivable, shall be the result of such Lender's reasonable allocation of the
aggregate of such increases or reductions resulting from such event), then such
Lender shall notify Borrower through Agent (which notice shall be accompanied by
a statement setting forth in reasonable detail the basis for the determination
of the amount due), and within 15 Business Days after demand therefor by such
Lender through Agent, Borrower shall pay to such Lender, from time to time as
specified by such Lender, such additional amounts as shall be sufficient to
compensate such Lender for such increased costs or reductions in amount. Such
statement as to such increased costs or reductions in amount incurred by such
Lender, submitted by such

                                      21
<PAGE>
Lender to Borrower, shall create a rebuttable presumption as to the accuracy
thereof, and may be computed using any reasonable averaging and attribution
method. Each Lender will notify Borrower through Agent of any event occurring
after the date of this Agreement which will entitle such Lender to compensation
pursuant to this Section as promptly as practicable after any executive officer
of such Lender obtains knowledge thereof and determines to request such
compensation, and (if so requested by Borrower through Agent) will designate a
different lending office of such Lender for the issuance or maintenance of
Letters of Credit by such Lender or will take such other action as Borrower may
reasonably request if such designation or action is consistent with the internal
policy of such Lender and legal and regulatory restrictions, can be undertaken
at no additional cost, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender (PROVIDED that such Lender shall have no
obligation so to designate a different lending office which is not located in
the United States of America).

      2.3   TERMINATIONS OR REDUCTIONS OF  COMMITMENTS.

      (a) MANDATORY. On the Revolving Loan Termination Date, all Revolving Loan
Commitments shall be terminated in their entirety.

      (b) OPTIONAL. Borrower shall have the right to terminate or reduce the
unused portion of the Revolving Loan Commitments at any time or from time to
time, PROVIDED that (i) Borrower shall give notice of each such termination or
reduction to Agent as provided in SECTION 4.3 hereof and (ii) each such partial
reduction shall be in an integral multiple of $5,000,000.

      (c) NO REINSTATEMENT. No termination or reduction of the Revolving Loan
Commitments may be reinstated without the written approval of Agent and the
Lenders.

      2.4   COMMITMENT FEES.

      (a) Borrower shall pay to Agent for the account of each Revolving Loan
Lender revolving loan commitment fees for the period from the Effective Date to
and including the Revolving Loan Termination Date at a rate per annum equal to
the Commitment Fee Percentage. Such revolving loan commitment fees shall be
computed (on the basis of the actual number of days elapsed in a year composed
of 360 days) on each day and shall be based on the excess of (x) the aggregate
amount of each Revolving Loan Lender's Revolving Loan Commitment for such day
over (y) the sum of (i) the aggregate unpaid principal balance of such Lender's
Revolving Note on such day PLUS (ii) the aggregate Letter of Credit Liabilities
as to such Lender for such day. Accrued revolving loan commitment fees shall be
payable in arrears on the Quarterly Dates prior to the Revolving Loan
Termination Date and on the Revolving Loan Termination Date.

      (b) All past due fees payable under this Section shall bear interest at
the Past Due Rate.

                                      22
<PAGE>
      2.5 SEVERAL OBLIGATIONS. The failure of any Lender to make any Loan to be
made by it on the date specified therefor shall not relieve any other Lender of
its obligation to make its Loan on such date, but neither Agent nor any Lender
shall be responsible or liable for the failure of any other Lender to make a
Loan to be made by such other Lender or to participate in, or coissue, any
Letter of Credit. Notwithstanding anything contained herein to the contrary, (a)
no Lender shall be required to make or maintain Loans at any time outstanding if
as a result the total Revolving Loan Obligations held by such Lender shall
exceed the lesser of (1) such Lender's Revolving Loan Commitment Percentage of
all Revolving Loan Obligations and (2) such Lender's Revolving Loan Commitment
Percentage of the aggregate of the Revolving Loan Commitments and (b) if a
Revolving Loan Lender fails to make a Loan as and when required hereunder, then
upon each subsequent event which would otherwise result in funds being paid to
the defaulting Lender, the amount which would have been paid to the defaulting
Lender shall be divided among the non-defaulting Lenders ratably according to
their respective shares of the outstanding Revolving Loan Commitment Percentages
until the Revolving Loan Obligations of each Revolving Loan Lender (including
the defaulting Lender) are equal to such Lender's Revolving Loan Commitment
Percentage of the total Revolving Loan Obligations.

      2.6 NOTES. The Loans made by each Lender shall be evidenced by a single
promissory note of Borrower in substantially the form of EXHIBIT C hereto
payable to the order of such Lender in a principal amount equal to the Revolving
Loan Commitment of such Lender, and otherwise duly completed. The promissory
notes described in this Section are each, together with all renewals,
extensions, modifications, amendments, increases and/or and replacements thereof
and substitutions therefor, called a "NOTE" and collectively called the "NOTES".
Each Lender is hereby authorized by Borrower to endorse on the schedule (or a
continuation thereof) that may be attached to each Note of such Lender, to the
extent applicable, the date, amount, type of and the applicable period of
interest for each Loan made by such Lender to Borrower hereunder, and the amount
of each payment or prepayment of principal of such Loan received by such Lender,
PROVIDED, that any failure by such Lender to make any such endorsement shall not
affect the obligations of Borrower under such Note or hereunder in respect of
such Loan.

      2.7 USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance
existing Borrowed Money Indebtedness of Borrower, to finance acquisitions and
for other working capital and general corporate purposes. Neither Agent nor any
Lender shall have any responsibility as to the use of any proceeds of the Loans.

3.    BORROWINGS, PAYMENTS, PREPAYMENTS AND INTEREST OPTIONS.

      3.1 BORROWINGS. Borrower shall give Agent notice of each borrowing to be
made hereunder as provided in SECTION 4.3 hereof and Agent shall promptly notify
each Lender of such request. Not later than 2:00 p.m. Houston time on the date
specified for each such borrowing hereunder, each Lender shall make available
the amount of the Loan, if any, to be made by it on such date to Agent at its
Principal Office, in immediately available funds, for the account of Borrower.
Such amounts received by Agent will be held in an account maintained by Borrower

                                      23
<PAGE>
with Agent. The amounts so received by Agent shall, subject to the terms and
conditions of this Agreement, be made available to Borrower by wiring or
otherwise transferring, in immediately available funds, such amount to an
account designated by Borrower.

      3.2   PREPAYMENTS.

      (a) OPTIONAL PREPAYMENTS. Except as provided in SECTION 3.3 hereof,
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, any Loans at any time or from
time to time, PROVIDED that Borrower shall give Agent notice of each such
prepayment as provided in SECTION 4.3 hereof. Each optional prepayment on a Loan
shall be in an amount equal to an integral multiple of $100,000.

      (b) INTEREST PAYMENTS. Accrued and unpaid interest on the unpaid principal
balance of the Loans shall be due and payable on the Interest Payment Dates.

      (c) PAYMENTS AND INTEREST ON REIMBURSEMENT OBLIGATIONS. Borrower will pay
to Agent for the account of each Lender the amount of each Reimbursement
Obligation on the date on which the Agent notifies Borrower of the date and
amount of the applicable payment by the Issuer of any drawing under a Letter of
Credit. The amount of any Reimbursement Obligation may, if the applicable
conditions precedent specified in SECTIONS 5.1 and 5.2 hereof have been
satisfied, be paid with the proceeds of Loans. Subject to SECTION 11.7 hereof,
Borrower will pay to Agent for the account of each Lender interest at the
applicable Past Due Rate on any Reimbursement Obligation and on any other amount
payable by Borrower hereunder to or for the account of such Lender (but, if such
amount is interest, only to the extent legally allowed), which has not been paid
in full within five (5) days after the date due (whether at stated maturity, by
acceleration or otherwise), for the period commencing on the expiration of such
five (5) day period until the same is paid in full.

      3.3   INTEREST OPTIONS

      (a) OPTIONS AVAILABLE. The outstanding principal balance of the Notes
shall bear interest at the Base Rate; PROVIDED, that (1) all past due amounts,
both principal and accrued interest, shall bear interest at the Past Due Rate,
and (2) subject to the provisions hereof, Borrower shall have the option of
having all or any portion of the principal balances of the Notes from time to
time outstanding bear interest at a Eurodollar Rate. The records of Agent and
each of the Lenders with respect to Interest Options, Interest Periods and the
amounts of Loans to which they are applicable shall create a rebuttable
presumption as to the accuracy thereof, and Agent and Lenders agree to furnish
written evidence to Borrower upon request of Borrower with respect to such
matters. Interest on the Loans shall be calculated at the Base Rate except where
it is expressly provided pursuant to this Agreement that a Eurodollar Rate is to
apply. Interest on the amount of each advance against the Notes shall be
computed on the amount of that advance and from the date it is made.
Notwithstanding anything in this Agreement to the contrary, for the full term of
the Notes the interest rate produced by the aggregate of all sums

                                      24
<PAGE>
paid or agreed to be paid to the holders of the Notes for the use, forbearance
or detention of the debt evidenced thereby (including all interest on the Notes
at the Stated Rate plus the Additional Interest) shall not exceed the Ceiling
Rate.

      (b) DESIGNATION AND CONVERSION. Borrower shall have the right to designate
or convert its Interest Options in accordance with the provisions hereof.
PROVIDED no Event of Default has occurred and is continuing and subject to the
last sentence of SECTION 3.3(A) and the provisions of SECTION 3.3(C), Borrower
may elect to have a Eurodollar Rate apply or continue to apply to all or any
portion of the principal balance of the Notes. Each change in Interest Options
shall be a conversion of the rate of interest applicable to the specified
portion of the Loans, but such conversion shall not change the respective
outstanding principal balances of the Notes. The Interest Options shall be
designated or converted in the manner provided below:

      (i)   Borrower shall give Agent telephonic notice, promptly confirmed by a
            Rate Designation Notice (and Agent shall promptly inform each Lender
            thereof). Each such telephonic and written notice shall specify the
            amount of the Loan which is the subject of the designation, if any;
            the amount of borrowings into which such borrowings are to be
            converted or for which an Interest Option is designated; the
            proposed date for the designation or conversion and the Interest
            Period or Periods, if any, selected by Borrower. Such telephonic
            notice shall be irrevocable and shall be given to Agent no later
            than the applicable Rate Designation Date.

      (ii)  No more than fifteen (15) LIBOR Borrowings shall be in effect with
            respect to the Loans at any time.

      (iii) Each designation or conversion of a LIBOR Borrowing shall occur on a
            LIBOR Business Day.

      (iv)  Each request for a LIBOR Borrowing shall be in the amount equal to
            an integral multiple of $100,000.

      (v)   Each designation of an Interest Option with respect to the Revolving
            Notes shall apply to all of the Revolving Notes ratably in
            accordance with their respective outstanding principal balances. If
            any Lender assigns an interest in any of its Notes when any LIBOR
            Borrowing is outstanding with respect thereto, then such assignee
            shall have its ratable interest in such LIBOR Borrowing.

      (c)   SPECIAL PROVISIONS APPLICABLE TO LIBOR BORROWINGS.

      (i) OPTIONS UNLAWFUL. If the adoption of any applicable Legal Requirement
after the Effective Date or any change after the Effective Date in any
applicable Legal Requirement or in the interpretation or administration thereof
by any Governmental Authority or compliance by

                                      25
<PAGE>
any Lender with any request or directive (whether or not having the force of
law) issued after the Effective Date by any central bank or other Governmental
Authority shall at any time make it unlawful or impossible for any Lender to
permit the establishment of or to maintain any LIBOR Borrowing, the commitment
of such Lender to establish or maintain such LIBOR Borrowing shall forthwith be
canceled and Borrower shall forthwith, upon demand by Agent to Borrower, (1)
convert the LIBOR Borrowing of such Lender with respect to which such demand was
made to a Base Rate Borrowing; (2) pay all accrued and unpaid interest to date
on the amount so converted; and (3) pay any amounts required to compensate each
Lender for any additional cost or expense which any Lender may incur as a result
of such adoption of or change in such Legal Requirement or in the interpretation
or administration thereof and any Funding Loss which any Lender may incur as a
result of such conversion. If, when Agent so notifies Borrower, Borrower has
given a Rate Designation Notice specifying a LIBOR Borrowing but the selected
Interest Period has not yet begun, as to the applicable Lender such Rate
Designation Notice shall be deemed to be of no force and effect, as if never
made, and the balance of the Loans made by such Lender specified in such Rate
Designation Notice shall bear interest at the Base Rate until a different
available Interest Option shall be designated in accordance herewith.

      (ii) INCREASED COST OF BORROWINGS. If the adoption after the Effective
Date of any applicable Legal Requirement or any change after the Effective Date
in any applicable Legal Requirement or in the interpretation or administration
thereof by any Governmental Authority or compliance by any Lender with any
request or directive (whether or not having the force of law) issued after the
Effective Date by any central bank or Governmental Authority shall at any time
as a result of any portion of the principal balances of the Notes being
maintained on the basis of a Eurodollar Rate:

            (1)   subject any Lender to any Taxes, or any deduction or
                  withholding for any Taxes, on or from any payment due under
                  any LIBOR Borrowing or other amount due hereunder, other than
                  income and franchise taxes of the United States or its
                  political subdivisions or such other jurisdiction in which the
                  applicable Lender has its principal office or applicable
                  lending office; or

            (2)   change the basis of taxation of payments due from Borrower to
                  any Lender under any LIBOR Borrowing (other than by a change
                  in the rate of taxation of the overall net income of such
                  Lender); or

            (3)   impose, modify, increase or deem applicable any reserve
                  requirement (excluding that portion of any reserve requirement
                  included in the calculation of the applicable Eurodollar
                  Rate), special deposit requirement or similar requirement
                  (including, but not limited to, state law requirements and
                  Regulation D) against assets of any Lender, or against
                  deposits with any Lender, or against loans made by any Lender,
                  or against any

                                      26
<PAGE>
                  other funds, obligations or other property owned or held by
                  any Lender; or

            (4)   impose on any Lender any other condition regarding any LIBOR
                  Borrowing;

and the result of any of the foregoing is to increase the cost to any Lender of
agreeing to make or of making, renewing or maintaining such LIBOR Borrowing, or
reduce the amount of principal or interest received by any Lender, then, within
15 Business Days after demand by the applicable Lender (accompanied by a
statement setting forth in reasonable detail the applicable Lender's basis
therefor), Borrower shall pay to Agent additional amounts which shall compensate
each Lender for such increased cost or reduced amount. The determination by any
Lender of the amount of any such increased cost, increased reserve requirement
or reduced amount shall create a rebuttable presumption as to the accuracy
thereof. Borrower shall have the right, if it receives from Agent any notice
referred to in this paragraph, upon three Business Days' notice to Agent (which
shall notify each affected Lender), either (i) to repay in full (but not in
part) any borrowing with respect to which such notice was given, together with
any accrued interest thereon, or (ii) to convert the LIBOR Borrowing which is
the subject of the notice to a Base Rate Borrowing; PROVIDED, that any such
repayment or conversion shall be accompanied by payment of (x) the amount
required to compensate each Lender for the increased cost or reduced amount
referred to in the preceding paragraph; (y) all accrued and unpaid interest to
date on the amount so repaid or converted, and (z) any Funding Loss which any
Lender may incur as a result of such repayment or conversion. Each Lender will
notify Borrower through Agent of any event occurring after the date of this
Agreement which will entitle such Lender to compensation pursuant to this
Section as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation, and (if so requested by Borrower
through Agent) will designate a different lending office of such Lender for the
applicable LIBOR Borrowing or will take such other action as Borrower may
reasonable request if such designation or action is consistent with the internal
policy of such Lender and legal and regulatory restrictions, will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
opinion of such Lender, be disadvantageous to such Lender (PROVIDED that such
Lender shall have no obligation so to designate a different lending office which
is located in the United States of America).

      (iii) INADEQUACY OF PRICING AND RATE DETERMINATION. If, for any reason
with respect to any Interest Period, Agent (or, in the case of CLAUSE 3 below,
the applicable Lender) shall have determined (which determination shall create a
rebuttable presumption as to the accuracy thereof) that:

            (1)   Agent is unable through its customary general practices to
                  determine any applicable Eurodollar Rate, or

                                      27

<PAGE>
            (2)   by reason of circumstances affecting the applicable market,
                  generally, Agent is not being offered deposits in United
                  States dollars in such market, for the applicable Interest
                  Period and in an amount equal to the amount of any applicable
                  LIBOR Borrowing requested by Borrower, or

            (3)   any applicable Eurodollar Rate will not adequately and fairly
                  reflect the cost to any Lender of making and maintaining such
                  LIBOR Borrowing hereunder for any proposed Interest Period,

then Agent shall give Borrower written notice thereof (accompanied by a
statement setting forth in reasonable detail the applicable Lender's basis
therefor) and thereupon, (A) any Rate Designation Notice previously given by
Borrower designating the applicable LIBOR Borrowing which has not commenced as
of the date of such notice from Agent shall be deemed for all purposes hereof to
be of no force and effect, as if never given, and (B) until Agent shall notify
Borrower that the circumstances giving rise to such notice from Agent no longer
exist, each Rate Designation Notice requesting the applicable Eurodollar Rate
shall be deemed a request for a Base Rate Borrowing, and any applicable LIBOR
Borrowing then outstanding shall be converted, without any notice to or from
Borrower, upon the termination of the Interest Period then in effect with
respect to it, to a Base Rate Borrowing.

      (iv) FUNDING LOSSES. Borrower shall indemnify each Lender against and hold
each Lender harmless from any Funding Loss. This indemnity shall survive the
payment of the Notes. A certificate of such Lender (explaining in reasonable
detail the amount and calculation of the amount claimed) as to any additional
amounts payable pursuant to this paragraph submitted to Borrower shall create a
rebuttable presumption as to the accuracy thereof.

      (d) FUNDING OFFICES; ADJUSTMENTS AUTOMATIC; CALCULATION YEAR. Any Lender
may, if it so elects, fulfill its obligation as to any LIBOR Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to or for the account of any branch office or affiliate
of such Lender; PROVIDED, that in such event for the purposes of this Agreement
such Loan shall be deemed to have been made by such Lender and the obligation of
Borrower to repay such Loan shall nevertheless be to such Lender and shall be
deemed held by it for the account of such branch or affiliate. Without notice to
Borrower or any other Person, each rate required to be calculated or determined
under this Agreement shall automatically fluctuate upward and downward in
accordance with the provisions of this Agreement. Interest at the Prime Rate
shall be computed on the basis of the actual number of days elapsed in a year
consisting of 365 or 366 days, as the case may be. All other interest required
to be calculated or determined under this Agreement shall be computed on the
basis of the actual number of days elapsed in a year consisting of 360 days,
unless the Ceiling Rate would thereby be exceeded, in which event, to the extent
necessary to avoid exceeding the Ceiling Rate, the applicable interest shall be
computed on the basis of the actual number of days elapsed in the applicable
calendar year in which accrued.

                                      28
<PAGE>
      (e) FUNDING SOURCES. Notwithstanding any provision of this Agreement to
the contrary, each Lender shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if each Lender had actually funded and maintained each LIBOR
Borrowing during each Interest Period through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.

      3.4 CAPITAL ADEQUACY. If any Lender shall have determined that the
adoption after the Effective Date or effectiveness after the Effective Date
(whether or not previously announced) of any applicable law, rule, regulation or
treaty regarding capital adequacy, or any change therein after the Effective
Date, or any change in the interpretation or administration thereof after the
Effective Date by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender with any request or directive after the Effective Date regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder, under the Letters of Credit, the Notes or other
Obligations held by it to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, upon satisfaction of the
conditions precedent set forth in this Section, after demand by such Lender
(with a copy to Agent) as provided below, Borrower shall pay (subject to SECTION
11.7 hereof) to such Lender such additional amount or amounts as will compensate
such Lender for such reduction. The certificate of any Lender setting forth such
amount or amounts as shall be necessary to compensate it and the basis thereof
and reasons therefor shall be delivered as soon as practicable to Borrower and
shall create a rebuttable presumption as to the accuracy thereof. Borrower shall
pay the amount shown as due on any such certificate within five (5) Business
Days after the delivery of such certificate. In preparing such certificate, a
Lender may employ such assumptions and allocations of costs and expenses as it
shall in good faith deem reasonable and may use any reasonable averaging and
attribution method.

      3.5 LIMITATION ON CHARGES; SUBSTITUTE LENDERS; NON-DISCRIMINATION.
Anything in SECTIONS 3.3(C) or 3.4 notwithstanding:

            (1) Borrower shall not be required to pay to any Lender
      reimbursement with regard to any costs or expenses described in such
      Sections, unless such Lender notifies Borrower of such costs or expenses
      within 90 days after the date paid or incurred;

            (2) none of the Lenders shall be permitted to pass through to
      Borrower charges and costs under such Sections on a discriminatory basis
      (i.e., which are not also passed through by such Lender to other customers
      of such Lender similarly situated where such customer is subject to
      documents providing for such pass through); and

                                      29
<PAGE>
            (3) if any Lender elects to pass through to Borrower any material
      charge or cost under such Sections or elects to terminate the availability
      of LIBOR Borrowings for any material period of time, Borrower may, within
      60 days after the date of such event and so long as no Default shall have
      occurred and be continuing, elect to terminate such Lender as a party to
      this Agreement; PROVIDED that, concurrently with such termination Borrower
      shall (i) if Agent and each of the other Lenders shall consent, pay that
      Lender all principal, interest and fees and other amounts owed to such
      Lender through such date of termination or (ii) have arranged for another
      financial institution approved by Agent (such approval not to be
      unreasonably withheld) as of such date, to become a substitute Lender for
      all purposes under this Agreement in the manner provided in SECTION 11.6;
      PROVIDED FURTHER that, prior to substitution for any Lender, Borrower
      shall have given written notice to Agent of such intention and the Lenders
      shall have the option, but no obligation, for a period of 60 days after
      receipt of such notice, to increase their Revolving Loan Commitments in
      order to replace the affected Lender in lieu of such substitution.

4.    PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.

      4.1   PAYMENTS.

      (a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
Borrower hereunder, under the Notes and under the other Loan Documents shall be
made in Dollars, in immediately available funds, to Agent at the Principal
Office (or in the case of a successor Agent, at the principal office of such
successor Agent in the United States), not later than 11:00 a.m. Houston time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).

      (b) Borrower shall, at the time of making each payment hereunder, under
any Note or under any other Loan Document, specify to Agent the Loans or other
amounts payable by Borrower hereunder or thereunder to which such payment is to
be applied. Each payment received by Agent hereunder, under any Note or under
any other Loan Document for the account of a Lender shall be paid promptly to
such Lender, in immediately available funds. If Agent fails to send to any
Lender the applicable amount by the close of business on the date any such
payment is received by Agent if such payment is received prior to 11:00 a.m.
Houston time (or on the next succeeding Business Day with respect to payments
which are received after 11:00 a.m. Houston time), Agent shall pay to the
applicable Lender interest on such amount from such date at the Federal Funds
Rate. Borrower, the Lenders and Agent acknowledge and agree that this provision
and each other provision of this Agreement or any of the other Loan Documents
relating to the application of amounts in payment of the Obligations shall be
subject to the provisions of SECTION 4.2(D) regarding PRO RATA application of
amounts after an Event of Default shall have occurred and be continuing.

                                      30
<PAGE>
      (c) If the due date of any payment hereunder or under any Note falls on a
day which is not a Business Day, the due date for such payments (except as
otherwise provided in SECTION 3.3 hereof) shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.

      (d) All payments by the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for or on account
of any present or future income, stamp, or other taxes, fees, duties,
withholding or other charges of any nature whatsoever imposed by any taxing
authority excluding in the case of each Lender taxes imposed on or measured by
its net income or franchise taxes imposed by the jurisdiction in which it is
organized or through which it acts for purposes of this Agreement (such
non-excluded items being hereinafter referred to as "TAXES"). If as a result of
any change in law (or the interpretation thereof) after the date that the
applicable Lender became a "Lender" under this Agreement any withholding or
deduction from any payment to be made to, or for the account of, a Lender by the
Borrower hereunder or under any other Loan Document is required in respect of
any Taxes pursuant to any applicable law, rule, or regulation, then the Borrower
will (i) pay to the relevant authority the full amount required to be so
withheld or deducted; (ii) to the extent available, promptly forward to the
Agent an official receipt or other documentation reasonably satisfactory to the
Agent evidencing such payment to such authority; and (iii) pay to the Agent, for
the account of each affected Lender, such additional amount or amounts as are
necessary to ensure that the net amount actually received by such Lender will
equal the full amount such Lender would have received had no such withholding or
deduction been required. Each Lender shall determine such additional amount or
amounts payable to it (which determination shall create a rebuttable presumption
as to the accuracy thereof), and in such event, Agent shall furnish written
evidence to Borrower showing how Agent made such determination. If a Lender
becomes aware that any such withholding or deduction from any payment to be made
by the Borrower hereunder or under any other Loan Document is required, then
such Lender shall promptly notify the Agent and the Borrower thereof stating the
reasons therefor and the additional amount required to be paid under this
Section. Each Lender shall execute and deliver to the Agent and Borrower such
forms as it may be required to execute and deliver pursuant to SECTION 11.13
hereof. To the extent that any such withholding or deduction results from the
failure of a Lender to provide a form required by SECTION 11.13 hereof (unless
such failure is due to some prohibition under applicable Legal Requirements),
the Borrower shall have no obligation to pay the additional amount required by
CLAUSE (III) above. Anything in this Section notwithstanding, if any Lender
elects to require payment by the Borrower of any material amount under this
Section, the Borrower may, within 60 days after the date of receiving notice
thereof and so long as no Default shall have occurred and be continuing, elect
to terminate such Lender as a party to this Agreement; PROVIDED that,
concurrently with such termination the Borrower shall (i) if the Agent and each
of the other Lenders shall consent, pay that Lender all principal, interest and
fees and other amounts owed to such Lender through such date of termination or
(ii) have arranged for another financial institution approved by the Agent (such
approval not to be unreasonably withheld) as of such date, to become a
substitute Lender for all purposes under this Agreement in the manner provided
in SECTION 11.6; PROVIDED FURTHER

                                      31
<PAGE>
that, prior to substitution for any Lender, the Borrower shall have given
written notice to the Agent of such intention and the Lenders shall have the
option, but no obligation, for a period of 60 days after receipt of such notice,
to increase their Commitments in order to replace the affected Lender in lieu of
such substitution.

      4.2 PRO RATA TREATMENT. Except to the extent otherwise provided herein:
(a) each borrowing from the Lenders under SECTION 2.1 hereof shall be made
ratably from the Revolving Loan Lenders in accordance with their respective
Revolving Loan Commitments; (b) each payment of revolving loan commitment fees
shall be made for the account of the Revolving Loan Lenders, and each
termination or reduction of the Revolving Loan Commitments of the Revolving Loan
Lenders under SECTION 2.3 hereof shall be applied, PRO RATA, according to the
Revolving Loan Lenders' respective Revolving Loan Commitments; (c) each payment
by Borrower of principal of or interest on the Loans shall be made to Agent for
the account of the Lenders PRO RATA in accordance with the respective unpaid
principal amounts of such Loans held by the Lenders, and (d) the Revolving Loan
Lenders (other than the applicable Issuer) shall purchase from the applicable
Issuer participations in each Letter of Credit to the extent of their respective
Revolving Loan Commitment Percentages.

      4.3 CERTAIN ACTIONS, NOTICES, ETC. Notices to Agent of any termination or
reduction of Revolving Loan Commitments and of borrowings and optional
prepayments of Loans and requests for issuances of Letters of Credit shall be
irrevocable and shall be effective only if received by Agent not later than
11:00 a.m. Houston time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing and/or prepayment specified below:

                                                NUMBER OF BUSINESS DAYS
                                                      PRIOR NOTICE

            Borrowing at the Base Rate                same day

            Repayment of Base Rate Borrowing          same day

            Borrowing at Eurodollar Rate              3 LIBOR Business Days

            Repayment of LIBOR Borrowing
            prior to last day of the applicable       1 LIBOR Business day
            Interest Period

            Letter of Credit issuance                 2

            Termination or Reduction of
            Revolving Loan Commitments                3

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<PAGE>
Each such notice of termination or reduction shall specify the amount of the
applicable Revolving Loan Commitment to be terminated or reduced. Each such
notice of borrowing or prepayment shall specify the amount of the Loans to be
borrowed or prepaid and the date of borrowing or prepayment (which shall be a
Business Day). Agent shall promptly notify the affected Lenders of the contents
of each such notice. Any selection of a Eurodollar Rate with respect to a Loan
shall be subject to the advance notice requirements set forth in SECTION 3.3
hereof.

      4.4 NON-RECEIPT OF FUNDS BY AGENT. Unless Agent shall have been notified
by a Lender or Borrower (the "PAYOR") prior to the date on which such Lender is
to make payment to Agent of the proceeds of a Loan (or funding of a drawing
under a Letter of Credit or reimbursement with respect to any drawing under a
Letter of Credit) to be made by it hereunder or Borrower is to make a payment to
Agent for the account of one or more of the Lenders, as the case may be (such
payment being herein called the "REQUIRED PAYMENT"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to Agent, Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to Agent, the recipient of such
payment (or, if such recipient is the beneficiary of a Letter of Credit,
Borrower and, if Borrower fails to pay the amount thereof to Agent forthwith
upon demand, the Lenders ratably in proportion to their respective Revolving
Loan Commitment Percentages) shall, on demand, pay to Agent the amount made
available by Agent, together with interest thereon in respect of the period
commencing on the date such amount was so made available by Agent until the date
Agent recovers such amount at a rate per annum equal to the Federal Funds Rate
for such period.

      4.5 SHARING OF PAYMENTS, ETC. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, on any
Reimbursement Obligation or on any other Obligation then due to such Lender
hereunder, through the exercise of any right of set-off (including, without
limitation, any right of setoff or lien granted under SECTION 9.2 hereof),
banker's lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Lenders participations in the Loans made, or
Reimbursement Obligations or other Obligations held, by the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable to the end that all the Lenders shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in obtaining
or preserving such benefit) PRO RATA in accordance with the unpaid Obligations
then due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in the Loans made, or Reimbursement
Obligations or other Obligations held, by other Lenders may exercise all rights
of set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans, or
Reimbursement Obligations or other Obligations in the amount of such

                                      33
<PAGE>
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of Borrower.

5.    CONDITIONS PRECEDENT.

      5.1 INITIAL LOANS AND LETTERS OF CREDIT. The obligation of each Lender or
each Issuer to make its initial Loans or issue or participate in a Letter of
Credit (if such Letter of Credit is issued prior to the funding of the initial
Loans) hereunder is subject to the following conditions precedent, each of which
shall have been fulfilled or waived to the satisfaction of Agent:

      (a) AUTHORIZATION AND STATUS. Agent shall have received from the
appropriate Governmental Authorities certified copies of the Organizational
Documents (other than by-laws) of each Obligor, and evidence satisfactory to
Agent of all action taken by each Obligor authorizing the execution, delivery
and performance of the Loan Documents and all other documents related to this
Agreement to which it is a party (including, without limitation, a certificate
of the secretary of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby and attaching a copy of its bylaws), together with such certificates as
may be appropriate to demonstrate the qualification and good standing of and
payment of taxes by each Obligor in the jurisdiction of its organization and in
each other jurisdiction where the failure in which to qualify would have a
Material Adverse Effect.

      (b) INCUMBENCY. Each Obligor shall have delivered to Agent a certificate
in respect of the name and signature of each of the officers (i) who is
authorized to sign on its behalf the applicable Loan Documents related to any
Loan or the issuance of any Letter of Credit and (ii) who will, until replaced
by another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with any Loan or the issuance of any Letter
of Credit. Agent and each Lender may conclusively rely on such certificates
until they receive notice in writing from the applicable Obligor to the
contrary.

      (c) NOTES. Agent shall have received the appropriate Notes of Borrower for
each Lender, duly completed and executed.

      (d) LOAN DOCUMENTS. Each Obligor shall have duly executed and delivered
the Loan Documents to which it is a party (in such number of copies as Agent
shall have requested). Each such Loan Document shall be in substantially the
form furnished to the Lenders prior to their execution of this Agreement,
together with such changes therein as Agent may approve.

      (e) FEES AND EXPENSES. Borrower shall have paid to Agent all unpaid fees
in the amounts previously agreed upon in writing among Borrower and Agent; and
shall have in addition paid to Agent all amounts payable under SECTION 11.3
hereof, on or before the date of

                                      34
<PAGE>
this Agreement, except for amounts which Agent, in its sole discretion, agrees
may be paid at a later date.

      (f) OPINIONS OF COUNSEL. Agent shall have received such opinions of
counsel to Obligors as Agent shall reasonably request with respect to Obligors
and the Loan Documents.

      (g) CONSENTS. Agent shall have received evidence satisfactory to Agent
that all material consents of each Governmental Authority and of each other
Person, if any, reasonably required in connection with (a) the Loans and the
Letters of Credit and (b) the execution, delivery and performance of this
Agreement and the other Loan Documents have been satisfactorily obtained.

      (h) PAYMENT OF CERTAIN OUTSTANDING INDEBTEDNESS. Agent shall have received
evidence satisfactory to Agent that all existing Indebtedness owing under the
credit facility provided to Borrower by NationsBank-Texas, N.A. shall have been
paid in full (or will be paid in full out of the initial advance hereunder) and
that all rights to further advances under such facility shall have been
terminated.

      (i) OTHER DOCUMENTS. Agent shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agent may reasonably request.

      5.2 ALL LOANS AND LETTERS OF CREDIT. The obligation of each Lender to make
any Loan to be made by it hereunder or to issue or participate in any Letter of
Credit is subject to (a) the accuracy, in all material respects, on the date of
such Loan or such issuance of all representations and warranties of each Obligor
contained in this Agreement and the other Loan Documents; (b) Agent shall have
received the following, all of which shall be duly executed and in Proper Form:
(1) a Request for Extension of Credit as to the Loan or the Letter of Credit, as
the case may be, no later than 11:00 a.m. Houston time on the Business Day on
which such Request for Extension of Credit must be given under SECTION 4.3
hereof, (2) in the case of a Letter of Credit, an Application, and (3) such
other documents as Agent may reasonably require; (c) prior to the making of such
Loan or the issuance of such Letter of Credit, there shall have occurred no
event having a Material Adverse Effect; (d) no Default or Event of Default shall
have occurred and be continuing; (e) the making of such Loan or the issuance of
such Letter of Credit shall not be illegal or prohibited by any Legal
Requirement, and (f) Borrower shall have paid all fees and expenses of the type
described in SECTION 11.3 hereof and all other fees owed to Agent or any Lender
under the Loan Documents which are due and payable, in each case, prior to or on
the date of such Loan or such issuance (except for amounts which Agent or the
applicable Lender, as the case may be, in their sole discretion, agree may be
paid at a later date). The submission by the Borrower of a Request for Extension
of Credit shall be deemed to be a representation and warranty that the
conditions precedent to the applicable Loan or Letter of Credit have been
satisfied. Selection of a new interest rate at the expiration of an Interest
Period shall not constitute a new Loan hereunder.

                                      35
<PAGE>
6.    REPRESENTATIONS AND WARRANTIES.

      To induce the Lenders to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit, Borrower represents and
warrants (such representations and warranties to survive any investigation and
the making of the Loans and the issuance of any Letters of Credit) to the
Lenders and Agent as follows:

      6.1 ORGANIZATION. Each Obligor (a) is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its organization; (b)
has all necessary power and authority to conduct its business as presently
conducted, and (c) is duly qualified to do business and in good standing in the
jurisdiction of its organization and in all jurisdictions in which the failure
to so qualify would reasonably be expected to have a Material Adverse Effect.

      6.2 FINANCIAL STATEMENTS. Borrower has furnished to Agent (i) audited
financial statements (including a balance sheet) as to Borrower which fairly
present in all material respects, in accordance with GAAP, the consolidated
financial condition and the results of operations of Borrower as at the end of
Borrower's fiscal year ending March 31, 1996 and (ii) unaudited financial
statements (including a balance sheet) as to Borrower which fairly present in
all material respects, in accordance with GAAP, the consolidated financial
position and the results of operations of Borrower for the nine months ended
December 31, 1996. No events, conditions or circumstances have occurred from the
date that the financial statements were delivered to Agent through the Effective
Date which would cause said financial statements to be misleading in any
material respect. There are no material instruments or liabilities which should,
in accordance with GAAP, be reflected in such financial statements provided to
Agent which are not so reflected.

      6.3 ENFORCEABLE OBLIGATIONS; AUTHORIZATION. The Loan Documents are legal,
valid and binding obligations of each applicable Obligor, enforceable in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency and other similar laws and judicial decisions affecting creditors'
rights generally and by general equitable principles. The execution, delivery
and performance of the Loan Documents (a) have all been duly authorized by all
necessary action; (b) are within the power and authority of each applicable
Obligor; (c) to the best of Borrower's knowledge, do not and will not contravene
or violate any Legal Requirement applicable to any applicable Obligor or the
Organizational Documents of any applicable Obligor, the contravention or
violation of which would reasonably be expected to have a Material Adverse
Effect; (d) do not and will not result in the breach of, or constitute a default
under, any material agreement or instrument by which any Obligor or any of its
Property may be bound, and (e) do not and will not result in the creation of any
Lien upon any Property of any Obligor. All necessary permits, registrations and
consents for such making and performance have been obtained, except where the
failure to obtain the same would not have a Material Adverse Effect.

                                      36
<PAGE>
      6.4 OTHER DEBT. No Obligor is in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security agreement
or lease to which it is a party and which would constitute an Event of Default
under SECTION 9.1(B).

      6.5 LITIGATION. There is no litigation or administrative proceeding, to
the knowledge of any executive officer of Borrower, pending or threatened
against, nor any outstanding judgment, order or decree against, any Obligor
before or by any Governmental Authority which does or would reasonably be
expected to have a Material Adverse Effect. No Obligor is in default with
respect to any judgment, order or decree of any Governmental Authority where
such default would have a Material Adverse Effect.

      6.6 TITLE. Each Obligor has good and marketable title to its material
Property, free and clear of all Liens except Permitted Liens.

      6.7 TAXES. Each Obligor has filed all tax returns required to have been
filed and paid all taxes shown thereon to be due, except those for which
extensions have been obtained and those which are being contested in good faith.

      6.8 REGULATIONS G, U AND X. None of the proceeds of any Loan will be used
for the purpose of purchasing or carrying directly or indirectly any margin
stock or for any other purpose which would constitute this transaction a
"purpose credit" within the meaning of Regulations G, U and X of the Board of
Governors of the Federal Reserve System, as any of them may be amended from time
to time.

      6.9 SUBSIDIARIES. As of the Effective Date, Borrower has no Subsidiaries
other than those set forth on EXHIBIT F hereto.

      6.10 NO UNTRUE OR MISLEADING STATEMENTS. No representation or warranty
made by Borrower in any Loan Document or in any document, instrument or other
writing furnished to the Lenders by or on behalf of any Obligor in connection
with the transactions contemplated in any Loan Document contains any untrue
material statement of fact or omits to state any such fact (of which any
executive officer of Borrower has knowledge) necessary to make the
representations, warranties and other statements contained herein or in such
other document, instrument or writing not misleading in any material respect on
the date when made or deemed made.

      6.11 ERISA. With respect to each Plan, Borrower and each member of the
Controlled Group have fulfilled their obligations, including obligations under
the minimum funding standards of ERISA and the Code and are in compliance in all
material respects with the provisions of ERISA and the Code. No event has
occurred which could result in a liability of Borrower or any member of the
Controlled Group to the PBGC or a Plan (other than to make contributions in the
ordinary course) that would reasonably be expected to have a Material Adverse
Effect. There have not been any nor are there now existing any events or
conditions

                                      37
<PAGE>
that would cause the Lien provided under Section 4068 of ERISA to attach to any
Property of Borrower or any member of the Controlled Group. Unfunded Liabilities
as of the date hereof do not exceed $500,000. No "prohibited transaction" (for
which there is not an exemption) has occurred with respect to any Plan.

      6.12 INVESTMENT COMPANY ACT. No Obligor is an investment company within
the meaning of the Investment Company Act of 1940, as amended, or, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act.

      6.13 PUBLIC UTILITY HOLDING COMPANY ACT. No Obligor is an "affiliate" or a
"subsidiary company" of a "public utility company," or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.

      6.14 SOLVENCY. None of Borrower, any Obligor, or Borrower and its
Subsidiaries, on a consolidated basis, is "insolvent," as such term is used and
defined in (i) the Bankruptcy Code and (ii) the fraudulent conveyance statutes
of the State of Texas or of any other applicable jurisdiction.

      6.15  FISCAL YEAR.  The fiscal year of each Obligor ends on March 31.

      6.16 COMPLIANCE. To the best knowledge of any executive officer of
Borrower, each Obligor is in compliance with all Legal Requirements applicable
to it, except to the extent that the failure to comply therewith would not
reasonably be expected to have a Material Adverse Effect.

      6.17 ENVIRONMENTAL MATTERS. Each Obligor has, to the best knowledge of
Borrower's executive officers, obtained and maintained in effect all
Environmental Permits (or the applicable Person has initiated the necessary
steps to transfer the Environmental Permits into its name or obtain such
permits), the failure to obtain which would reasonably be expected to have a
Material Adverse Effect. Each Obligor and its Properties, business and
operations have been and are, to the best knowledge of Borrower's executive
officers, in compliance with all applicable Requirements of Environmental Law
and Environmental Permits, the failure to comply with which would reasonably be
expected to have a Material Adverse Effect. Each Obligor and its Properties,
business and operations are not, to the best knowledge of Borrower's executive
officers (after making reasonable inquiry of the personnel and records of their
respective Corporations), subject to any (a) Environmental Claims or (b)
Environmental Liabilities, in either case direct or contingent, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which would reasonably be expected to
have a Material Adverse Effect. None of the officers of Borrower have received
nor is aware of any Obligor receiving any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any

                                      38
<PAGE>
Environmental Claim in connection with its Properties, liabilities, condition
(financial or otherwise), business or operations which would reasonably be
expected to have a Material Adverse Effect. Borrower does not know of any event
or condition with respect to currently enacted Requirements of Environmental
Laws presently scheduled to become effective in the future with respect to any
of the Properties of any Obligor which would reasonably be expected to have a
Material Adverse Effect, for which the applicable Obligor has not made good
faith provisions in its business plan and projections of financial performance.

7.    AFFIRMATIVE COVENANTS.

      Borrower covenants and agrees with Agent and the Lenders that prior to the
termination of this Agreement it will do or cause to be done, and cause each
other Obligor (unless limited by the language of the applicable provision to
less than all of the Obligors) to do or cause to be done, each and all of the
following:

      7.1 TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC. At all times (a) pay
when due all taxes and governmental charges of every kind upon it or against its
income, profits or Property, unless and only to the extent that the same shall
be contested diligently in good faith and adequate reserves in accordance with
GAAP have been established therefor; (b) do all things necessary to preserve its
existence, qualifications, rights and franchises in all jurisdictions where such
failure to qualify would reasonably be expected to have a Material Adverse
Effect; (c) comply with all applicable Legal Requirements (including without
limitation Requirements of Environmental Law) in respect of the conduct of its
business and the ownership of its Property, the noncompliance with which would
reasonably be expected to have a Material Adverse Effect; and (d) cause its
Property to be protected, maintained and kept in good repair (ordinary wear and
tear excepted) and make all replacements and additions to such Property as may
be reasonably necessary to conduct its business properly and efficiently except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.

      7.2 FINANCIAL STATEMENTS AND INFORMATION. Furnish to Agent and each Lender
each of the following: (a) as soon as available and in any event within 120 days
after the end of each applicable fiscal year, beginning with the fiscal year
ending on March 31, 1997, Annual Financial Statements of Borrower; (b) as soon
as available and in any event within 60 days after the end of each fiscal
quarter (other than the last fiscal quarter) of each applicable fiscal year,
Quarterly Financial Statements of Borrower; (c) concurrently with the financial
statements provided for in SUBSECTIONS 7.2(A) and (B) hereof, such schedules,
computations and other information, in reasonable detail, as may be required by
Agent to demonstrate compliance with the covenants set forth herein or
reflecting any non-compliance therewith as of the applicable date, all certified
and signed by the president, chief financial officer or treasurer of Borrower
(or other authorized officer approved by Agent) as true and correct in all
material respects to the best knowledge of such officer and, commencing with the
quarterly financial statement prepared as of June 30, 1997, a compliance
certificate ("COMPLIANCE CERTIFICATE") in the form of EXHIBIT E hereto, duly
executed by such authorized officer; (d) promptly upon their becoming

                                      39
<PAGE>
publicly available, each financial statement, report, notice or definitive proxy
statements sent by any Obligor to shareholders generally and each regular or
periodic report and each registration statement or prospectus filed by any
Obligor with any securities exchange or the Securities and Exchange Commission
or any successor agency, and (e) such other information relating to the
condition (financial or otherwise), operations or business of any Obligor as
from time to time may be reasonably requested by Agent. Each delivery of a
financial statement pursuant to this SECTION 7.2 shall constitute a restatement
of the representations contained in the last two sentences of SECTION 6.2 with
respect to the period of time from the date of such most recently delivered
financial statements.

      7.3   FINANCIAL TESTS.  Borrower will have and maintain:

            (a) MINIMUM NET WORTH - Stockholders' Equity at all times of not
      less than $50,000,000 PLUS 50% of the Consolidated Net Income (if
      positive) for the period from and after January 1, 1997 through the date
      of such calculation PLUS 75% of the net proceeds (whether cash or
      non-cash) realized from the issuance of any equity securities by Borrower
      or its Subsidiaries (or other capital contributions made to Borrower)
      during that period.

            (b) DEBT TO CAPITALIZATION RATIO - a Debt to Capitalization Ratio at
      the end of each fiscal quarter of not greater than 0.60.

            (c) DEBT TO PRO FORMA CONSOLIDATED EBITDA RATIO - a Debt to Pro
      Forma Consolidated EBITDA Ratio at the end of each fiscal quarter of not
      greater than 3.00.

            (d) FIXED CHARGE COVERAGE RATIO - a Fixed Charge Coverage Ratio at
      the end of each fiscal quarter of not less than 1.25.

      7.4 INSPECTION. Permit Agent and each Lender upon 3 days' prior notice
(unless a Default or an Event of Default has occurred which is continuing, in
which case no prior notice is required) to inspect its Property, to examine its
files, books and records, except privileged communication with legal counsel and
classified governmental material, and make and take away copies thereof, and to
discuss its affairs with its officers and accountants, all during normal
business hours and at such intervals and to such extent as Agent may reasonably
desire. Unless an Event of Default has occurred which is continuing, Agent or
the applicable Lender, as the case may be, shall pay its own costs and expenses
relating to the exercise of the rights under this Section.

      7.5 FURTHER ASSURANCES. Promptly execute and deliver, at Borrower's
expense, any and all other and further instruments which may be reasonably
requested by Agent to cure any defect in the execution and delivery of any Loan
Document in order to effectuate the transactions contemplated by the Loan
Documents.

                                      40
<PAGE>
      7.6 BOOKS AND RECORDS. Maintain accounting records which permit financial
statements to be prepared in accordance with GAAP.

      7.7 INSURANCE. Borrower will (and will cause each of its Subsidiaries to)
maintain insurance with such insurers, on such of its Property, with responsible
companies in such amounts, with such deductibles and against such risks as are
usually carried by owners of similar businesses and properties in the same
general areas in which the applicable Person operates.

      7.8 NOTICE OF CERTAIN MATTERS. Give Agent written notice of the following
promptly (and in any event within five Business Days) after any executive
officer of Borrower shall become aware of the same:

      (a) the issuance by any court or governmental agency or authority of any
injunction, order or other restraint prohibiting, or having the effect of
prohibiting, the performance of this Agreement, any other Loan Document, or the
making of the Loans or the initiation of any litigation, or any claim or
controversy which would reasonably be expected to result in the initiation of
any litigation, seeking any such injunction, order or other restraint;

      (b) the filing or commencement of any action, suit or proceeding, whether
at law or in equity or by or before any court or any Governmental Authority
involving claims in excess of $1,000,000 (exclusive of claims covered by
insurance) or which may reasonably be expected to result in a Default hereunder;

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

      (d) the incurrence of material burdensome restrictions under contracts or
applicable law which could reasonably be expected to have a Material Adverse
Effect and any other event (including strikes, labor disputes or loss of use of
material patents or trademarks) which could reasonably be expected to have a
Material Adverse Effect; and

      (e) if Borrower creates, incurs, suffers or permits any Indebtedness after
the Effective Date in accordance with SECTION 8.1(V) hereof or Indebtedness
secured by Liens permitted under SECTION 8.2(XI) hereof, and such Indebtedness
contains terms and conditions which are more restrictive upon Borrower than the
terms and conditions provided herein (other than terms and conditions that
relate to Liens permitted under SECTION 8.2(XI)), Borrower shall promptly
provide a copy of the more restrictive terms and conditions to Agent and Lenders
along with such other information as Agent may reasonably request in order to
understand such restrictive terms and conditions.

Borrower will also notify Agent in writing at least 30 days prior to the date
that any Obligor changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records.

                                      41
<PAGE>
      7.9 ERISA INFORMATION AND COMPLIANCE. Promptly furnish to Agent (i)
immediately upon receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA which could reasonably be expected to have a
Material Adverse Effect and any notice from the PBGC under Title IV of ERISA of
an intent to terminate or appoint a trustee to administer any Plan which could
reasonably be expected to have a Material Adverse Effect, (ii) if requested by
Agent, promptly after the filing thereof with the United States Secretary of
Labor or the PBGC or the Internal Revenue Service, copies of each annual and
other report with respect to each Plan or any trust created thereunder, (iii)
immediately upon becoming aware of the occurrence of any "reportable event," as
such term is defined in Section 4043 of ERISA which could reasonably be expected
to have a Material Adverse Effect, for which the disclosure requirements of
Regulation Section 2615.3 promulgated by the PBGC have not been waived, or of
any "prohibited transaction," as such term is defined in Section 4975 of the
Code, in connection with any Plan or any trust created thereunder which could
reasonably be expected to have a Material Adverse Effect, a written notice
signed by the President or the principal financial officer of Borrower or the
applicable member of the Controlled Group specifying the nature thereof, what
action Borrower or the applicable member of the Controlled Group is taking or
proposes to take with respect thereto, and, when known, any action taken by the
PBGC, the Internal Revenue Service or the Department of Labor with respect
thereto, (iv) promptly after the filing or receiving thereof by Borrower or any
member of the Controlled Group of any notice of the institution of any
proceedings or other actions which may result in the termination of any Plan
which could reasonably be expected to have a Material Adverse Effect, and (v)
each request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or Section 412 of
the Code promptly after the request is submitted by Borrower or any member of
the Controlled Group to the Secretary of the Treasury, the Department of Labor
or the Internal Revenue Service, as the case may be. To the extent required
under applicable statutory funding requirements, Borrower will fund, or will
cause the applicable member of the Controlled Group to fund, all current service
pension liabilities as they are incurred under the provisions of all Plans from
time to time in effect, and comply with all applicable provisions of ERISA, in
each case, except to the extent that failure to do the same would not reasonably
be expected to have a Material Adverse Effect. Except to the extent that failure
to do the same would not reasonably be expected to have a Material Adverse
Effect, Borrower covenants that it shall and shall cause each member of the
Controlled Group to (1) make contributions to each Plan in accordance with the
time limits imposed by ERISA and in an amount sufficient to comply with the
contribution obligations under such Plan and the minimum funding standards
requirements of ERISA; (2) prepare and file in accordance with the time limits
imposed by ERISA all notices and reports required under the terms of ERISA
including but not limited to annual reports; and (3) pay in accordance with the
time limits imposed by ERISA all required PBGC premiums.

      7.10 PRINCIPAL SUBSIDIARIES. Concurrently with the financial statements
provided for in SUBSECTIONS 7.2(A) and (B) hereof, furnish to Agent and each
Lender a list of all Subsidiaries of Borrower of the end of the most recent
fiscal quarter and specifically indicating each Subsidiary which became a
Subsidiary of Borrower during the most recent fiscal quarter and whether such

                                      42
<PAGE>
Subsidiary constitutes a "Principal Subsidiary." Along with such list of
Subsidiaries of Borrower, Borrower shall show the portion of Borrower's
consolidated assets and Consolidated EBITDA which was provided by Borrower and
its Principal Subsidiaries (including any newly designated Principal
Subsidiaries) and, if Borrower and its Principal Subsidiaries provided less than
80% of Borrower's consolidated assets or Consolidated EBITDA, Borrower shall
designate additional Subsidiaries as being Principal Subsidiaries such that the
Borrower and its Principal Subsidiaries (including all newly Designated
Principal Subsidiaries) shall provide at least 80% of Borrower's consolidated
assets and Consolidated EBITDA. Within thirty (30) days after delivering such
list of Subsidiaries, Borrower shall cause each newly designated Principal
Subsidiary to execute and deliver to Agent a Guaranty, together with such
resolutions, certificates and opinions regarding the authorization and binding
effect of such Guaranty as Agent may reasonably require.

      7.11 LIEN RELEASES. Within sixty (60) days from the Effective Date,
Borrower will obtain, file or record and deliver to Agent duly executed releases
of liens for those Liens described on SCHEDULE 8.2 and identified with a
footnote number 1. Notwithstanding the foregoing, in the event that Borrower is
unable to obtain such releases within said sixty (60) day period, such failure
shall not constitute a Default or Event of Default under the Loan Agreement so
long as the aggregate amount of Indebtedness secured thereby does not exceed
$500,000.

8.    NEGATIVE COVENANTS.

      Borrower covenants and agrees with Agent and the Lenders that prior to the
termination of this Agreement it will not, and will not suffer or permit any
other Obligor or any Subsidiary of Borrower to, do any of the following without
the prior written consent of the Majority Lenders:

      8.1 BORROWED MONEY INDEBTEDNESS. Create, incur, suffer or permit to exist,
or assume or guarantee, directly or indirectly, or become or remain liable with
respect to any Borrowed Money Indebtedness, whether direct, indirect, absolute,
contingent or otherwise, except the following:

      (i)   Indebtedness under this Agreement and the other Loan Documents and
            Indebtedness secured by Liens permitted by SECTION 8.2 hereof;

      (ii)  the liabilities existing on the date of this Agreement and disclosed
            in the financial statements delivered on or prior to the Effective
            Date pursuant to SECTION 6.2 hereof and set forth on SCHEDULE 8.1,
            and all renewals, extensions and replacements (but not increases
            other than increases of the Indebtedness permitted under SECTION
            8.2(IX) hereof, which shall be subject to the maximum permitted
            outstanding amounts set forth in SECTION 8.2(IX)) of any of the
            foregoing;

      (iii) the Interest Rate Risk Indebtedness;

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      (iv)  current liabilities incurred in the ordinary course of business;

      (v)   so long as no Event of Default has occurred which is continuing (or
            would result as a result of the applicable additional Indebtedness),
            other unsecured Indebtedness of Borrower;

PROVIDED, HOWEVER, that the Indebtedness permitted under SECTION 8.1(V) hereof
or Indebtedness secured by Liens permitted under SECTION 8.2(XI) hereof shall be
on terms and conditions no more restrictive upon Borrower than the terms and
conditions provided for herein (other than terms and conditions that relate to
Liens permitted under SECTION 8.2(XI)) unless Borrower has provided prompt
notice thereof in accordance with SECTION 7.8(E), and (A) such more restrictive
terms and conditions have been incorporated into this Agreement by amendment, or
(B) the Borrower shall have delivered and shall continue to deliver to the Agent
and the Lenders a Compliance Certificate modified to incorporate such more
restrictive covenants.

      8.2 LIENS. Create or suffer to exist any Lien upon any of its Property now
owned or hereafter acquired, or acquire any Property upon any conditional sale
or other title retention device or arrangement or any purchase money security
agreement; or in any manner directly or indirectly sell, assign, pledge or
otherwise transfer any of its Accounts or General Intangibles; PROVIDED,
HOWEVER, that any Obligor may create or suffer to exist the following:

      (i)   artisans' or mechanics' Liens arising in the ordinary course of
            business, and Liens for taxes, but only to the extent that payment
            thereof shall not at the time be due or if due, the payment thereof
            is being diligently contested in good faith and adequate reserves
            computed in accordance with GAAP have been set aside therefor;

      (ii)  normal encumbrances and restrictions on title which do not secure
            Borrowed Money Indebtedness and which do not have a Material Adverse
            Effect;

      (iii) Liens in favor of Agent or any Lender under the Loan Documents,
            including, without limitation, Liens securing Interest Rate Risk
            Indebtedness owed to one or more of the Lenders (but not to any
            Person which is not, at the time the Interest Rate Risk Indebtedness
            is incurred, a Lender);

      (iv)  Liens incurred or deposits made in the ordinary course of business
            (1) in connection with workmen's compensation, unemployment
            insurance, social security and other like laws, or (2) to secure
            insurance in the ordinary course of business, the performance of
            bids, tenders, contracts, leases, licenses, statutory obligations,
            surety, appeal and performance bonds and other similar obligations
            incurred in the ordinary course of business, not, in any of the
            cases specified in this clause (2), incurred in connection with the
            borrowing of money, the obtaining of advances or the payment of the
            deferred purchase price of Property;

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<PAGE>
      (v)   attachments, judgments and other similar Liens arising in connection
            with court proceedings, PROVIDED that the execution and enforcement
            of such Liens are effectively stayed and the claims secured thereby
            are being actively contested in good faith with adequate reserves
            made therefor in accordance with GAAP;

      (vi)  Liens imposed by law, such as carriers', warehousemen's, mechanics',
            materialmen's and vendors' liens, incurred in good faith in the
            ordinary course of business and securing obligations which are not
            yet due or which are being contested in good faith by appropriate
            proceedings if adequate reserves with respect thereto are maintained
            in accordance with GAAP;

      (vii) zoning restrictions, easements, licenses, reservations, provisions,
            covenants, conditions, waivers, and restrictions on the use of
            Property, and which do not in any case singly or in the aggregate
            materially impair the present use or value of the Property subject
            to any such restriction or materially interfere with the ordinary
            conduct of the business of any Obligor or any Subsidiary of Borrower
            to the extent that it would cause a Material Adverse Effect;

      (viii)capital leases and sale/leaseback transactions permitted under the
            other provisions of this Agreement;

      (ix)  Liens upon (a) Property owned by Borrower or its Subsidiaries as of
            December 31, 1996 and disclosed to the Lenders in the financial
            statements delivered on or prior to the Effective Date and set forth
            on SCHEDULE 8.2 or (b) Property owned by Borrower or its
            Subsidiaries as of December 31, 1996 but not then subject to a Lien;
            PROVIDED, HOWEVER, that the aggregate book value of the Property
            subject to the Liens permitted under this CLAUSE (IX) shall not
            exceed 200% of the aggregate amount of the Borrowed Money
            Indebtedness permitted to be secured by such Liens and PROVIDED
            FURTHER, HOWEVER, that the aggregate Borrowed Money Indebtedness
            secured by the Liens permitted under this CLAUSE (IX) shall not
            exceed (1) $12,000,000 at any time from the Effective Date through
            March 31, 1998, (2) $10,000,000 at any time from April 1, 1998
            through March 31, 1999, (3) $8,000,000 at any time from April 1,
            1999 through March 31, 2000 and (4) $7,000,000 at any time
            thereafter;

      (x)   pre-existing Liens securing pre-existing Borrowed Money Indebtedness
            covering tangible Property (other than Inventory) of Subsidiaries
            acquired after December 31, 1996 (provided, however, that no such
            Liens were created and no such Borrowed Money Indebtedness was
            incurred at the instigation of Borrower in contemplation of the
            acquisition of such Subsidiary);

      (xi)  Liens upon Property owned by Subsidiaries acquired after December
            31, 1996 and created after or in contemplation of such acquisition
            securing Borrowed

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            Money Indebtedness incurred by such Subsidiaries after or in
            contemplation of such acquisition (provided, however, that the
            aggregate Borrowed Money Indebtedness secured by Liens permitted
            under this CLAUSE (XI) shall not exceed $10,000,000), and

      (xii) extensions, renewals and replacements of Liens referred to in
            CLAUSES (I) through (XI) above; PROVIDED that any such extension,
            renewal or replacement Lien shall be limited to the Property or
            assets covered by the Lien extended, renewed or replaced and that
            the Borrowed Money Indebtedness secured by any such extension,
            renewal or replacement Lien shall be in an amount not greater than
            the amount of the Indebtedness secured by the Lien extended, renewed
            or replaced.

      8.3 CONTINGENT LIABILITIES. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person (other than Subsidiaries) except for
(a) the endorsement of checks or other negotiable instruments in the ordinary
course of business; (b) obligations disclosed to Agent in the financial
statements delivered on or prior to the Effective Date pursuant to SECTION 6.2
hereof (but not increases of such obligations after the Effective Date), (c)
those liabilities permitted under SECTION 8.1 hereof, and (d) earnouts incurred
in connection with acquisitions.

      8.4 MERGERS AND CONSOLIDATIONS. In any single transaction or series of
transactions, directly or indirectly: (a) liquidate or dissolve; (b) be a party
to any merger or consolidation unless and so long as (i) no Default or Event of
Default has occurred that is then continuing, (ii) immediately thereafter and
giving effect thereto, no event will occur and be continuing which constitutes a
Default and (iii) an Obligor is the surviving Person or the surviving Person
ratifies and assumes each Loan Document to which any party to such merger was a
party.

      8.5 DISPOSITION OF ASSETS. Sell, convey or lease all or any part of its
assets, except for (x) sales of Inventory in the ordinary course of business,
(y) sales of other Property in the ordinary course of business and (z) sales of
any other Property so long as that portion of the net proceeds realized from
such sales in any fiscal year in excess of the greater of (1) $5,000,000 or (2)
ten percent (10%) of the tangible assets of Borrower and its Subsidiaries as of
the beginning of such year are, within one (1) year, either reinvested in assets
that may be productively used in the business of the Borrower or the applicable
Subsidiary of Borrower or used to repay Indebtedness of Borrower which has not
been subordinated to the Obligations; PROVIDED, that for purposes of this
Agreement, no sale/leaseback transaction will be deemed to be in the ordinary
course of business.

      8.6 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS. At any time: (a) redeem,
retire or otherwise acquire, directly or indirectly, any equity interest in
Borrower or (b) make any distributions of any Property or cash to the owner of
any of the equity interests in any Obligor other than the following:

                                      46
<PAGE>
      (i)   dividends or distributions by a Subsidiary of Borrower to Borrower
            and

      (ii)  so long as no Default or Event of Default shall have occurred and be
            continuing (or would result therefrom), dividends by Borrower so
            long as the aggregate dividends paid by Borrower from January 1,
            1997 through the date of the applicable dividend (and after giving
            effect to the applicable dividend and any Investments made by
            Borrower or any of its Subsidiaries concurrently) do not exceed an
            amount equal to (x) $5,000,000 PLUS one-third of Consolidated Net
            Income for such period MINUS (y) aggregate Investments (exclusive of
            Investments permitted in CLAUSES (I) through (VI) of SECTION 8.9)
            made by Borrower and its Subsidiaries during such period.

      8.7 NATURE OF BUSINESS. Change the nature of its business or enter into
any business which is substantially different from the business in which it is
presently engaged.

      8.8 TRANSACTIONS WITH RELATED PARTIES. Enter into any material transaction
or agreement (but excluding transactions between Subsidiaries of Borrower or
between Borrower and any of its Subsidiaries, other than transfers by Borrower
of equity interests in its Subsidiaries, so long as such transactions do not
have a Material Adverse Effect, determined on a consolidated basis as set forth
in the definition of "Material Adverse Effect" in SECTION 1.1 hereof but without
taking into account Subsidiaries of Borrower which are not Principal
Subsidiaries) with any officer, director or holder of any equity interest in any
Obligor (or any Affiliate of any such Person) unless the same is upon terms
substantially similar to those obtainable from wholly unrelated sources (to the
best knowledge of the executive officers of Borrower).

      8.9 LOANS AND INVESTMENTS. Make any loan, advance, extension of credit or
capital contribution to, or make or have any Investment in, any Person, or make
any commitment to make any such extension of credit or Investment, except (a)
normal and reasonable advances in the ordinary course of business to officers
and employees and (b) the following:

      (i)   obligations, with a maturity of less than two years, with the full
            faith and credit of the United States of America;

      (ii)  direct obligations of any state of the United States, or
            municipality therein, rated in one of the two top classifications by
            Standard and Poor's Ratings Services or Moody's Investors Services,
            Inc. and maturing within two years;

      (iii) certificates of deposit or banker's acceptances, maturing within two
            years, issued by US commercial banks having capital, surplus and
            undivided profits aggregating not less than $100 million and whose
            unsecured long-term debt is rated in one of the two classifications
            by Standard and Poor's Ratings Services or Moody's Investors
            Services, Inc.;

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<PAGE>
      (iv)  commercial paper of any U.S. corporation with a maturity of less
            than 270 days and which is rated in one of the two top
            classifications by Standard and Poor's Ratings Services or Moody's
            Investors Services, Inc.;

      (v)   Investments by Borrower or any of its Subsidiaries in and to
            Borrower or any Qualified Subsidiary of Borrower, including
            Investments in a corporation which after giving effect thereto will
            become a Qualified Subsidiary;

      (vi)  existing Investments as of Effective Date as set forth on SCHEDULE
            8.9, and

      (vii) so long as no Default or Event of Default shall have occurred and be
            continuing (or would result therefrom), other Investments by
            Borrower or any of its Subsidiaries so long as the aggregate
            Investments (exclusive of Investments permitted in CLAUSES (I)
            through (VI) of this Section) made by Borrower and its Subsidiaries
            from January 1, 1997 through the date of the applicable Investment
            (and after giving effect to the applicable Investments and any
            dividends paid by Borrower concurrently) do not exceed an amount
            equal to (x) $5,000,000 PLUS one-third of Consolidated Net Income
            for such period MINUS (y) aggregate dividends paid by Borrower
            during such period.

      8.10 ORGANIZATIONAL DOCUMENTS. Amend, modify, restate or supplement any of
its Organizational Documents if such action would reasonably be expected to have
a Material Adverse Effect, unless such action shall be consented to in writing
by Agent.

      8.11 UNFUNDED LIABILITIES. Incur any Unfunded Liabilities after the
Effective Date or allow any Unfunded Liabilities in excess of $500,000, in the
aggregate, to arise or exist.

      8.12 CAPITAL EXPENDITURES. Permit Capital Expenditures of Borrower and its
Subsidiaries to exceed, in the aggregate for any period of 12 months, 300% of
aggregate depreciation taken by Borrower and its Subsidiaries during such
period.

      8.13 ACQUISITIONS. Acquire any real Property or any material personal
Property after the Effective Date with respect to which the aggregate
consideration for a single transaction in the form of cash and assumed
Indebtedness would exceed the greater of (i) $15,000,000 or (ii) 20% of the
Stockholders' Equity.

9.    DEFAULTS.

      9.1 EVENTS OF DEFAULT. If any one or more of the following events (herein
called "EVENTS OF DEFAULT") shall occur, then Agent may (and at the direction of
the Majority Lenders, shall) do any or all of the following: (1) without notice
to Borrower or any other Person, declare the Revolving Loan Commitments
terminated (whereupon the Revolving Loan Commitments shall be terminated) and/or
accelerate the Revolving Loan Termination Date to a

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<PAGE>
date as early as the date of termination of the Revolving Loan Commitments; (2)
terminate any Letter of Credit allowing for such termination, by sending a
notice of termination as provided therein and require Borrower to provide Cover
for outstanding Letters of Credit; (3) declare the principal amount then
outstanding of and the unpaid accrued interest on the Loans and Reimbursement
Obligations and all fees and all other amounts payable hereunder, under the
Notes and under the other Loan Documents to be forthwith due and payable,
whereupon such amounts shall be and become immediately due and payable, without
notice (including, without limitation, notice of acceleration and notice of
intent to accelerate), presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by Borrower; PROVIDED that in the
case of the occurrence of an Event of Default with respect to any Obligor
referred to in CLAUSE (F), (G) or (H) of this SECTION 9.1, the Revolving Loan
Commitments shall be automatically terminated and the principal amount then
outstanding of and unpaid accrued interest on the Loans and the Reimbursement
Obligations and all fees and all other amounts payable hereunder, under the
Notes and under the other Loan Documents shall be and become automatically and
immediately due and payable, without notice (including, without limitation,
notice of acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower, and (4) exercise any or all other rights and remedies
available to Agent or any of the Lenders under the Loan Documents, at law or in
equity:

            (a) PAYMENTS - (i) any Obligor shall fail to make any payment or
      required prepayment of any installment of principal on the Loans or any
      Reimbursement Obligation payable under the Notes, this Agreement or the
      other Loan Documents when due or (ii) any Obligor fails to make any
      payment or required prepayment of interest with respect to the Loans, any
      Reimbursement Obligation or any other fee or amount under the Notes, this
      Agreement or the other Loan Documents when due and such failure to pay
      continues unremedied for a period of five Business Days; or

            (b) OTHER OBLIGATIONS - any Obligor shall default in the payment
      when due of any principal of or interest on any Indebtedness having an
      outstanding principal amount of at least $5,000,000 (other than the Loans
      and Reimbursement Obligations) and such default shall continue beyond any
      applicable period of grace; or any event or condition shall occur which
      results in the acceleration of the maturity of any Indebtedness having an
      outstanding principal amount of at least $5,000,000 (other than the Loans
      and Reimbursement Obligations) or enables (or, with the giving of notice
      or lapse of time or both, would enable) the holder of any such
      Indebtedness or any Person acting on such holder's behalf to accelerate
      the maturity thereof and such event or condition shall not be cured within
      any applicable period of grace; or

            (c) REPRESENTATIONS AND WARRANTIES - any representation or warranty
      made or deemed made by or on behalf of any Obligor in this Agreement or
      any other Loan Document or in any certificate furnished or made by any
      Obligor to Agent or the Lenders in connection herewith or therewith shall
      prove to have been incorrect, false or

                                      49
<PAGE>
      misleading in any material respect as of the date thereof or as of the
      date as of which the facts therein set forth were stated or certified or
      deemed stated or certified; or

            (d) AFFIRMATIVE COVENANTS - (i) default shall be made in the due
      observance or performance of any of the covenants or agreements contained
      in SECTIONS 7.3 or 7.8(C) hereof (ii) default is made in the due
      observance or performance of any of the other covenants and agreements
      contained in SECTION 7 hereof or any other affirmative covenant of any
      Obligor contained in this Agreement or any other Loan Document and such
      default continues unremedied for a period of 30 days after (x) notice
      thereof is given by Agent to Borrower or (y) such default otherwise
      becomes known to any executive officer of Borrower, whichever is earlier;
      or

            (e) NEGATIVE COVENANTS - default is made in the due observance or
      performance by Borrower of any of the other covenants or agreements
      contained in SECTION 8 of this Agreement or of any other negative covenant
      of any Obligor contained in this Agreement or any other Loan Document; or

            (f) INVOLUNTARY BANKRUPTCY OR RECEIVERSHIP PROCEEDINGS - a receiver,
      conservator, liquidator or trustee of any Obligor or of any of its
      Property is appointed by the order or decree of any court or agency or
      supervisory authority having jurisdiction, and such decree or order
      remains in effect for more than 60 days; or any Obligor is adjudicated
      bankrupt or insolvent; or any of such Person's Property is sequestered by
      court order and such order remains in effect for more than 60 days; or a
      petition is filed against any Obligor under any state or federal
      bankruptcy, reorganization, arrangement, insolvency, readjustment or debt,
      dissolution, liquidation or receivership law or any jurisdiction, whether
      now or hereafter in effect, and is not dismissed within 60 days after such
      filing; or

            (g) VOLUNTARY PETITIONS OR CONSENTS - any Obligor commences a
      voluntary case or other proceeding or order seeking liquidation,
      reorganization, arrangement, insolvency, readjustment of debt,
      dissolution, liquidation or other relief with respect to itself or its
      debts or other liabilities under any bankruptcy, insolvency or other
      similar law now or hereafter in effect or seeking the appointment of a
      trustee, receiver, liquidator, custodian or other similar official of it
      or any substantial part of its Property, or consents to any such relief or
      to the appointment of or taking possession by any such official in an
      involuntary case or other proceeding commenced against it, or fails
      generally to, or cannot, pay its debts generally as they become due or
      takes any corporate action to authorize or effect any of the foregoing; or

            (h) ASSIGNMENTS FOR BENEFIT OF CREDITORS OR ADMISSIONS OF INSOLVENCY
      - any Obligor makes an assignment for the benefit of its creditors, or
      admits in writing its inability to pay its debts generally as they become
      due, or consents to the appointment

                                      50
<PAGE>
      of a receiver, trustee, or liquidator of such Obligor or of all or any
      substantial part of its Property; or

            (i) UNDISCHARGED JUDGMENTS - a final non-appealable judgment or
      judgments for the payment of money exceeding, in the aggregate, $5,000,000
      in excess of amounts covered by insurance) is rendered by any court or
      other governmental body against any Obligor and such Obligor does not
      discharge the same or provide for its discharge in accordance with its
      terms, or procure a stay of execution thereof within 60 days from the date
      of entry thereof; or

            (j) CONCEALMENT - any Obligor shall have concealed, removed, or
      permitted to be concealed or removed, any part of its Property, with
      intent to hinder, delay or defraud its creditors or any of them, or shall
      have made any transfer of its Property to or for the benefit of a creditor
      at a time when other creditors similarly situated have not been paid; or

            (k) CHANGE OF CONTROL - there should occur any Change of Control; or

            (l) CERTAIN COVENANTS CONTAINED IN OTHER INDEBTEDNESS - default is
      made in the due observance or performance by Borrower of any covenant,
      term or condition contained in any agreement for Indebtedness for which
      notice is required to be given pursuant to SECTION 7.8(E) hereof and such
      default continues beyond any applicable period of grace contained in the
      agreement for such Indebtedness (once notice of more restrictive terms and
      conditions has been given, this CLAUSE (L) shall continue to apply with
      respect to such terms and conditions notwithstanding any subsequent
      relaxation or waiver of such terms and conditions under the documents
      evidencing such Indebtedness).

      9.2 RIGHT OF SETOFF. Upon the occurrence and during the continuance of any
Event of Default, each Lender (with the approval of the Majority Lenders) is
hereby authorized at any time and from time to time, without notice to any
Obligor (any such notice being expressly waived by Borrower and the other
Obligors), to setoff and apply any and all deposits (general or special, time or
demand, provisional or final (but excluding the funds held in accounts clearly
designated as escrow or trust accounts held by Borrower or any other Obligor for
the benefit of Persons which are not Affiliates of any Obligor, whether or not
such setoff results in any loss of interest or other penalty, and including
without limitation all certificates of deposit) at any time held, and any other
funds or Property at any time held, and other Indebtedness at any time owing by
such Lender to or for the credit or the account of Borrower or any other Obligor
against any and all of the Obligations irrespective of whether or not such
Lender or Agent will have made any demand under this Agreement, the Notes or any
other Loan Document. Should the right of any Lender to realize funds in any
manner set forth hereinabove be challenged and any application of such funds be
reversed, whether by court order or otherwise, the Lenders shall make
restitution or refund to Borrower pro rata in accordance with their Revolving
Loan Commitments. Each Lender agrees to promptly notify Borrower and Agent after
any such setoff and application, provided that the failure to give such notice
will not affect the validity of such

                                      51
<PAGE>
setoff and application. The rights of Agent and the Lenders under this Section
are in addition to other rights and remedies (including without limitation other
rights of setoff) which Agent or the Lenders may have. This Section is subject
to the terms and provisions of SECTIONS 4.5 and 11.7 hereof.

      9.3 COLLATERAL ACCOUNT. Borrower hereby agrees, in addition to the
provisions of SECTION 9.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by Agent or the
Majority Lenders (through Agent), pay to Agent an amount in immediately
available funds equal to the then aggregate amount available for drawings under
all Letters of Credit issued for the account of Borrower, which funds shall be
held by Agent as Cover.

      9.4 PRESERVATION OF SECURITY FOR UNMATURED REIMBURSEMENT OBLIGATIONS. In
the event that, following (i) the occurrence of an Event of Default and the
exercise of any rights available to Agent or any Lender under the Loan
Documents, and (ii) payment in full of the principal amount then outstanding of
and the accrued interest on the Loans and Reimbursement Obligations and fees and
all other amounts payable hereunder and under the Notes, any Letters of Credit
shall remain outstanding and undrawn upon, Agent shall be entitled to hold (and
Borrower and each other Obligor hereby grants and conveys to Agent a security
interest in and to) all cash or other Property ("PROCEEDS OF REMEDIES") realized
or arising out of the exercise of any rights available under the Loan Documents,
at law or in equity, including, without limitation, the proceeds of any
foreclosure, as collateral for the payment of any amounts due or to become due
under or in respect of such Letters of Credit. Such Proceeds of Remedies shall
be held for the ratable benefit of the Lenders. The rights, titles, benefits,
privileges, duties and obligations of Agent with respect thereto shall be
governed by the terms and provisions of this Agreement. Agent may, but shall
have no obligation to, invest any such Proceeds of Remedies in such manner as
Agent, in the exercise of its sole discretion, deems appropriate. Such Proceeds
of Remedies shall be applied to Reimbursement Obligations arising in respect of
any such Letters of Credit and/or the payment of any Lender's obligations under
any such Letter of Credit when such Letter of Credit is drawn upon. Nothing in
this Section shall cause or permit an increase in the maximum amount of the
Revolving Loan Obligations permitted to be outstanding from time to time under
this Agreement.

      9.5 REMEDIES CUMULATIVE. No remedy, right or power conferred upon Agent or
any Lender is intended to be exclusive of any other remedy, right or power given
hereunder or now or hereafter existing at law, in equity, or otherwise, and all
such remedies, rights and powers shall be cumulative.

10.   AGENT.

      10.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder, under the Letters
of Credit and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Any

                                      52
<PAGE>
Loan Documents executed in favor of Agent shall be held by Agent for the ratable
benefit of the Lenders. Agent ("Agent" as used in this SECTION 10 shall include
reference to its Affiliates and its own and its Affiliates' respective officers,
shareholders, directors, employees and agents) (a) shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the Letters
of Credit, and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender;
(b) shall not be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, the
Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, execution, filing, registration,
collectibility, recording, perfection, existence or sufficiency of this
Agreement, the Letters of Credit, or any other Loan Document or any other
document referred to or provided for herein or therein or any Property covered
thereby or for any failure by any Obligor or any other Person to perform any of
its obligations hereunder or thereunder, and shall not have any duty to inquire
into or pass upon any of the foregoing matters; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder or under
the Letters of Credit or any other Loan Document except to the extent requested
by the Majority Lenders; (d) shall not be responsible for any mistake of law or
fact or any action taken or omitted to be taken by it hereunder or under the
Letters or Credit or any other Loan Document or any other document or instrument
referred to or provided for herein or therein or in connection herewith or
therewith, including, without limitation, pursuant to its own negligence, except
for its own gross negligence or willful misconduct; (e) shall not be bound by or
obliged to recognize any agreement among or between Borrower and any Lender to
which Agent is not a party, regardless of whether Agent has knowledge of the
existence of any such agreement or the terms and provisions thereof; (f) shall
not be charged with notice or knowledge of any fact or information not herein
set out or provided to Agent in accordance with the terms of this Agreement or
any other Loan Document; (g) shall not be responsible for any delay, error,
omission or default of any mail, telegraph, cable or wireless agency or
operator, and (h) shall not be responsible for the acts or edicts of any
Governmental Authority. Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any way
limiting any of the foregoing, each Lender acknowledges that Agent shall have no
greater responsibility in the operation of the Letters of Credit than is
specified in the Uniform Customs and Practice for Documentary Credits (1993
Revision, International Chamber of Commerce Publication No. 500). In any
foreclosure proceeding concerning any collateral, each holder of an Obligation
if bidding for its own account or for its own account and the accounts of other
Lenders is prohibited from including in the amount of its bid an amount to be
applied as a credit against the Obligations held by it or the Obligations held
by the other Lenders; instead, such holder must bid in cash only. However, in
any such foreclosure proceeding, Agent may (but shall not be obligated to)
submit a bid for all Lenders (including itself) in the form of a credit against
the Obligations, and Agent or its designee may (but shall not be obligated to)
accept title to such collateral for and on behalf of all Lenders.

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      10.2 RELIANCE. Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (which may be counsel for Borrower), independent
accountants and other experts selected by Agent. Agent shall not be required in
any way to determine the identity or authority of any Person delivering or
executing the same. As to any matters not expressly provided for by this
Agreement, the Letters of Credit, or any other Loan Document, Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions of the Majority Lenders, and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders. If any order, writ, judgment or decree shall be made or entered by any
court affecting the rights, duties and obligations of Agent under this Agreement
or any other Loan Document, then and in any of such events Agent is authorized,
in its sole discretion, to rely upon and comply with such order, writ, judgment
or decree which it is advised by legal counsel of its own choosing is binding
upon it under the terms of this Agreement, the relevant Loan Document or
otherwise; and if Agent complies with any such order, writ, judgment or decree,
then it shall not be liable to any Lender or to any other Person by reason of
such compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.

      10.3 DEFAULTS. Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the non-payment of principal of or interest
on Loans or Reimbursement Obligations) unless Agent has received notice from a
Lender or Borrower specifying such Default and stating that such notice is a
"NOTICE OF DEFAULT." In the event that Agent receives such a Notice of Default,
Agent shall give prompt notice thereof to the Lenders (and shall give each
Lender prompt notice of each such non-payment). Agent shall (subject to SECTION
10.7 hereof) take such action with respect to such Notice of Default as shall be
directed by the Majority Lenders and within its rights under the Loan Documents
and at law or in equity, PROVIDED that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, permitted hereby with respect to
such Notice of Default as it shall deem advisable in the best interests of the
Lenders and within its rights under the Loan Documents, at law or in equity.

      10.4 MATERIAL WRITTEN NOTICES. In the event that Agent receives any
written notice of a material nature from the Borrower or any Obligor under the
Loan Documents, Agent shall promptly inform each of the Lenders thereof.

      10.5 RIGHTS AS A LENDER. With respect to its Revolving Loan Commitments
and the Loans made and Letter of Credit Liabilities, TCB in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting in its agency
capacity, and the term "LENDER" or "LENDERS" shall, unless the context otherwise
indicates, include Agent in its individual capacity. Agent may (without having
to account therefor to any Lender) accept deposits from, lend money to and

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generally engage in any kind of banking, trust, letter of credit, agency or
other business with Borrower (and any of its Affiliates) as if it were not
acting as Agent, and Agent may accept fees and other consideration from Borrower
(in addition to the fees heretofore agreed to between Borrower and Agent) for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.

      10.6 INDEMNIFICATION. The Lenders agree to indemnify Agent (to the extent
not reimbursed under SECTION 2.2(C), SECTION 11.3 or SECTION 11.4 hereof, but
without limiting the obligations of Borrower under said SECTIONS 2.2(C), 11.3
and 11.4), ratably in accordance with the Lenders' respective Revolving Loan
Commitments, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY
THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES, which may be imposed on, incurred by
or asserted against Agent in any way relating to or arising out of this
Agreement, the Letters of Credit or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses which Borrower is obligated to pay under SECTIONS 2.2(C), 11.3 and 11.4
hereof, interest, penalties, attorneys' fees and amounts paid in settlement, but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents; PROVIDED that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified. The obligations of the Lenders under
this SECTION 10.6 shall survive the termination of this Agreement and the
repayment of the Obligations.

      10.7 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it
has received current financial information with respect to Borrower and each
other Obligor that it has, independently and without reliance on Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and each other Obligor and
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Loan Documents. Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement,
the Letters of Credit or any of the other Loan Documents or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Obligor. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Agent
hereunder, under the Letters of Credit or the other Loan Documents, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of any
Obligor (or any of their affiliates) which may come into the possession of
Agent.

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<PAGE>
      10.8 FAILURE TO ACT. Except for action expressly required of Agent
hereunder, under the Letters of Credit or under the other Loan Documents, Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction by
the Lenders of their indemnification obligations under SECTION 10.6 hereof
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.

      10.9 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Lenders and Borrower, and Agent may be removed
at any time with or without cause by the Majority Lenders; PROVIDED, that Agent
shall continue as Agent until such time as any successor shall have accepted
appointment as Agent hereunder. Upon any such resignation or removal, (i) the
Majority Lenders without the consent of Borrower shall have the right to appoint
a successor Agent so long as such successor Agent is also a Lender at the time
of such appointment and (ii) the Majority Lenders shall have the right to
appoint a successor Agent that is not a Lender at the time of such appointment
so long as Borrower consents to such appointment (which consent shall not be
unreasonably withheld). If no successor Agent shall have been so appointed by
the Majority Lenders and accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent. Any successor Agent shall be a bank which
has an office in the United States and a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
and the retiring Agent shall be discharged from its duties and obligations
hereunder and under any other Loan Documents. Such successor Agent shall
promptly specify by notice to Borrower its Principal Office referred to in
SECTION 3.1 and SECTION 4 hereof. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this SECTION 10 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.

      10.10 NO PARTNERSHIP. Neither the execution and delivery of this Agreement
nor any of the other Loan Documents nor any interest the Lenders, Agent or any
of them may now or hereafter have in all or any part of the Obligations shall
create or be construed as creating a partnership, joint venture or other joint
enterprise between the Lenders or among the Lenders and Agent. The relationship
between the Lenders, on the one hand, and Agent, on the other, is and shall be
that of principals and agent only, and nothing in this Agreement or any of the
other Loan Documents shall be construed to constitute Agent as trustee or other
fiduciary for any Lender or to impose on Agent any duty, responsibility or
obligation other than those expressly provided for herein and therein.

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11.   MISCELLANEOUS.

      11.1 WAIVER. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of Agent
or any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under any Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law or in equity.

      11.2 NOTICES. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof (or
provided for in an Assignment and Acceptance); or, as to any party hereto, at
such other address as shall be designated by such party in a notice (given in
accordance with this Section) (i) as to Borrower, to Agent, (ii) as to Agent, to
Borrower and to each Lender, and (iii) as to any Lender, to Borrower and Agent.
Except as otherwise provided in this Agreement, all such notices or
communications shall be deemed to have been duly given when (i) transmitted by
telex or telecopier or delivered to the telegraph or cable office, (ii)
personally delivered (iii) one Business Day after deposit with an overnight mail
or delivery service, postage prepaid or (iv) three Business Days' after deposit
in a receptacle maintained by the United States Postal Service, postage prepaid,
registered or certified mail, return receipt requested, in each case given or
addressed as aforesaid.

      11.3 EXPENSES, ETC. Whether or not any Loan is ever made or any Letter of
Credit ever issued, Borrower shall pay or reimburse within 10 days after written
demand (a) Agent for paying the reasonable fees and expenses of legal counsel to
Agent in connection with the preparation, negotiation, execution and delivery of
this Agreement (including the exhibits and schedules hereto), the other Loan
Documents and the making of the Loans and the issuance of Letters of Credit
hereunder, and any modification, supplement or waiver of any of the terms of
this Agreement, the Letters of Credit or any other Loan Document; (b) Agent for
any lien search fees; (c) Agent for reasonable out-of-pocket expenses incurred
in connection with the preparation, documentation, administration and
syndication of the Loans or any of the Loan Documents (including, without
limitation, the marketing, printing, duplicating, mailing and similar expenses)
of the Loans and Letter of Credit Liabilities; (d) Agent for paying all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement,
any Letter of Credit or any other Loan Document or any other document referred
to herein or therein; (e) Agent for paying all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement or

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any document referred to herein and (f) following the occurrence and during the
continuation of an Event of Default, any Lender or Agent for paying all amounts
reasonably expended, advanced or incurred by such Lender or Agent to satisfy any
obligation of any Obligor under this Agreement or any other Loan Document, to
protect collateral, to collect the Obligations or to enforce, protect, preserve
or defend the rights of the Lenders or Agent under this Agreement or any other
Loan Document, including, without limitation, fees and expenses incurred in
connection with such Lender's or Agent's participation as a member of a
creditor's committee in a case commenced under the Bankruptcy Code or other
similar law, fees and expenses incurred in connection with lifting the automatic
stay prescribed in ss. 362 of the Bankruptcy Code and fees and expenses incurred
in connection with any action pursuant to ss. 1129 of the Bankruptcy Code and
all other customary out-of-pocket expenses incurred by such Lender or Agent in
connection with such matters, together with interest thereon at the Past Due
Rate on each such amount until the date of reimbursement to such Lender or
Agent.

      11.4 INDEMNIFICATION. Borrower shall indemnify each of Agent, the Lenders,
and each Affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by Borrower of the
proceeds of any extension of credit (whether a Loan or a Letter of Credit) by
any Lender hereunder; (ii) breach by any Obligor of this Agreement or any other
Loan Document; (iii) violation by any Obligor of any Legal Requirement; (iv)
investigation, litigation or other proceeding relating to any of the foregoing,
and Borrower shall reimburse Agent, each Lender, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
reasonable expenses (including reasonable legal fees) incurred in connection
with any such investigation or proceeding, or (v) taxes (excluding income taxes
and franchise taxes) payable or ruled payable by any Governmental Authority in
respect of the Obligations or any Loan Document, together with interest and
penalties, if any; PROVIDED, HOWEVER, that Borrower shall not have any
obligations pursuant to this Section with respect to any losses, liabilities,
claims, damages or expenses incurred by the Person seeking indemnification by
reason of the gross negligence or willful misconduct of that Person or with
respect to any disputes between or among any and all of Agent, Lenders and
Issuers. Nothing in this Section is intended to limit the obligations of
Borrower under any other provision of this Agreement. Agent and each Lender,
respectively, shall indemnify Borrower and hold Borrower harmless from and
against the gross negligence or willful misconduct of Agent or such Lender, as
the case may be.

      11.5 AMENDMENTS, ETC. No amendment or modification of this Agreement, the
Notes or any other Loan Document shall in any event be effective against
Borrower unless the same shall be agreed or consented to in writing by Borrower.
No amendment, modification or waiver of any provision of this Agreement, the
Notes or any other Loan Document, nor any consent to any departure by Borrower
therefrom, shall in any event be effective against the Lenders

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unless the same shall be agreed or consented to in writing by the Majority
Lenders, and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; PROVIDED, that no
amendment, modification, waiver or consent shall, unless in writing and signed
by each Lender affected thereby, do any of the following: (a) increase any
Revolving Loan Commitment of any of the Lenders (or reinstate any termination or
reduction of the Revolving Loan Commitments) or subject any of the Lenders to
any additional obligations; (b) reduce the principal of, or interest on, any
Loan, Reimbursement Obligation or fee hereunder; (c) postpone or extend the
Revolving Loan Maturity Date, the Revolving Loan Termination Date, the Revolving
Loan Availability Period or any scheduled date fixed for any payment of
principal of, or interest on, any Loan, Reimbursement Obligation, fee or other
sum to be paid hereunder or waive any Event of Default described in SECTION
9.1(A) hereof; (d) change the percentage of any of the Revolving Loan
Commitments or of the aggregate unpaid principal amount of any of the Loans and
Letter of Credit Liabilities, or the percentage of Lenders, which shall be
required for the Lenders or any of them to take any action under this Agreement
(including, without linitation, the definition of "Majority Lenders"); (e)
change any provision contained in SECTIONS 2.2(C), 3.4, 7.10, 11.3 OR 11.4
hereof or this SECTION 11.5; (f) release any Person from liability under a
Guaranty, or (g) modify the provisions of SECTIONS 4.1(B) or 4.2 hereof
regarding PRO RATA application of amounts after an Event of Default shall have
occurred and be continuing. Notwithstanding anything in this SECTION 11.5 to the
contrary, no amendment, modification, waiver or consent shall be made with
respect to SECTION 10 without the consent of Agent to the extent it affects
Agent, as Agent.

      11.6  SUCCESSORS AND ASSIGNS.

      (a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent and the Lenders and their respective successors and assigns;
PROVIDED, HOWEVER, that Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written con sent of all of the Lenders,
and any such assignment or transfer without such consent shall be null and void.
Each Lender may sell participations to any Person in all or part of any Loan, or
all or part of its Notes, Revolving Loan Commitments or interests in Letters of
Credit, in which event, without limiting the foregoing, the provisions of the
Loan Documents shall inure to the benefit of each purchaser of a participation;
PROVIDED, HOWEVER, the PRO RATA treatment of payments, as described in SECTION
4.2 hereof, shall be determined as if such Lender had not sold such
participation. Any Lender that sells one or more participations to any Person
shall not be relieved by virtue of such participation from any of its
obligations to Borrower under this Agreement relating to the Loans. In the event
any Lender shall sell any participation, such Lender shall retain the sole right
and responsibility to enforce the obligations of Borrower relating to the Loans,
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement other than amendments,
modifications or waivers with respect to (i) any fees payable hereunder to the
Lenders and (ii) the amount of principal or the rate of interest payable on, or
the dates fixed for the scheduled repayment of principal of, the Loans.

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      (b) Each Lender may assign to one or more Lenders or any other Person all
or a portion of its interests, rights and obligations under this Agreement;
PROVIDED, HOWEVER, that (i) the aggregate amount of the Revolving Loan
Commitments of the assigning Lender subject to each such assignment shall in no
event be less than $5,000,000; (ii) other than in the case of an assignment to
another Lender (that is, at the time of the assignment, a party hereto) or to an
Affiliate of such Lender or to a Federal Reserve Bank, Agent and, so long as no
Event of Default shall have occurred and be continuing, Borrower must each give
its prior written consent, which consents shall not be unreasonably withheld,
and (iii) the parties to each such assignment shall execute and deliver to
Agent, for its acceptance an Assignment and Acceptance in the form of EXHIBIT D
hereto (each an "ASSIGNMENT AND ACCEPTANCE") with blanks appropriately
completed, together with any Note or Notes subject to such assignment and a
processing and recording fee of $3,000 paid by the assignee (for which Borrower
will have no liability). Upon such execution, delivery and acceptance, from and
after the effective date specified in each Assignment and Acceptance, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and (B) the Lender thereunder shall, to the extent provided in such Assignment
and Acceptance, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto except in respect of provisions of this
Agreement which survive payment of the Obligations and termination of the
Commitments). Notwithstanding anything contained in this Agreement to the
contrary, any Lender may at any time assign all or any portion of its rights
under this Agreement and the Notes issued to it as collateral to a Federal
Reserve Bank; provided that no such assignment shall release such Lender from
any of its obligations hereunder.

      (c) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Lender assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Lender assignor makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any of the other Loan Documents or any other instrument
or document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in SECTION 6.2 hereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon Agent, such Lender assignor or any other
Lender and based on such

                                      60
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documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents; (v) such assignee appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all obligations that by the terms of this Agreement
and the other Loan Documents are required to be performed by it as a Lender.

      (d) The entries in the records of Agent as to each Assignment and
Acceptance delivered to it and the names and addresses of the Lenders and the
Revolving Loan Commitments of, and principal amount of the Loans owing to, each
Lender from time to time shall create a rebuttable presumption as to the
accuracy thereof and Borrower, Agent and the Lenders may treat each Person the
name of which is recorded in the books and records of Agent as a Lender
hereunder for all purposes of this Agreement and the other Loan Documents.

      (e) Upon Agent's receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee thereunder, together with any Note or Notes
subject to such assignment and the written consent to such assignment (to the
extent consent is required), Agent shall, if such Assignment and Acceptance has
been completed with blanks appropriately filled, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in its records and
(iii) give prompt notice thereof to Borrower. Within ten (10) Business Days
after receipt of notice, Borrower, at its own expense, shall execute and deliver
to Agent in exchange for the surrendered Notes new Notes to the order of such
assignee in an amount equal to the Revolving Loan Commitments assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained Revolving Loan Commitments hereunder, new Notes to the order of the
assigning Lender in an amount equal to the Revolving Loan Commitment retained by
it hereunder. Such new Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the respective Note. Thereafter, such surrendered
Notes shall be marked renewed and substituted and the originals thereof
delivered to Borrower (with copies, certified by Borrower as true, correct and
complete, to be retained by Agent).

      (f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this SECTION 11.6, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to Borrower furnished to such Lender by or on behalf of Borrower.

      11.7 LIMITATION OF INTEREST. Borrower and the Lenders intend to strictly
comply with all applicable federal and Texas laws, including applicable usury
laws (or the usury laws of any jurisdiction whose usury laws are deemed to apply
to the Notes or any other Loan Documents despite the intention and desire of the
parties to apply the usury laws of the State of Texas).

                                      61
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Accordingly, the provisions of this SECTION 11.7 shall govern and control over
every other provision of this Agreement or any other Loan Document which
conflicts or is inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law, PROVIDED that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Obligations. In
no event shall Borrower or any other Person be obligated to pay, or any Lender
have any right or privilege to reserve, receive or retain, (a) any interest in
excess of the maximum amount of nonusurious interest permitted under the laws of
the State of Texas or the applicable laws (if any) of the United States or of
any other jurisdiction, or (b) total interest in excess of the amount which such
Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Obligations at
the Ceiling Rate. The daily interest rates to be used in calculating interest at
the Ceiling Rate shall be determined by dividing the applicable Ceiling Rate per
annum by the number of days in the calendar year for which such calculation is
being made. None of the terms and provisions contained in this Agreement or in
any other Loan Document (including, without limitation, SECTION 9.1 hereof)
which directly or indirectly relate to interest shall ever be construed without
reference to this SECTION 11.7, or be construed to create a contract to pay for
the use, forbearance or detention of money at an interest rate in excess of the
Ceiling Rate. If the term of any Obligation is shortened by reason of
acceleration of maturity as a result of any Default or by any other cause, or by
reason of any required or permitted prepayment, and if for that (or any other)
reason any Lender at any time, including but not limited to, the stated
maturity, is owed or receives (and/or has received) interest in excess of
interest calculated at the Ceiling Rate, then and in any such event all of any
such excess interest shall be canceled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to such Lender, it shall be credited PRO TANTO
against the then-outstanding principal balance of Borrower's obligations to such
Lender, effective as of the date or dates when the event occurs which causes it
to be excess interest, until such excess is exhausted or all of such principal
has been fully paid and satisfied, whichever occurs first, and any remaining
balance of such excess shall be promptly refunded to its payor.

      11.8 SURVIVAL. The obligations of Borrower under SECTIONS 2.2(C), 2.2(D),
3.4, 11.3 AND 11.4 hereof and all other obligations of Borrower in any other
Loan Document (to the extent stated therein), the obligations of each Issuer
under the last sentence of SECTION 2.2(B)(III) and the obligations of the
Lenders under SECTION 10.5 and 11.7 hereof, shall, notwithstanding anything
herein to the contrary, survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Revolving Loan Commitments and the
Letters of Credit.

                                      62
<PAGE>
      11.9 CAPTIONS. Captions and section headings appearing herein are included
solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

      11.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.

      11.11 GOVERNING LAW. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME
TO TIME IN EFFECT.

      11.12 SEVERABILITY. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.

      11.13 TAX FORMS. Each Lender which is organized under the laws of a
jurisdiction outside the United States shall, on the day of the initial
borrowing from each such Lender hereunder and from time to time thereafter if
requested by Borrower or Agent, provide Agent and Borrower with the forms
prescribed by the Internal Revenue Service of the United States certifying as to
such Lender's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Lender
hereunder or other documents satisfactory to such Lender, Borrower and Agent
indicating that all payments to be made to such Lender hereunder are not subject
to United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty. Unless Borrower and Agent shall have received such
forms or such documents indicating that payments hereunder are not subject to
United States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, Borrower or Agent shall withhold taxes from such payments
at the applicable statutory rate.

      11.14 CONFLICTS BETWEEN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. In
the event of any conflict between the terms of this Agreement and the terms of
any of the other Loan Documents, the terms of this Agreement shall control.

                                      63
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.

                                    CONSOLIDATED GRAPHICS, INC,
                                    a Texas corporation


                                    By: G. CHRISTOPHER COLVILLE
                                    Name: G. Christopher Colville
                                    Title:VP and CFO

                                    Address for Notices:

                                    2210 West Dallas Street
                                    Houston, Texas 77019
                                    Attention: Mr. Ronald E. Hale, Jr.,
                                          Vice President and Treasurer
                                    Telecopy No.: (713) 525-4350
<PAGE>
                                    TEXAS COMMERCE BANK NATIONAL
                                    ASSOCIATION, as Agent and as a Lender


                                    By: JAN DANVERS
                                    Name:Jan Danvers
                                    Title: Senior Vice President

                                    Address for Notices:

Revolving Loan Commitment:          712 Main Street
                                    Houston, Texas 77002
$20,000,000                         Attention:  Manager,  Diversified Corporate
                                                Group
                                    Telecopy No.: (713) 216-7500
<PAGE>
                                    BANKONE, TEXAS, N.A.,
                                    as Co-Agent and as a Lender


                                    By: SIGNATURE ILLEGIBLE
                                    Name:
                                    Title:

                                    Address for Notices:

Revolving Loan Commitment:          910 Travis Street, 7th Floor
                                    Houston, Texas 77002
$20,000,000                         Attention: Mr. John Elam
                                    Telecopy No.: (713) 751-6199
<PAGE>
                                    COMERICA BANK, TEXAS


                                    By: WALTER F. RODEE, III
                                    Name:Walter F. Rodee, III
                                    Title: Vice President

                                    Address for Notices:

Revolving Loan Commitment:          One Shell Plaza
                                    910 Louisiana, Suite 410
                                    Houston, Texas 77002
$20,000,000                         Attention: Mr. Fred Rodee
                                    Telecopy No.: (713) 722-6550

                                    Thanksgiving Tower
                                    1601 Elm Street 4th Floor
                                    Dallas, Texas 775201
                                    Attention: Mr. Gary W. Orr
                                    Telecopy No.: (214) 979-8310
<PAGE>
                                    FIRST UNION NATIONAL BANK OF NORTH
                                    CAROLINA

                                    By: JANE W. WORKMAN
                                    Name: Jane W. Workman
                                    Title: Senior Vice President

                                    Address for Notices:

Revolving Loan Commitment:          One First Union Center
                                    301 South College Street
                                    Charlotte, Northe Carolina 28202
$20,000,000                         Attention: Mr. Todd Rogers
                                    Telecopy No.: (704) 374-2802
<PAGE>
                                    CIBC, INC.


                                    By: ELIZABETH O. FISCHER
                                    Name: Elizabeth O. Fischer
                                    Title: Authorized Signatory

                                    Address for Notices:

Revolving Loan Commitment:          425 Lexington Avenue
                                    New York, New York 10017
$10,000,000                         Attention:Elizabeth Fischer
                                    Telecopy No.: (212) 856-3991
<PAGE>
                                    BANK OF TOKYO-MITSUBISHI, LTD.


                                    By: JOHN W. MCGHEE
                                    Name: John W. McGhee
                                    Title: Vice President and Manager

                                    Address for Notices:

Revolving Loan Commitment:          1100 Louisiana, Suite 2800
                                    Houston, Texas 77002
$10,000,000                         Attention: Mr. Mike Innes
                                    Telecopy No.: (713) 658-0116
<PAGE>
                         [LETTERHEAD OF THE BORROWER]


                        REQUEST FOR EXTENSION OF CREDIT


                           ________________, 199____


Texas Commerce Bank National
  Association, as Agent
712 Main Street
Houston, Texas  77002
Attention:  Manager, Diversified Corporate Group


Gentlemen:

      The undersigned hereby certifies that he is the
_________________________________ of CONSOLIDATED GRAPHICS, INC., a Texas
corporation (the "COMPANY"), and that as such he is authorized to execute this
Request for Extension of Credit (the "REQUEST") on behalf of the Company
pursuant to the Loan Agreement (as it may be amended, supplemented or restated
from time to time, the "AGREEMENT") dated as of June ____, 1997, by and among
the Company, Texas Commerce Bank National Association, as Agent, BankOne Texas,
N.A., as Co-Agent, and the Lenders therein named. The (check one) [ ] Loan [ ]
Letter of Credit being requested hereby is to be in the amount set forth in (b)
below and is requested to be made on __________________, which is a Business
Day. The undersigned further certifies, represents and warrants that to his
knowledge, after due inquiry (each capitalized term used herein having the same
meaning given to it in the Agreement unless otherwise specified herein):

      (a)   As of the date hereof:

            (1)   The aggregate outstanding amount of Revolving
                  Loan Obligations is:                            $__________

            (2)   The Letter of Credit Liabilities as of the date
                  hereof, before giving effect to the Letter
                  of Credit, if any, requested hereby,
                  is:                                             $__________


                                   EXHIBIT A
                               to Loan Agreement
                                     1
<PAGE>
            (3)   The aggregate unused Revolving Loan Commitments
                  of all Lenders [$100,000,000 MINUS the amount in
                  (a)(1) above], if positive, is:                 $__________

      (b)   If and only if the aggregate unused Revolving Loan Commitments of
            all Lenders is positive, the Company hereby requests under this
            Request a Loan or Letter of Credit (as indicated above) in the
            amount of $____________ (which is no more than the aggregate unused
            Revolving Loan Commitments of all Lenders).

      (c)   If a Letter of Credit is requested hereby, it should be issued for
            the benefit of ___________________________________ and should have
            an expiration date of ____________________ (which date is no later
            than one year from the proposed date of issuance) and any special
            language to be incorporated into such Letter of Credit is attached
            hereto. The sum of the face amount of the requested Letter of Credit
            PLUS the Letter of Credit Liabilities as the date hereof as
            specified in item 2 above does not exceed $10,000,000.

      (d)   The representations and warranties made in each Loan Document are
            true and correct in all material respects on and as of the time of
            delivery hereof, with the same force and effect as if made on and as
            of the time of delivery hereof.

      (e)   No change in the assets, liabilities, financial condition, business
            or affairs of the Company or any of the other Obligors has occurred
            which results in a Material Adverse Effect.

      (f)   No Default or Event of Default has occurred and is continuing.

      Thank you for your attention to this matter.



                                    Very truly yours,



                                    [SIGNATURE OF AUTHORIZED OFFICER]


                                   EXHIBIT A
                               to Loan Agreement
                                     2
<PAGE>
                            RATE DESIGNATION NOTICE

      CONSOLIDATED GRAPHICS, INC., Texas Commerce Bank National Association, as
Agent, BankOne Texas, N.A., as Co-Agent, and certain financial institutions
executed and delivered that certain Loan Agreement (as amended, supplemented and
restated, the "LOAN AGREEMENT") dated as of June ____, 1997. Any term used
herein and not otherwise defined herein shall have the meaning herein ascribed
to it in the Loan Agreement. In accordance with the Loan Agreement, Borrower
hereby notifies Agent of the exercise of an Interest Option.

A.    CURRENT BORROWINGS

      1.    Interest Options now in effect:  _____________________

      2.    Amounts:  $ _____________________

      3.    Expiration of current Interest Periods, if applicable: ____________

B.    PROPOSED ELECTION

      1.    Total Amount:  $____________________

      2.    Date Interest Option is to be effective:

      3.    Interest Option to be applicable (check one):

            [____] Base Rate

            [____] Eurodollar Rate

      4.    Interest Period:____[months] [days] (if available and if applicable)

                                    EXHIBIT B

                                        1
<PAGE>
      Borrower represents and warrants that the Interest Option and Interest
Period selected above comply with all provisions of the Loan Agreement and that
there exists no Event of Default or any event which, with the passage of time,
the giving of notice or both, would be an Event of Default.

Date:________
                                    CONSOLIDATED GRAPHICS, INC.,
                                    a Texas corporation


                                    By:_____________________

                                    Name:___________________

                                    Title:__________________



                                    EXHIBIT B

                                        2
<PAGE>
                                     NOTE

                                Houston, Texas
$_______________________                                   ______________, 199_



      FOR VALUE RECEIVED, CONSOLIDATED GRAPHICS, INC. ("MAKER"), a Texas
corporation, promises to pay to the order of _______________________ ("PAYEE"),
at the principal office of Texas Commerce Bank National Association, a national
banking association, 712 Main Street, Houston, Harris County, Texas 77002, in
immediately available funds and in lawful money of the United States of America,
the principal sum of ________________________________ Dollars ($_____________)
(or the unpaid balance of all principal advanced against this note, if that
amount is less), together with interest on the unpaid principal balance of this
note from time to time outstanding at the rate or rates provided in that certain
Loan Agreement (as amended, supplemented, restated or replaced from time to
time, the "LOAN AGREEMENT") dated as of June _____, 1997 among Maker, certain
signatory banks named therein, Texas Commerce Bank National Association, as
Agent, and BankOne Texas, N.A., as Co-Agent; PROVIDED, that for the full term of
this note the interest rate produced by the aggregate of all sums paid or agreed
to be paid to the holder of this note for the use, forbearance or detention of
the debt evidenced hereby (including, but not limited to, all interest on this
note at the Stated Rate plus the Additional Interest) shall not exceed the
Ceiling Rate. Any term defined in the Loan Agreement which is used in this note
and which is not otherwise defined in this note shall have the meaning ascribed
to it in the Loan Agreement.

      1. LOAN AGREEMENT; ADVANCES; SECURITY. This note has been issued pursuant
to the terms of the Loan Agreement, and is one of the Notes referred to in the
Loan Agreement. Advances against this note by Payee or other holder hereof shall
be governed by the terms and provisions of the Loan Agreement. Reference is
hereby made to the Loan Agreement for all purposes. Payee is entitled to the
benefits of the Loan Agreement. The unpaid principal balance of this note at any
time shall be the total of all amounts lent or advanced against this note less
the amount of all payments or permitted prepayments made on this note and by or
for the account of Maker. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on a schedule
which may be attached hereto (and thereby made a part hereof for all purposes)
or otherwise recorded in the holder's records; PROVIDED, that any failure to
make notation of (a) any advance shall not cancel, limit or otherwise affect
Maker's obligations or any holder's rights with respect to that advance, or (b)
any payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Maker's entitlement to credit for that payment as of the date
received by the holder.

                                    EXHIBIT C
                                to Loan Agreement
                                       -1-
<PAGE>
      2.    MANDATORY PAYMENTS OF PRINCIPAL AND INTEREST.

      (a) Accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable on the Interest Payment Dates.

      (b) On the Revolving Loan Maturity Date, the entire unpaid principal
balance of this note and all accrued and unpaid interest on the unpaid principal
balance of this note shall be finally due and payable.

      (c) All payments hereon made pursuant to this Paragraph shall be applied
first to accrued interest, the balance to principal.

      (d) If any payment provided for in this note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day (unless the result of such extension of time would be to extend the
date for such payment into another calendar month or beyond the Revolving Loan
Maturity Date, and in either such event such payment shall be made on the
Business Day immediately preceding the day on which such payment would otherwise
have been due), and such extension of time shall in such case be included in the
computation of interest on this note.

      (e) The Loan Agreement provides for required prepayments of the
indebtedness evidenced hereby upon terms and conditions specified therein.

      3. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in this note or any of the other Loan Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Loan Documents, which under applicable laws are or
may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable federal and Texas usury
laws (and the usury laws of any other jurisdiction whose usury laws are deemed
to apply to this note or any of the other Loan Documents despite the intention
and desire of the parties to apply the usury laws of the State of Texas). In
furtherance thereof, none of the terms of this note or any of the other Loan
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the Ceiling Rate. Maker or other parties now or hereafter becoming liable for
payment of the indebtedness evidenced by this note shall never be liable for
interest in excess of the Ceiling Rate. If, for any reason whatever, the
interest paid or received on this note during its full term produces a rate
which exceeds the Ceiling Rate, the holder of this note shall credit against the
principal of this note (or, if such indebtedness shall have been paid in full,
shall refund to the payor of such interest) such portion of said interest as
shall be

                                    EXHIBIT C
                                to Loan Agreement
                                       -2-
<PAGE>
necessary to cause the interest paid on this note to produce a rate equal to the
Ceiling Rate. All sums paid or agreed to be paid to the holder of this note for
the use, forbearance or detention of the indebtedness evidenced hereby shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of this note, so that the
interest rate is uniform throughout the full term of this note. The provisions
of this Paragraph shall control all agreements, whether now or hereafter
existing and whether written or oral, between Maker and Payee.

      4. DEFAULT. The Loan Agreement provides for the acceleration of the
maturity of this note and other rights and remedies upon the occurrence of
certain events specified therein.

      5. WAIVERS BY MAKER AND OTHERS. Except to the extent, if any, that notice
of default is expressly required herein or in any of the other Loan Documents,
Maker and any and all co-makers, endorsers, guarantors and sureties severally
waive notice (including, but not limited to, notice of intent to accelerate and
notice of acceleration, notice of protest and notice of dishonor), demand,
presentment for payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof
may be extended and re-extended from time to time without notice to any of them.
Each such person agrees that his, her or its liability on or with respect to
this note shall not be affected by any release of or change in any guaranty or
security at any time existing or by any failure to perfect or to maintain
perfection of any lien against or security interest in any such security or the
partial or complete unenforceability of any guaranty or other surety obligation,
in each case in whole or in part, with or without notice and before or after
maturity.

      6. PARAGRAPH HEADINGS. Paragraph headings appearing in this note are for
convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.

      7. CHOICE OF LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES
OF AMERICA FROM TIME TO TIME IN EFFECT.

      8. SUCCESSORS AND ASSIGNS. This note and all the covenants and agreements
contained herein shall be binding upon, and shall inure to the benefit of, the
respective legal representatives, heirs, successors and assigns of Maker and
Payee.

      9. SEVERABILITY. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it.

                                    EXHIBIT C
                                to Loan Agreement
                                       -3-
<PAGE>
      10. REVOLVING LOAN. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Revolving Loan Maturity Date. Maker may
borrow, repay and reborrow hereunder, and except as set forth in the Loan
Agreement there is no limitation on the number of advances made hereunder.
Pursuant to Article 15.10(b) of Chapter 15 ("CHAPTER 15") of Title 79, Texas
Revised Civil Statutes, 1925, as amended, Maker and Payee expressly agree that
Chapter 15 shall not apply to this note or to any loan evidenced by this note
and that neither this note nor any such loan shall be governed by or subject to
the provisions of Chapter 15 in any manner whatsoever.

      11. BUSINESS LOANS. Maker warrants and represents to Payee and all other
holders of this note that all loans evidenced by this note are and will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One.


                                    CONSOLIDATED GRAPHICS, INC.,
                                    a Texas corporation


                                    By:_________________________

                                    Name:_______________________

                                    Title:______________________

                                    EXHIBIT C
                                to Loan Agreement
                                       -4-
<PAGE>
                           ASSIGNMENT AND ACCEPTANCE

                          Dated:___________________


      Reference is made to the Loan Agreement dated as of June _____, 1997 (as
restated, amended, modified, supplemented and in effect from time to time, the
"LOAN AGREEMENT"), among CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"COMPANY"), the Lenders named therein, BankOne Texas, N.A., as Co-Agent, and
Texas Commerce Bank National Association, as Agent (the "AGENT"). Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Loan Agreement. This Assignment and Acceptance, between the
Assignor (as defined and set forth on SCHEDULE I hereto and made a part hereof)
and the Assignee (as defined and set forth on SCHEDULE I hereto and made a part
hereof) is dated as of the Effective Date (as set forth on SCHEDULE I hereto and
made a part hereof).

      1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "ASSIGNED INTEREST") in and to all
the Assignor's rights and obligations under the Loan Agreement respecting those,
and only those, credit facilities contained in the Loan Agreement as are set
forth on SCHEDULE I (collectively, the "ASSIGNED FACILITIES," individually, an
"ASSIGNED FACILITY"), in a principal amount for each Assigned Facility as set
forth on SCHEDULE I.

      2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company or its Subsidiaries or the performance or observance by the
Company or its Subsidiaries of any of its respective obligations under the Loan
Agreement, any other Loan Document or any other instrument or document furnished
pursuant thereto; and (iii) attaches the Note(s) held by it evidencing the
Assigned Facility or Facilities, as the case may be, and requests that the Agent
exchange such Note(s) for a new Note or Notes payable to the Assignor (if the
Assignor has retained any interest in the Assigned Facility or Facilities) and a
new Note or Notes payable to the Assignee in the respective amounts which
reflect the assignment being made hereby


                                    EXHIBIT D
                                       to
                                 Loan Agreement

                                       -1-
<PAGE>
(and after giving effect to any other assignments which have become effective on
the Effective Date).

      3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Loan Agreement, together with copies of the financial statements
referred to in SECTION 6.2 thereof, or if later, the most recent financial
statements delivered pursuant to SECTION 7.2 thereof, and such other documents
and information as it has deemed appropriate to make its own credit analysis;
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Agreement; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Agreement as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (v)
agrees that it will be bound by the provisions of the Loan Agreement and will
perform in accordance with its terms all the obligations which by the terms of
the Loan Agreement are required to be performed by it as a Lender; (vi) if the
Assignee is organized under the laws of a jurisdiction outside the United
States, attaches the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Loan Agreement or such other documents as are necessary to indicate that all
such payments are subject to such tax at a rate reduced by an applicable tax
treaty, and (vii) has supplied the information requested on the administrative
questionnaire attached hereto as EXHIBIT A.

      4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance by it and the Company and recording by the
Agent pursuant to SECTION 11.6 of the Loan Agreement, effective as of the
Effective Date (which Effective Date shall, unless otherwise agreed to by the
Agent, be at least five Business Days after the execution of this Assignment and
Acceptance).

      5. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignee,
whether such amounts have accrued prior to the Effective Date or accrue
subsequent to the Effective Date. The Assignor and Assignee shall make all appro
priate adjustments in payments for periods prior to the Effective Date by the
Agent or with respect to the making of this assignment directly between
themselves.

      6. From and after the Effective Date, (i) the Assignee shall be a party to
the Loan Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and

                                    EXHIBIT D
                                       to
                                 Loan Agreement

                                       -2-
<PAGE>
obligations of a Lender thereunder, and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Agreement.

      7.    THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

            IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Acceptance to be executed by their respective duly authorized officers on
Schedule I hereto.

                                    EXHIBIT D
                                       to
                                 Loan Agreement

                                       -3-
<PAGE>
                    SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE

Legal Name of Assignor:  ____________________________

Legal Name of Assignee:  _________________________________________

Effective Date of Assignment:  ________________________

                                                   Percentage Assigned of Each
                                                     Facility (to at least 8
                               Principal              decimals) (Shown as a
                              Amount (or,            percentage of aggregate
                             with respect           original principal amount
                              to Letters          [or, with respect to Letters
        Assigned            of Credit, face           Credit, face amount]
       FACILITIES          AMOUNT) ASSIGNED              OF ALL LENDERS)


Loans       :               $______________                  ______%

Letter of Credit
  participation interests   $______________                  ______%


          Total             $______________



________________________________,
      as Assignor


By:______________________________

Name:____________________________

Title:___________________________

                                    EXHIBIT D
                                       to
                                 Loan Agreement

                                       -1-
<PAGE>
_________________________________,
      as Assignee


By:______________________________

Name:____________________________

Title:___________________________



CONSOLIDATED GRAPHICS, INC.,
a Texas corporation


By:______________________________

Name:____________________________

Title:___________________________

                                    EXHIBIT D
                                       to
                                 Loan Agreement

                                       -2-
<PAGE>
Accepted:

TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Agent


By: ____________________________

Name:___________________________

Title:__________________________

                                    EXHIBIT D
                                       to
                                 Loan Agreement

                                       -3-
<PAGE>
                            COMPLIANCE CERTIFICATE


      The undersigned hereby certifies that he is the
______________________________ of CONSOLIDATED GRAPHICS, INC., a Texas
corporation (the "BORROWER"), and that as such he is authorized to execute this
certificate on behalf of the Borrower pursuant to the Loan Agreement (the
"AGREEMENT") dated as of June ____, 1997, by and among the Borrower, TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, as Agent, BankOne Texas, N.A., as Co-Agent,
and the lenders therein named; and that a review of the Borrower and the other
Obligors has been made under his supervision with a view to determining whether
the Borrower and the other Obligors have fulfilled all of their respective
obligations under the Agreement, the Notes and the other Loan Documents; and on
behalf of the Borrower further certifies, represents and warrants that to his
knowledge, after due inquiry (each capitalized term used herein having the same
meaning given to it in the Agreement unless otherwise specified):

             (a) The Borrower and the other Obligors have fulfilled, in all
      material respects, their respective obligations under the Agreement, the
      Notes and the other Loan Documents.

             (b) The representations and warranties made in each Loan Document
      are true and correct in all material respects on and as of the time of
      delivery hereof, with the same force and effect as if made on and as of
      the time of delivery hereof.

             (c) The financial statements delivered to the Agent concurrently
      with this Compliance Certificate have been prepared in accordance with
      GAAP consistently followed throughout the period indicated and fairly
      present the financial condition and results of operations of the
      applicable Persons as at the end of, and for, the period indicated
      (subject, in the case of Quarterly Financial Statements, to normal changes
      resulting from year-end adjustments).

             (d) No Default or Event of Default has occurred and is continuing.
      In this regard, the compliance with the provisions of SECTIONS 7.3 and
      8.12 is as follows:

             (i)   SECTION 7.3(A) -- MINIMUM NET WORTH

                   ACTUAL                  REQUIRED

                   $_________              $__________

                                   EXHIBIT E

                                      1
<PAGE>
             (ii)  SECTION 7.3(B) -- DEBT TO CAPITALIZATION RATIO

                   ACTUAL                  REQUIRED

                   ______                  0.60

             (iii) SECTION 7.3(C) -- DEBT TO PRO FORMA CONSOLIDATED EBITDA RATIO

                   ACTUAL                  REQUIRED

                   ______                  3.00

             (iv)  SECTION 7.3(D) -- FIXED CHARGE COVERAGE RATIO

                   ACTUAL                  REQUIRED

                   ______                  1.25

             (v)   SECTION 8.12 -- CAPITAL EXPENDITURES

                   ACTUAL                  MAXIMUM

                   ______                  ______

             (e) Attached hereto are calculations for the appropriate components
      to the ratios contemplated in SECTIONS 7.3 and 8.12 supporting the
      determination of said ratios as of the date of the date of this
      Certificate.

             (f) No material adverse change in the assets, liabilities,
      financial condition, business or affairs of the Borrower or any of the
      other Obligors has occurred since the Effective Date.


                                    EXHIBIT E

                                        2
<PAGE>
             DATED as of ____________________.




                                     [SIGNATURE OF AUTHORIZED OFFICER]

                                    EXHIBIT E

                                        3
<PAGE>
                                    EXHIBIT F
List of Principal Subsidiaries
As of March 31, 1997


        Name of Subsidiary                   State of Incorporation

1.      Precision Litho, Inc.                       Texas

2.      Chas P. Young Company                       Texas

3.      The Jarvis Press, Inc.                      Texas

4.      Consolidated Graphics Properties II,        Texas

5.      Garner Printing Company                      Iowa

6.      Emerald City Graphics, Inc.               Washington

7.      Western Lithographic Company                Texas

8.      Frederic Printing Company                  Colorado

9.      Direct Color, Inc.                        California

10.     Gulf Printing Company                       Texas

11.     Clear Visions, Inc.                         Texas

12.     Bridgetown Printing Co.                     Texas

13.     Tewell Warren Printing Company              Texas

14.     Consolidated Eagle Press, Inc.              Texas

15.     Heritage Graphics, Inc.                     Texas

Percentage of Total Consolidated          86%

Percentage of Total Consolidated      106.84%
<PAGE>
                                 SCHEDULE 8.2

                               Permitted Liens

==========================================================================
         DEBTOR                 Secured Party                   Security
- --------------------------------------------------------------------------
1 Precision Litho          Fuji Photo Film U.S.A., Inc.         Equipment
- --------------------------------------------------------------------------
1 Precision Litho          Fuji Photo Film U.S.A., Inc.         Equipment
- --------------------------------------------------------------------------
1 Precision Litho          U.S. Concord Inc.                    Equipment
- --------------------------------------------------------------------------
1 Precision Litho          U.S. Concord Inc.                    Equipment
- --------------------------------------------------------------------------
1 Precision Litho          U.S. Concord Inc.                    Equipment
- --------------------------------------------------------------------------
1 Precision Litho          Cobblestone Corporation of           Equipment
                           Northern England, Inc.
- --------------------------------------------------------------------------
1 Precision Litho          General Electric Capital             Equipment
                           Corporation
- --------------------------------------------------------------------------
1 Precision Litho          General Electric Capital             Equipment
                           Corporation
- --------------------------------------------------------------------------
1 Precision Litho          General Electric Capital             Equipment
                           Corporation
- --------------------------------------------------------------------------
1 Precision Litho          TOKAI Financial Services, Inc.       Equipment
- --------------------------------------------------------------------------
1 Precision Litho          Fuji Photo Film U.S.A., Inc.         Equipment
- --------------------------------------------------------------------------
1 Precision Litho          Crown Credit Co.                     Equipment
- --------------------------------------------------------------------------
2 Chas. P. Young           Komori America Corp.                 Equipment
  Company
- --------------------------------------------------------------------------
2 Chas. P. Young           Komori America Corp.                 Equipment
  Company
- --------------------------------------------------------------------------
3 Chas. P. Young           Heidelberg Harris, Inc.              Equipment
  Company
- --------------------------------------------------------------------------
2 The Jarvis Press, Inc.   P. C. Leasing, a division            Equipment
                           of Phoenixcor Inc.
- --------------------------------------------------------------------------
2 The Jarvis Press, Inc.   Phoenixcor, Inc.                     Equipment
- --------------------------------------------------------------------------
2 The Jarvis Press, Inc.   Phoenixcor, Inc.                     Equipment
                                                            Fixture Filing
- --------------------------------------------------------------------------
2 The Jarvis Press, Inc.   Phoenixcor, Inc.                     Equipment
                                                            Fixture Filing
- --------------------------------------------------------------------------
2 The Jarvis Press, Inc.   Komori America Corporation           Equipment
- --------------------------------------------------------------------------
2 The Jarvis Press, Inc.   Komori Leasing Incorporated          Equipment
- --------------------------------------------------------------------------
<PAGE>
==========================================================================
         DEBTOR                 Secured Party                   Security
- --------------------------------------------------------------------------
2 Emerald City Graphics,   Seattle First National Bank          Equipment
  Inc.
- --------------------------------------------------------------------------
4 Emerald City Graphics    Polychrome Corporation               Equipment
- --------------------------------------------------------------------------
1 Direct Color Inc.        Deutsche Credit Corp.                Equipment
- --------------------------------------------------------------------------
1 Direct Color Inc.        Heidelberg U.S.A., Inc.              Equipment
- --------------------------------------------------------------------------
1 Direct Color Inc.        JLA Credit Corporation               Equipment
- --------------------------------------------------------------------------
1 Direct Color Inc.        Jefferson Smurfit Corporation        Equipment
- --------------------------------------------------------------------------
1 Bridgetown Printing      NEC Industries, Inc.                 Equipment
  Company
- --------------------------------------------------------------------------
4 Bridgetown Printing      FujioPhoto Film U.S.A., Inc.         Equipment
  Company
- --------------------------------------------------------------------------
4 Bridgetown Printing      Agfa Division of Bayer               Equipment
  Company                  Corporation
- --------------------------------------------------------------------------
1 Eagle Press              The CIT Group/Equipment              Equipment
                           Financing, Inc.
- --------------------------------------------------------------------------
1 Eagle Press              Associates Commercial Credit         Equipment
- --------------------------------------------------------------------------
1 Frederic Printing        E. I. du Pont De Nemours & Co.,      Equipment
  Company                  Inc.
- --------------------------------------------------------------------------
1 Frederic Printing        Vendor Funding Co., Inc.             Equipment
  Company
- --------------------------------------------------------------------------
1 Frederic Printing        United Printing Equipment &          Equipment
  Company                  Supply, Inc.
- --------------------------------------------------------------------------
1 Frederic Printing        Bell Industries, Inc.                Equipment
  Company
- --------------------------------------------------------------------------
1 John Frederic Printing   The Colorado National Bank of        Equipment
  Co.                      Denver
- --------------------------------------------------------------------------
1 John Frederic Printing   Duetsche Credit Corporation          Equipment
  Co.
- --------------------------------------------------------------------------
1 John Frederic Printing   The Colorado National Bank of     All Accounts,
  Co.                      Denver                            Account
                                                             Receivable
- --------------------------------------------------------------------------

                                       2
<PAGE>
==========================================================================
         DEBTOR                 Secured Party                   Security
- --------------------------------------------------------------------------
1 John Frederic Printing   The Colorado National Bank of  All Inventories,
  Co.                      Denver                         Accounts,
                                                          General
                                                          Intangibles
- --------------------------------------------------------------------------
1 Garner Printing Company  Fleet Credit Corp.                   Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Concord Commercial Division          Equipment
                           of Marine Midland Bus Loans, Inc.
- --------------------------------------------------------------------------
1 Garner Printing Company  Scitex America Corp.                 Equipment
- --------------------------------------------------------------------------
3 Garner Printing Company  Kamori America Corp.                 Equipment
- --------------------------------------------------------------------------
1 Garner Publishing Co.,   West Des Moines State Bank;     Blanket Filing
  Inc.                     subordination of certain
                           equipment to American Capital
                           Resources, Inc.
- --------------------------------------------------------------------------
1 Garner Publishing Co.,   Fleet Credit Corp.               All Equipment
  Inc.
- --------------------------------------------------------------------------
1 Garner Publishing Co.,   Leslie.Midwestern Paper Co.     Blanket Filing
  Inc.
- --------------------------------------------------------------------------
2 Garner Publishing Co.,   The CIT Group/Equipment              Equipment
  Inc.                     Finance, Inc.
- --------------------------------------------------------------------------
2 Garner Publishing Co.,   The CIT Group/Equipment              Equipment
  Inc.                     Finance, Inc.
- --------------------------------------------------------------------------
2 Garner Publishing Co.,   The CIT Group/Equipment              Equipment
  Inc.                     Finance, Inc.
- --------------------------------------------------------------------------
2 Garner Publishing Co.,   General Electric Capital Corp.       Equipment;
                                                               All Chattel
                                                                Paper
- --------------------------------------------------------------------------
2 Garner Publishing Co.,   General Electric Capital Corp.       Equipment
- --------------------------------------------------------------------------
2 Garner Publishing Co.,   General.Electric Capital Corp.       Equipment;
                                                               All Chattel
                                                                Paper
- --------------------------------------------------------------------------
1 Heritage Graphics, Inc.  Miles Financial Services, Inc.       Equipment
- --------------------------------------------------------------------------
1 Heritage Graphics, Inc.  Minnesota Mining & Manufacturing     Equipment
- --------------------------------------------------------------------------

                                       3
<PAGE>
==========================================================================
         DEBTOR                 Secured Party                   Security
- --------------------------------------------------------------------------
4 Tewell Warren Printing   FujimPhoto Film U.S.A., Inc.    Equipment
  Company
- --------------------------------------------------------------------------
2 Tewell Warren Printing   Komori America Corporation      Equipment
  Company
- --------------------------------------------------------------------------
2 Tewell Warren Printing   Komori Leasing Incorporated     Equipment
  Company
- --------------------------------------------------------------------------
4 Tewell's Printing and    Polychrome Corporation,         Equipment
  Litho                    a division os Sun Chemical
                           Corporation
- --------------------------------------------------------------------------
4 Tewells Printing         Polychrome Corporation          Equipment
- --------------------------------------------------------------------------
2 Consolidated Graphics    MetLife Capital, Inc.           Real Estate
  Properties I, Inc.
- --------------------------------------------------------------------------
2 Consolidated Graphics    MetLife Capital, Inc.           Real Estate
  Properties I, Inc.
- --------------------------------------------------------------------------
2 Tewell Warren Printing   Gerald A. Tewell Trust & Renee  Real Estate
  Company                  J. Tewell Trust
- --------------------------------------------------------------------------
2 Garner Printing Company  Rodger Hintz                    Land & Building
- --------------------------------------------------------------------------
2 Garner Printing Company  GMAC                            Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Peoples Trust & Savings Bank    Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Peoples Trust & Savings Bank    Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Peoples Trust & Savings Bank    Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Boatman's Bank                  Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  GMAC                            Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Homeland Bank                   Equipment
- --------------------------------------------------------------------------
2 Garner Printing Company  Homeland Bank                   Equipment
- --------------------------------------------------------------------------
2 Bridgetown Printing      Lanier Worldwide, Inc.          Equipment
  Company
==========================================================================

1  The Debtor is in the process of releasing these liens because the obligations
   giving rise to these liens have been paid.

2  Secured Indebtedness described on Schedule 8.1.

                                       4
<PAGE>
3  Equipment that has been delivered but not invoiced and to be paid with
   proceeds of the Loans with the corresponding lien to be released.

4  This is not a lien on equipment owned by Debtor; it is merely a protective
   filing by Secured Party for equipment owned by Secured Party at no charge in
   consideration of Debtor purchasing supplies and/or materials from Debtor.


                                       5
<PAGE>
                          CONSOLIDATED GRAPHICS, INC.
                                  SCHEDULE 8.9
                              AS OF APRIL 30, 1997

                                                         PRINCIPAL
     SUBSIDIARY                   INVESTMENT               AMOUNT     SECURITY
- ---------------------   ------------------------------   ---------   -----------
Consolidated Graphics   Note Receivable - Rampe Living    $452,024   Real Estate
 Properties II, Inc.                 Trust


                                                                      EXHIBIT 21

                              LIST OF SUBSIDIARIES

                                                                JURISDICTION OF
                     SUBSIDIARY                                  INCORPORATION
- ----------------------------------------------------------    ------------------
Bridgetown Printing Company ..............................    Texas
Chas. P. Young Company ...................................    Texas
Chas. P. Young Company, Inc. .............................    New York
Clear Visions, Inc. ......................................    Texas
Consolidated Eagle Press, Inc. ...........................    Texas
Consolidated Graphics Management, Inc. ...................    Delaware
Consolidated Graphics Management, Ltd. ...................    Texas
Consolidated Graphics Properties, Inc. ...................    Texas
Consolidated Graphics Properties II, Inc. ................    Texas
Consolidated Mobility, Inc. ..............................    Texas
Direct Color, Inc. .......................................    California
Emerald City Graphics, Inc. ..............................    Washington
Frederic Printing Company ................................    Colorado
Garner Printing Company .................................    Iowa
Gritz-Ritter Graphics, Inc. ..............................    Colorado
Grover Printing Company ..................................    Texas
Gulf Printing Company ....................................    Texas
Heritage Graphics, Inc. ..................................    Texas
Precision Litho, Inc. ....................................    Texas
Superb Printing Company ..................................    Texas
Tewell Warren Printing Company ...........................    Texas
The Jarvis Press, Inc. ...................................    Texas
Theo Davis Sons, Inc. ....................................    North Carolina
Tucker Printers, Inc. ....................................    Texas
Tulsa Litho Company ......................................    Oklahoma
Western Lithograph Company ...............................    Texas


                                                                      EXHIBIT 23

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

     As independent public accountants, we hereby consent to the incorporation
of our report, included in this Form 10-K, into the Company's previously filed
Registration Statement Files No. 33-87192, 333-06097, 333-18435 and 333-18741.

ARTHUR ANDERSEN LLP

Houston, Texas
June 30, 1997


                                                                      EXHIBIT 24

                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.


                                                          /s/ LARRY J. ALEXANDER
                                                              Larry J. Alexander
<PAGE>
POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.



                                                          /s/ BRADY F. CARRUTH
                                                              Brady F. Carruth
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.


                                                          /s/ CLARENCE C. COMER
                                                              Clarence C. Comer
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.


                                                          /s/ GARY L. FORBES
                                                              Gary L. Forbes
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.


                                                             /s/ W.D. HAWKINS
                                                                 W. D. Hawkins
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.


                                                            /s/ JAMES H. LIMMER
                                                                James H. Limmer
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.


                                                             /s/ THOMAS E. SMITH
                                                                 Thomas E. Smith
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.

                                                              /s/ HUGH N. WEST
                                                                  Hugh N. West
<PAGE>
                            POWER OF ATTORNEY FOR 10K

               WHEREAS, CONSOLIDATED GRAPHICS, INC., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the "Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1997, as
prescribed by the Commission pursuant to the Act and the rules and regulations
of the Commission promulgated thereunder, with any and all exhibits and other
documents relating to said Annual Report;

               NOW, THEREFORE, the undersigned in his capacity as a director or
officer, or both, as the case may be, of the Company, does hereby appoint Joe R.
Davis and G. Christopher Colville and each of them severally, his true and
lawful attorney or attorneys with power to act with or without the other, and
with full power of substitution and resubstitution, to execute in his name,
place and stead in his capacity as a director or officer, or both, as the case
may be, of the Company, said Annual Report, any and all amendments to said
Annual Report and all instruments as said attorneys or any of them shall deem
necessary or incidental in connection therewith and to file the same with the
Commission. Each of said attorneys shall have full power and authority to do and
perform in the name and on behalf of the undersigned in any and all capacities
every act whatsoever necessary or desirable as the undersigned might or could do
in person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them.

               IN WITNESS WHEREOF, the undersigned has executed this instrument
on this 28th day of April, 1997.

                                                               /S/JOE R. DAVIS
                                                                  Joe R. Davis

<TABLE> <S> <C>

<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1997
<PERIOD-END>                               MAR-31-1997
<CASH>                                           3,636
<SECURITIES>                                         0
<RECEIVABLES>                                   30,588
<ALLOWANCES>                                     1,241
<INVENTORY>                                      8,679
<CURRENT-ASSETS>                                43,096
<PP&E>                                         103,084
<DEPRECIATION>                                  17,441
<TOTAL-ASSETS>                                 135,720
<CURRENT-LIABILITIES>                           21,016
<BONDS>                                              0
                                0
                                          0
<COMMON>                                           124
<OTHER-SE>                                      66,323
<TOTAL-LIABILITY-AND-EQUITY>                   135,720
<SALES>                                        144,082
<TOTAL-REVENUES>                               144,082
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