FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this  "AMENDMENT")  dated as of
October 6, 2000, to the Credit  Agreement  referenced  below,  is by and among
WATSON WYATT & COMPANY, a Delaware corporation (the "BORROWER"),  WATSON WYATT
& COMPANY  HOLDINGS,  a Delaware  corporation  (the  "PARENT"),  the  Domestic
Subsidiaries  of the  Parent  identified  on the  signature  pages  hereto  as
"Subsidiary  Guarantors"  (the  "SUBSIDIARY  GUARANTORS" and together with the
Parent, the "GUARANTORS"),  the Banks identified on the signature pages hereto
and Bank of America,  N.A., a national banking  association  formerly known as
NationsBank, N.A., as agent for the Banks (in such capacity, together with any
successor in such capacity, the "AGENT").

                              W I T N E S S E T H

     WHEREAS, a $120 million credit facility has been extended to the Borrower
pursuant to the terms of that certain  Credit  Agreement  dated as of June 30,
1998 (as amended,  modified and supplemented  from time to time, the "EXISTING
CREDIT AGREEMENT") among the Borrower,  the Parent, the Subsidiary Guarantors,
the Banks identified therein and the Agent;

     WHEREAS, the Borrower has requested certain modifications to the Existing
Credit Agreement;

     WHEREAS, the requested  modifications require the consent of the Majority
Banks;
     WHEREAS, the Majority Banks have agreed to the requested modifications on
the terms and conditions set forth herein;

     NOW,  THEREFORE,  IN  CONSIDERATION  of the  premises  and other good and
valuable  consideration,  the  receipt  and  sufficiency  of which are  hereby
acknowledged, the parties hereto agree as follows:

                                    PART 1
                                  DEFINITIONS

SUBPART  1.1  DEFINITIONS.  Unless  otherwise  defined  herein or the  context
otherwise requires,  terms used in this Amendment,  including its preamble and
recitals,  have the  meanings  provided  to such terms in the  Amended  Credit
Agreement.

                                    PART 2
                    AMENDMENTS TO EXISTING CREDIT AGREEMENT

SUBPART 2.1  AMENDMENTS  TO EXISTING  CREDIT  AGREEMENT.  The Existing  Credit
Agreement  is hereby  amended and  replaced in its  entirety  with the Amended
Credit Agreement attached hereto as Annex A (the "AMENDED CREDIT AGREEMENT").

<PAGE>

SUBPART 2.2 NO OTHER AMENDMENTS.  Except as expressly  modified hereby, all of
the  terms  and  provisions  of the  Credit  Agreement  and the  other  Credit
Documents  (including,  in each case,  schedules and exhibits) shall remain in
full force and effect.

                                    PART 3
                                   CONSENTS

SUBPART 3.1 AMENDMENT OF THE EMPLOYEE PROMISSORY NOTES AND THE EMPLOYEE PLEDGE
AGREEMENTS.   The  Majority   Banks  hereby  consent  to  (a)  the  amendment,
restatement and  replacement of the existing  Employee Notes with new Employee
Notes in the form of EXHIBIT B to the Amended  Credit  Agreement (the "AMENDED
EMPLOYEE  NOTES") and (b) the amendment,  restatement  and  replacement of the
existing Employee Pledge Agreements with new Employee Pledge Agreements in the
form  of  Exhibit  D-1  to  the  Amended  Credit   Agreement  (for  individual
purchasers)  or Exhibit  D-2 to the Amended  Credit  Agreement  (for  personal
holding companies) (the "AMENDED EMPLOYEE PLEDGE AGREEMENTS").

SUBPART  3.2  RESTRUCTURING  OF  CONSOLIDATED   GROUP.   Notwithstanding   the
provisions of Section 7.3 of the Existing Credit Agreement, the Majority Banks
hereby consent to the restructuring of capital and ownership  structure of the
Borrower  and its  Subsidiaries  pursuant to which (a) the Parent will acquire
100% of the capital stock of the Borrower,  (b) the existing  shareholders  of
the Borrower  will  surrender  their shares of common stock of the Borrower in
exchange for  outstanding  common stock of the Parent and (c) a portion of the
common stock of the Parent will be sold to the public in the IPO.

SUBPART  3.3  RELEASE OF LIENS ON EMPLOYEE  PLEDGED  SHARES  SOLD IN IPO.  The
Majority  Banks  hereby  consent  to the  release of the Liens in favor of the
Agent,  for the benefit of the Banks,  on those Employee  Pledged Shares which
are sold by Qualified  Employees in connection with the IPO; PROVIDED that the
Liens  on those  Employee  Pledged  Shares  which  are not  sold by  Qualified
Employees in connection with the IPO shall not be released and shall remain in
full force and effect.

                                    PART 4
                    TERMINATION OF EMPLOYEE LOAN COMMITMENT

SUBPART 4.1  TERMINATION  OF  EMPLOYEE  LOAN  COMMITMENT.  The  Employee  Loan
Commitment is hereby  terminated.  The Employee Loans  outstanding on the date
hereof  shall  remain  outstanding  under  the  terms  of the  Amended  Credit
Agreement,  the  Amended  Employee  Notes  and  the  Amended  Employee  Pledge
Agreements.

                                    PART 5
                     CONDITIONS PRECEDENT TO EFFECTIVENESS

SUBPART 5.1 CONDITIONS  PRECEDENT TO  EFFECTIVENESS.  This Amendment  shall be
effective  as of the  date  hereof  upon  the  satisfaction  of the  following
conditions:

<PAGE>

     (a)  receipt  by the Agent of (i) a  Joinder  Agreement  from the  Parent
relating to the Existing Credit  Agreement and the other Credit  Documents and
(ii) appropriate UCC-1 financing  statements for the jurisdiction of the chief
executive  office of the Parent and each other  jurisdiction  where the Parent
maintains  any other  Collateral,  in each case duly executed and delivered by
the Parent;

     (b) receipt by the Agent of multiple  counterparts of the First Amendment
executed by the Credit Parties and the Majority Lenders;

     (c) receipt by the Agent of multiple  counterparts of a reaffirmation  of
the  Borrower  Guaranty  (relating  to the  guaranty  by the  Borrower  of the
Employee Loans), in form and substance  satisfactory to the Agent, executed by
the Borrower;

     (d) the IPO shall have been completed;

     (e) receipt by the Agent of a description  of the corporate  structure of
the Consolidated  Group;

     (f) receipt  by  the  Agent of  the following  corporate  documents  with
respect to the Parent:

              (i) a certificate of good standing,  existence or its equivalent
         certified  as  of a  recent  date  by  the  appropriate  governmental
         authority of the state of incorporation of the Parent;

              (ii) a copy of the articles or certificates of  incorporation or
         other  charter  documents  of the  Parent  certified  to be true  and
         complete  as  of  a  recent  date  by  the  appropriate  governmental
         authority of the state of  incorporation  of the Parent and certified
         by a secretary  or  assistant  secretary of the Parent to be true and
         correct as of the First Amendment Date;

              (iii)  a  copy  of  the  bylaws  of the  Parent  certified  by a
         secretary or assistant secretary of the Parent to be true and correct
         and in force and effect as of the First Amendment Date;

              (iv) a copy of the  resolutions of the board of directors of the
         Parent  approving  and adopting the Joinder  Agreement  and the other
         Credit   Documents,   the  transactions   contemplated   therein  and
         authorizing execution and delivery thereof,  certified by a secretary
         or  assistant  secretary  of the Parent to be true and correct and in
         force and effect as of the First Amendment Date; and

              (v) an  incumbency  certificate  for each  officer of the Parent
         authorized  to execute the  Joinder  Agreement  and the other  Credit
         Documents,  certified by a secretary  or  assistant  secretary of the
         Parent as of the First Amendment Date.

<PAGE>

     (g) receipt by the Agent of a favorable opinion of counsel for the Credit
Parties in form, scope and substance satisfactory to the Agent;

     (h) receipt by the Agent,  for the benefit of the Lenders that consent to
this  Amendment,  of an amendment fee equal to 15 basis points  (0.15%) on the
Aggregate Revolving Credit Commitment; and

     (i) receipt by the Agent of all other fees due in  connection  with this
Amendment.

                                    PART 6
                                 MISCELLANEOUS

SUBPART 6.1  REPRESENTATIONS  AND WARRANTIES;  NO DEFAULT.  The Credit Parties
hereby affirm (i) the  representations  and warranties set out in Section 4 of
the Credit  Agreement are true and correct as of the date hereof (except those
which  expressly  relate to an earlier period) and (ii) no Default or Event of
Default presently exists.

SUBPART 6.2 GUARANTORS.  Each of the Guarantors (i)  acknowledges and consents
to all of the terms and conditions of this Amendment,  (ii) affirms all of its
obligations  under the Credit  Documents and (iii) agrees that this  Amendment
and all documents executed in connection  herewith do not operate to reduce or
discharge the Guarantors'  obligations under the Credit Agreement or the other
Credit Documents.

SUBPART 6.3  AFFIRMATION  OF LIENS.  Each Credit  Party  affirms the liens and
security  interests  granted by such Credit Party to the Agent and the Lenders
in the Credit  Documents  and agrees  that this  Amendment  shall in no manner
adversely affect or impair such liens and security interests.

SUBPART 6.4 COSTS AND  EXPENSES.  The  Borrower  agrees to pay all  reasonable
costs and expenses of the Agent in connection with the preparation,  execution
and delivery of this Amendment,  including  without  limitation the reasonable
fees and expenses of Moore & Van Allen, PLLC.

SUBPART  6.5  COUNTERPARTS.  This  Amendment  may be executed in any number of
counterparts,  each of which when so executed and delivered shall be deemed an
original and it shall not be  necessary  in making proof of this  Amendment to
produce or account for more than one such counterpart.

SUBPART 6.6  GOVERNING  LAW. This  Amendment  shall be deemed to be a contract
made under,  and for all purposes  shall be construed in accordance  with, the
laws of the State of North Carolina.

                 [Remainder of Page Intentionally Left Blank]

<PAGE>

     IN WITNESS  WHEREOF,  each of the parties hereto has caused a counterpart
of this First Amendment to be duly executed and delivered as of the date first
above written.

BORROWER WATSON WYATT & COMPANY
                                     (d/b/a Watson Wyatt Worldwide),
                                     a Delaware corporation

ATTEST: /s/Walter W. Bardenwerper    By:/s/Eric B. Schweizer
        -------------------------       --------------------
Name:    Walter W. Bardenwerper      Name:   Eric B. Schweizer
Title:   Secretary                   Title:  Treasurer



PARENT                               WATSON WYATT & COMPANY HOLDINGS,
                                     a Delaware corporation

ATTEST: /s/Walter W. Bardenwerper    By:/s/Carl D. Mautz
        -------------------------       ----------------
Name:    Walter W. Bardenwerper      Name:  Carl D. Mautz
Title:   Secretary                   Title: Vice President and
                                            Chief Financial Officer



SUBSIDIARY GUARANTORS                WATSON WYATT INVESTMENT CONSULTING, INC.,
                                     a Delaware corporation
                                     WYATT DATA SERVICES, INC.,
                                     a Delaware corporation
                                     WATSON WYATT INTERNATIONAL, INC.,
                                     a Nevada corporation

ATTEST: /s/Walter W. Bardenwerper    By:/s/Eric B. Schweizer
        -------------------------       --------------------
Name:    Walter W. Bardenwerper      Name:  Eric B. Schweizer
Title:   Secretary of each of the    Title: Treasurer of each of the
         Subsidiary Guarantors              Subsidiary Guarantors
<PAGE>

BANKS    BANK OF AMERICA, N.A., as a Bank and as Agent

                                     By: /s/ Michael R. Heredia
                                         ----------------------
                                     Name:    Michael R. Heredia
                                     Title:   Managing Director

                                     PNC BANK, NATIONAL ASSOCIATION

                                     By:/s/ Eric G. Erickson
                                        --------------------
                                     Name:    Eric G. Erickson
                                     Title:   Vice President

                                     COMERICA BANK

                                     By:/s/Ashley S. Yashin
                                        -------------------
                                     Name:    Ashley S. Yashin
                                     Title:   Account Officer

                                     FIRST UNION NATIONAL BANK

                                     By:/s/E.A. Schirmer
                                        ----------------
                                     Name:    E.A. Schirmer
                                     Title:   Vice President

                                     SUNTRUST BANK

                                     By:/s/Nancy R. Petrash
                                        -------------------
                                     Name:    Nancy R. Petrash
                                     Title:   Director
                                     Corporate & Investment Banking

                                     THE BANK OF NOVA SCOTIA

                                     By:/s/ J.W. Campbell
                                        -----------------
                                     Name:    J.W. Campbell
                                     Title:   Unit Head

<PAGE>

                                    ANNEX A
                                      TO
                                FIRST AMENDMENT


                           AMENDED CREDIT AGREEMENT

See attached.

<PAGE>








                           AMENDED CREDIT AGREEMENT

                                 by and among

                            WATSON WYATT & COMPANY,
                                 as Borrower,

                        WATSON WYATT & COMPANY HOLDINGS
                                      and
                     CERTAIN OF ITS DOMESTIC SUBSIDIARIES,
                                as Guarantors,

                            THE BANKS PARTY HERETO

                                      and

                            BANK OF AMERICA, N.A.,
                                   as Agent

                          Dated as of October 6, 2000


                                  $95,000,000

<PAGE>

                               TABLE OF CONTENTS

                                                                          PAGE

ARTICLE I.  DEFINITIONS......................................................1
  Section 1.1.   DEFINITIONS.................................................1
  Section 1.2.   ACCOUNTING TERMS AND DETERMINATIONS........................16
  Section 1.3.   OTHER DEFINITIONAL PROVISIONS..............................16
ARTICLE II.  LOANS AND PAYMENTS.............................................17
  Section 2.1.   LOANS......................................................17
  Section 2.2.   LOAN PROCEDURES; SERVICING.................................18
  Section 2.3.   THE BANKS' OBLIGATIONS UNDER THE LOANS.....................19
  Section 2.4.   EXTENSION AND CONVERSION...................................19
  Section 2.5.   LETTERS OF CREDIT..........................................20
  Section 2.6.   REPAYMENT..................................................25
  Section 2.7.   INTEREST...................................................25
  Section 2.8.   PREPAYMENTS; COMMITMENT INCREASE; REDUCTION OR TERMINATION.26
  Section 2.9.   FEES.......................................................28
  Section 2.10.  METHOD OF PAYMENT..........................................29
  Section 2.11.  APPLICATION OF COLLECTIONS.................................30
  Section 2.12.  CAPITAL ADEQUACY...........................................32
  Section 2.13.  INABILITY TO DETERMINE INTEREST RATE.......................32
  Section 2.14.  ILLEGALITY.................................................32
  Section 2.15.  REQUIREMENTS OF LAW........................................33
  Section 2.16.  TAXES......................................................34
  Section 2.17.  INDEMNITY..................................................36
ARTICLE III. GUARANTY.......................................................36
  Section 3.1    THE GUARANTEE..............................................36
  Section 3.2    OBLIGATIONS UNCONDITIONAL..................................37
  Section 3.3    REINSTATEMENT..............................................38
  Section 3.4    CERTAIN ADDITIONAL WAIVERS.................................38
  Section 3.5    REMEDIES...................................................39
  Section 3.6    RIGHTS OF CONTRIBUTION.....................................39
  Section 3.7    CONTINUING GUARANTEE.......................................40
ARTICLE IV.  REPRESENTATIONS AND WARRANTIES.................................40
  Section 4.1.   ORGANIZATION...............................................40
  Section 4.2.   AUTHORIZATION..............................................40
  Section 4.3.   VALIDITY...................................................41
  Section 4.4.   GOVERNMENTAL APPROVALS.....................................41
  Section 4.5.   LITIGATION.................................................41
  Section 4.6.   FINANCIAL CONDITION........................................41
  Section 4.7.   RECORDS, BUSINESS LOCATION AND SUBSIDIARIES................42
  Section 4.8.   ERISA......................................................42
  Section 4.9.   ENCUMBRANCES...............................................42
  Section 4.10.  MARGIN STOCK...............................................42
  <PAGE>

  Section 4.11.  GOVERNMENTAL REGULATIONS...................................43
  Section 4.12.  TAXES......................................................43
  Section 4.13.  BURDENSOME DOCUMENTS.......................................43
  Section 4.14.  ENVIRONMENTAL MATTERS......................................43
  Section 4.15   EMPLOYEE LOANS; STOCK PLAN; QUALIFIED EMPLOYEE STATUS......44
  Section 4.16   USE OF PROCEEDS............................................44
ARTICLE V.  CONDITIONS PRECEDENT............................................44
  Section 5.1    [RESERVED].................................................44
  Section 5.2.   CONDITIONS PRECEDENT TO LOANS AND ISSUANCE OF
                 LETTERS OF CREDIT..........................................45
ARTICLE VI.  AFFIRMATIVE COVENANTS..........................................45
  Section 6.1.   PAYMENTS HEREUNDER.........................................45
  Section 6.2.   EXISTENCE AND GOOD STANDING; INSURANCE; CONDUCT............46
  Section 6.3.   TAXES AND CHARGES..........................................46
  Section 6.4.   FINANCIAL STATEMENTS.......................................46
  Section 6.5    REPORTS....................................................47
  Section 6.6.   LOAN BALANCES..............................................48
  Section 6.7.   POSITIVE NET WORTH.........................................48
  Section 6.8.   BORROWER GUARANTY..........................................48
  Section 6.9.   EMPLOYEE PLEDGE AGREEMENTS; EMPLOYEE PLEDGED SHARES........48
  Section 6.10.  ADDITIONAL GUARANTIES, STOCK PLEDGES AND FURTHER ASSURANCES49
  Section 6.11.  ADDITIONAL GUARANTIES, STOCK PLEDGES AND FURTHER ASSURANCES50
  Section 6.12.  FURTHER ASSURANCES IN CONNECTION WITH RESTRUCTURING........50
ARTICLE VII.  NEGATIVE COVENANTS............................................51
  Section 7.1.   INDEBTEDNESS...............................................51
  Section 7.2.   LIENS......................................................51
  Section 7.3.   CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.....52
  Section 7.4.   FISCAL YEAR; GOVERNING DOCUMENTS...........................53
  Section 7.5.   INVESTMENTS................................................53
  Section 7.6.   FINANCIAL COVENANTS........................................53
  Section 7.7.   FRANCHISES.................................................54
  Section 7.8.   CAPITAL EXPENDITURES.......................................54
  Section 7.9.   TRANSACTION WITH AFFILIATES................................54
  Section 7.10.  LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS
                 AND OTHER DISTRIBUTIONS, ETC...............................54
  Section 7.11   ISSUANCE AND SALE OF SUBSIDIARY STOCK......................55
  Section 7.12   LIMITATIONS ON PARENT......................................55
ARTICLE VIII.  DEFAULT......................................................55
  Section 8.1.   EVENTS OF DEFAULT..........................................55
  Section 8.2.   ACCELERATION...............................................57
  Section 8.3.   RIGHT OF SETOFF............................................58
ARTICLE IX.  AGENCY PROVISIONS..............................................58
  Section 9.1    APPOINTMENT................................................58
  Section 9.2    DELEGATION OF DUTIES.......................................59
  Section 9.3    EXCULPATORY PROVISIONS.....................................59
  Section 9.4    RELIANCE ON COMMUNICATIONS.................................59
  Section 9.5    NOTICE OF DEFAULT..........................................60

<PAGE>

  Section 9.6    NON-RELIANCE ON AGENT AND OTHER BANKS......................60
  Section 9.7    INDEMNIFICATION............................................61
  Section 9.8    AGENT IN ITS INDIVIDUAL CAPACITY...........................61
  Section 9.9    SUCCESSOR AGENT............................................61
ARTICLE X.  MISCELLANEOUS...................................................62
  Section 10.1.  RIGHTS AND WAIVERS.........................................62
  Section 10.2.  BINDING EFFECT; ASSIGNMENT.................................62
  Section 10.3.  SEVERABILITY...............................................64
  Section 10.4.  INTERPRETATION.............................................64
  Section 10.5.  GOVERNING LAW; JURY TRIAL..................................64
  Section 10.6.  PAYMENT OF EXPENSES AND TAXES; INDEMNIFICATION.............64
  Section 10.7.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................65
  Section 10.8.  NOTICES....................................................65
  Section 10.9.  EXECUTION..................................................67
  Section 10.10. AMENDMENTS.................................................67
  Section 10.11. RELATIONSHIP OF THE PARTIES................................68

<PAGE>

EXHIBITS

Exhibit B         Form of Employee Note
Exhibit C         Form of Guaranty
Exhibit D-1       Form of Employee Pledge Agreement (for Individuals)
Exhibit D-2       Form of Employee Pledge Agreement (for Holding Companies)
Exhibit E         Form of Employee Stock Power
Exhibit F         Form of Notice of Borrowing
Exhibit H         Form of Joinder Agreement
Exhibit I         Form of Agreement to Employee Pledge Agreements

SCHEDULES

Schedule 1        Subsidiaries
Schedule 2        Permitted Noncompliance
Schedule 3        Litigation
Schedule 4        Burdensome Documents
Schedule 5        Real Property
Schedule 6        Indebtedness
Schedule 7        Investments
Schedule 8        Employee Loans

<PAGE>

                            AMENDED CREDIT AGREEMENT

     THIS  AMENDED  CREDIT  AGREEMENT  (this  "AGREEMENT",   or  this  "CREDIT
AGREEMENT")  is dated as of  October  6,  2000,  by and among  WATSON  WYATT &
COMPANY,  a Delaware  corporation  (the  "BORROWER"),  WATSON  WYATT & COMPANY
HOLDINGS, a Delaware corporation (the "PARENT"), certain Domestic Subsidiaries
of the  Parent  identified  on  the  signature  pages  hereto  as  "Subsidiary
Guarantors" and such other Domestic Subsidiaries of the Parent as may become a
party hereto (the  "SUBSIDIARY  GUARANTORS" and together with the Parent,  the
"GUARANTORS"),  the banks  named  herein and such other  banks as may become a
party  hereto (the  "BANKS")  and Bank of America,  N.A.,  a national  banking
association  formerly known as  NationsBank,  N.A., as agent for the Banks (in
such capacity, together with any successor in such capacity, the "AGENT").

     WHEREAS,  a $120 million credit facility has been established in favor of
the Borrower  pursuant to the terms of that Credit  Agreement dated as of June
30, 1998 (as amended and  modified  from time to time,  the  "EXISTING  CREDIT
AGREEMENT") among the Borrower, the Guarantors, the Banks and the Agent;

     WHEREAS, the Borrower has requested,  and the Banks have agreed, to amend
and restate  the  Existing  Credit  Agreement  in its  entirety to provide for
certain  amendments to the terms of the Existing Credit Agreement  pursuant to
the terms set forth herein;

     NOW, THEREFORE, in consideration of their mutual covenants and agreements
contained herein, the parties hereby covenant and agree as follows:

                            ARTICLE I. DEFINITIONS

     Section 1.1. DEFINITIONS.

     For  purposes of this  Agreement,  terms  bearing  initial  capitals  and
defined in various sections hereof shall have the meanings stated therein; and
the  following  terms  shall have the  meanings  stated  below,  except as the
context otherwise requires:

     "Additional  Credit  Party"  means each Person that  becomes a Subsidiary
Guarantor after the Closing Date by execution of a Joinder Agreement.

     "Adjusted  Base Rate"  means,  for any day,  the rate per annum  (rounded
upwards, if necessary,  to the nearest whole multiple of 1/100 of 1%) equal to
the greater of (a) the Federal Funds Rate in effect on such day PLUS 2 of 1.0%
or (b) the Prime Rate in effect on such day, MINUS 1.0%. If for any reason the
Agent shall have determined  (which  determination  shall be conclusive absent
manifest  error) that it is unable after due inquiry to ascertain  the Federal
Funds Rate for any reason,  including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, the Adjusted
Base Rate  shall be  determined  without  regard  to  clause  (a) of the first
sentence  of this  definition  until  the  circumstances  giving  rise to such
inability  no longer  exist.  Any  change in the  Adjusted  Base Rate due to a
change in the Prime Rate or the Federal  Funds Rate shall be  effective on the

<PAGE>

effective  date of such  change in the Prime Rate or the  Federal  Funds Rate,
respectively.

     "Affiliate"  means, as to any Person,  any other Person which directly or
indirectly  controls,  is under common control with, or is controlled by, such
Person.
     "Agent" has the meaning  stated on page 1 hereof and, with respect to the
Employee Loans, shall include Bank of America in its individual capacity.

     "Agent's Fee" has the meaning stated in Section 2.9.

     "Agent's Fee Letter" means the letter agreement between the Agent and the
Borrower dated as of April 28, 1998.

     "Aggregate Revolving Credit Commitment" has the meaning stated in Section
2.1(a).

     "Agreement" has the meaning stated on page 1 hereof.

     "Applicable Percentage" means, for purposes of calculating the applicable
interest  rate for any day for any  Eurodollar  Loan or Base  Rate Loan or the
applicable  Unused Fee or the LOC Fee for any day for purposes of Section 2.9,
the appropriate  applicable percentage  corresponding to the Leverage Ratio in
effect as of the most recent Calculation Date:

<PAGE>
<TABLE>
<CAPTION>

 <S>           <C>                            <C>               <C>              <C>               <C>
   Pricing               Leverage                Applicable       Applicable        Applicable        Applicable
    Level                  Ratio                 Percentage       Percentage        Percentage        Percentage
                                                    for               for              for               for
                                              Eurodollar Loans      LOC Fee         Unused Fee     Base Rate Loans
 ------------- ------------------------------ ----------------- ---------------- ----------------- -----------------
      V        Greater than or equal to            1.75%             1.75%            0.50%             0.50%
               2.25 to 1.0
      IV       Less than 2.25 to 1.0 but           1.50%             1.50%            0.45%               0%
               greater than or equal to
               1.75 to 1.0
     III       Less than 1.75 to 1.0 but           1.25%             1.25%            0.375%              0%
               greater than or equal to
               1.25 to 1.0
      II       Less than 1.25 to 1.0 but           1.00%             1.00%            0.375%              0%
               greater than or equal to
               0.75 to 1.0
      I        Less than 0.75                      0.75%             0.75%            0.30%               0%

</TABLE>

     Determination  of the  appropriate  Applicable  Percentages for the Loans
based on the Leverage  Ratio shall be made as of each  Calculation  Date.  The
Leverage  Ratio  in  effect  as of a  Calculation  Date  shall  establish  the
Applicable  Percentages  that shall be effective as of the date  designated by
the Agent as the Applicable Percentage Change Date; PROVIDED,  HOWEVER, that a
new Applicable Percentage shall apply to outstanding  Eurodollar Loans only if
and when such  Eurodollar  Loans are extended into new Interest  Periods.  The
Agent shall determine the Applicable  Percentages as of each  Calculation Date
and  shall  promptly  notify  the  Borrower  and the  Banks of the  Applicable
Percentages so determined and of the  Applicable  Percentage  Change Date. The
Applicable  Percentage for the purpose of calculating  LOC Fees shall be fixed
for the  term  of each  related  Letter  of  Credit  based  on the  Applicable
Percentage in effect for LOC Fees at the time of issuance thereof. Any renewal
or extension of a Letter of Credit for the purpose of calculating  the LOC Fee
shall be considered a new issuance thereof.  Such  determinations by the Agent
of the Applicable Percentages shall be conclusive absent demonstrable error.

     "Applicable   Percentage   Change  Date"  means,   with  respect  to  any
Calculation Date, a date designated by the Agent that is not more than fifteen
(15)  Business  Days after the receipt by the Agent of the Required  Financial
Information for such Calculation Date; PROVIDED THAT in the event the Required
Financial  Information  is not  delivered by the date required by Section 6.4,
notwithstanding the definition of Applicable Percentage herein, the Applicable
Percentage  shall be based on Pricing  Level V until such time as the Required
Financial Information is delivered.

     "Applicable  Rate"  means  (i) for all  periods  prior  to and  including
January 5, 2001,  the Adjusted  Base Rate and (ii) for all periods  thereafter
(a)  if no  Cash  Flow  Deficiency  exists  as of  the  immediately  preceding
Calculation  Date,  the Adjusted  Base Rate and (b) if a Cash Flow  Deficiency
exists as of the immediately preceding Calculation Date, the Prime Rate.

<PAGE>

     "Authorized  Financial  Officer" means any of the  Borrower's  Treasurer,
Controller or Vice President and Chief Financial Officer.

     "Bank" and "Banks"  have the  meanings  stated on page 1 hereof and shall
include any assignees thereof in accordance with Section 10.2.

     "Bank of America" means Bank of America, N.A., and its successors.

     "Base Rate" means, for any day, the rate per annum (rounded  upwards,  if
necessary,  to the nearest whole multiple of 1/100 of 1%) equal to the greater
of (a) the  Federal  Funds  Rate in effect on such day PLUS 2 of 1% or (b) the
Prime  Rate in effect on such day.  If for any  reason  the Agent  shall  have
determined  (which  determination  shall be conclusive  absent manifest error)
that it is unable  after due inquiry to ascertain  the Federal  Funds Rate for
any  reason,  including  the  inability  or  failure  of the  Agent to  obtain
sufficient quotations in accordance with the terms hereof, the Base Rate shall
be  determined  without  regard to clause  (a) of the first  sentence  of this
definition  until the  circumstances  giving rise to such  inability no longer
exist.  Any  change in the Base Rate due to a change in the Prime  Rate or the
Federal Funds Rate shall be effective on the effective  date of such change in
the Prime Rate or the Federal Funds Rate, respectively.

     "Base Rate Loan" means any Loan bearing  interest at a rate determined by
reference to the Base Rate.

     "Borrower" means Watson Wyatt & Company, a Delaware corporation.

     "Borrower Guaranty" has the meaning stated in Section 6.8.

     "Business Day" means a day other than a Saturday,  Sunday or other day on
which commercial banks in Charlotte, North Carolina or Bethesda,  Maryland are
authorized or required by law to close,  EXCEPT THAT,  when used in connection
with a Revolving Credit Loan that is a Eurodollar Loan, such day shall also be
a day on which dealings  between banks are carried on in U.S.  dollar deposits
in London, England and New York, New York.

     "Calculation  Date"  means  the last day of each  fiscal  quarter  of the
Borrower.

     "Canadian  Loan  Program"  means the  Borrower's  employee  loan  program
established for the benefit of its Canadian employees.

     "Capital  Expenditures" means amounts expended for (i) the acquisition of
assets, whether tangible or intangible,  having a useful life in excess of one
year and not intended for resale in the normal  course of business,  including
but not limited to land, buildings, fixtures, equipment and computer software,
(ii)  additions or  improvements  to or rebuilding of existing  assets,  (iii)
improvements to leased  property,  and (iv) such other purposes  typically and
customarily considered to be capital expenditures.

<PAGE>

     "Capital  Lease"  means,  as  applied  to any  Person,  any  lease of any
property (whether real,  personal or mixed) by that Person as lessee which, in
accordance  with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.

     "Cash  Equivalents"  means (i) demand  deposits in Selected  Banks;  (ii)
marketable  obligations  of the  United  States or  Canada;  (iii)  marketable
obligations  guaranteed by or insured by the United States or Canada, or those
for which the full faith and credit of the United  States or Canada is pledged
for  the  repayment  of  principal  and  interest  thereon;   (iv)  marketable
obligations   issued,   guaranteed,   or   fully   insured   by  any   agency,
instrumentality,  or corporation of the United States or Canada established or
to be established by the Congress or Parliament,  respectively,  for which the
credit of such  agency,  instrumentality,  or  corporation  is pledged for the
repayment  of the  principal  and interest  thereof;  (v)  marketable  general
obligations of a state,  a territory or a possession of the United States,  or
any political subdivision of any of the foregoing, or the District of Columbia
(each, in this subsection,  an "ENTITY"),  unconditionally secured by the full
faith and credit of such Entity,  if such Entity has general taxing  authority
and the  power  to levy  such  taxes as may be  required  for the  payment  of
principal and interest thereof, and that such obligations have a credit rating
equal to at least Baa issued by Standard & Poor's  Corporation  ("S&P") or BBB
issued by Moody's  Investors  Service,  Inc.  ("MOODY'S");  (vi)  domestic and
LIBOR,  negotiable  time and variable rate  certificates  of deposit issued by
Selected  Banks;  (vii)  marketable  bankers'  acceptances  and finance  bills
accepted by Selected  Banks;  (viii)  prime  commercial  paper having a credit
rating equal to at least A-2 issued by S&P,  P-2 issued by Moody's,  or Duff-2
issued by Duff & Phelps Inc.; (ix) marketable corporate debt securities having
an A credit  rating  issued  by either  S&P or  Moody's;  and (x)  repurchase,
reverse repurchase  agreements and security lending agreements  collateralized
by securities of the type described in clauses (ii), (iv), (viii) and (ix).

     "Cash  Flow  Deficiency"  means  and  shall  exist at any  time  when the
Leverage Ratio is 2.5 or greater.

     "Change of Control" means the occurrence of any of the following  events:
(a) any Person or two or more Persons  acting in concert  shall have  acquired
beneficial  ownership,  directly or indirectly,  of, or shall have acquired by
contract or  otherwise,  or shall have entered into a contract or  arrangement
that, upon consummation, will result in its or their acquisition of or control
over,  Voting Stock of the Parent (or other  securities  convertible into such
Voting  Stock)  representing  20% or more of the combined  voting power of all
Voting  Stock of the  Parent,  (b) the  Parent  shall at any time  fail to own
directly 100% of the  outstanding  capital stock of the Borrower or (c) during
any  period  of  up to 24  consecutive  months,  commencing  after  the  First
Amendment Date,  individuals who at the beginning of such 24 month period were
directors of the Parent  (together with any new director whose election by the
Parent's  board of directors or whose  nomination for election by the Parent's
shareholders  was approved by a vote of at least  two-thirds  of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors of the Parent then in
office. As used herein, "beneficial ownership" shall have the meaning provided
in Rule 13d-3 of the Securities and Exchange  Commission  under the Securities
Exchange Act of 1934.

<PAGE>

     "Closing Date" means June 30, 1998.

     "Collateral"  has the  meaning  given to such  term in the  Credit  Party
Pledge Agreement and the Security Agreement.

     "Collections"  means all monies or other assets  received by the Agent or
any Bank, as repayment of amounts  advanced under the Notes, on account of the
Subsidiary Guaranteed Obligations, as proceeds of Collateral or otherwise, for
credit against  principal,  interest,  commitment fees, costs or expenses,  or
other amounts due under the Notes.

     "Consolidated  EBITDA"  means,  for any  period  of  calculation  for the
Consolidated  Group,  the sum of (i)  Consolidated Net Income for such period,
PLUS (ii) to the  extent  deducted  in the  calculation  of  Consolidated  Net
Income,  the  sum  of  interest  expense,   income  taxes,   depreciation  and
amortization, determined on a consolidated basis in accordance with GAAP.

     "Consolidated  EBITDAR"  means,  for any  period of  calculation  for the
Consolidated  Group,  the sum of (i)  Consolidated  EBITDA for such period and
(ii) Lease  Expenses for such period,  determined on a  consolidated  basis in
accordance with GAAP.

     "Consolidated  Funded Debt" means Funded Debt of the  Consolidated  Group
determined on a consolidated basis in accordance with GAAP.

     "Consolidated  Group" means the Parent and its consolidated  subsidiaries
(including the Borrower), as determined in accordance with GAAP.

     "Consolidated  Net Income"  means for any period of  calculation  for the
Consolidated   Group,  net  income  on  a  consolidated  basis  determined  in
accordance with GAAP.

     "Controller"  means the person holding the office,  under whatever title,
most  closely  corresponding  to  the  typical  duties  of a  controller  of a
corporation or the person acting in such capacity.

     "Credit Documents" means a collective reference to this Credit Agreement,
the  Revolving  Credit  Notes,  the Employee  Notes,  the LOC  Documents,  the
Borrower Guaranty, the Credit Party Pledge Agreement,  the Security Agreement,
the Employee Pledge Agreements, the Agent's Fee Letter, each Joinder Agreement
and all other related  agreements and documents issued or delivered  hereunder
or thereunder or pursuant hereto or thereto.

     "Credit Party Pledge  Agreement"  means the Pledge  Agreement dated as of
the Closing Date given by the Credit Parties  identified  therein to the Agent
to secure the obligations of the Credit Parties under the Credit Documents, as
such Pledge Agreement may be amended and modified from time to time.

     "Credit Party" means any of the Borrower and the Guarantors.

<PAGE>

     "CSAP"  means  the   Borrower's   Canadian   Separation   Allowance  Plan
established for the benefit of the Borrower's Canadian employees in connection
with the Canadian Loan Program.

     "Defaulting  Bank" means,  at any time,  any Bank that, at such time, (i)
has  failed  to make a Loan or  purchase  a  participation  interest  required
pursuant to the terms of this Credit Agreement within one Business Day of when
due, (ii) other than as set forth in (i) above, has failed to pay to the Agent
or any Bank an amount  owed by such Bank  pursuant  to the terms of the Credit
Agreement or any other of the Credit Documents within one Business Day of when
due, or (iii) has been deemed  insolvent or has become subject to a bankruptcy
or insolvency  proceeding or to a receiver,  trustee or similar  proceeding or
with  respect to which (or with respect to any of assets of which) a receiver,
trustee or similar official has been appointed.

     "Domestic  Credit Party" means any Credit Party which is  incorporated or
organized  under the laws of any State of the United States or the District of
Columbia.

     "Domestic  Subsidiary"  means any  Subsidiary  which is  incorporated  or
organized  under the laws of any State of the United States or the District of
Columbia.

     "Employee  Loan" and  "Employee  Loans" means the loans made to Qualified
Employees  by  Bank of  America  pursuant  to the  Existing  Credit  Agreement
including, without limitation, the loans identified on SCHEDULE 8.

     "Employee Loan Participation" has the meaning stated in Section 2.1(d).

     "Employee Note" and "Employee  Notes" have the meanings stated in Section
2.1(f).

     "Employee Pledge Agreements" has the meaning stated in Section 6.9(a).

     "Employee Pledged Shares" has the meaning stated in Section 6.9(a).

     "Employee Stock Powers" has the meaning stated in Section 6.9(b).

     "ERISA" has the meaning stated in Section 4.8.

     "Eurodollar  Loan" means any Revolving  Credit Loan bearing interest at a
rate determined by reference to the Eurodollar Rate.

     "Eurodollar Rate" means, for the Interest Period for each Eurodollar Loan
comprising part of the same borrowing (including  conversions,  extensions and
renewals),  a per annum  interest  rate  determined  pursuant to the following
formula:

                   Eurodollar Rate  =            Interbank Offered Rate
                                            ---------------------------------
                                            1 - Eurodollar Reserve Percentage

     "Eurodollar  Reserve  Percentage"  means  for any  day,  that  percentage
(expressed as a decimal) which is in effect from time to time under Regulation
D of the Board of Governors of the Federal  Reserve System (or any successor),

<PAGE>

as  such  regulation  may be  amended  from  time  to  time  or any  successor
regulation, as the maximum reserve requirement (including, without limitation,
any basic, supplemental,  emergency, special, or marginal reserves) applicable
with respect to Eurocurrency liabilities as that term is defined in Regulation
D (or against any other  category of  liabilities  that  includes  deposits by
reference  to which the  interest  rate of  Eurodollar  Loans is  determined),
whether or not a Bank has any Eurocurrency liabilities subject to such reserve
requirement  at that  time.  Eurodollar  Loans  shall be deemed to  constitute
Eurocurrency  liabilities  and as such  shall be  deemed  subject  to  reserve
requirements without benefits of credits for proration,  exceptions or offsets
that may be available from time to time to a Bank.  The Eurodollar  Rate shall
be adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.

     "Event of Default" has the meaning stated in Section 8.1.

     "Existing  Credit  Agreement"  has the  meaning  stated  in the  recitals
hereof.

     "Federal  Funds Rate" means,  for any day, the rate of interest per annum
(rounded upwards, if necessary,  to the nearest whole multiple of 1/100 of 1%)
equal  to the  weighted  average  of the  rates  on  overnight  Federal  funds
transactions  with members of the Federal  Reserve System  arranged by Federal
funds  brokers on such day, as  published  by the Federal  Reserve Bank of New
York on the Business Day next succeeding  such day,  PROVIDED THAT (A) if such
day is not a Business  Day, the Federal  Funds Rate for such day shall be such
rate on such  transactions  on the next  preceding  Business Day and (B) if no
such rate is so published on such next  succeeding  Business  Day, the Federal
Funds Rate for such day shall be the average  rate quoted to the Agent on such
day on such transactions as determined by the Agent.

     "First Amendment Date" means the date hereof.

     "Fixed Charge Coverage Ratio" means the ratio of (i) Consolidated EBITDAR
to (ii)  the sum of  interest  expense  PLUS  Lease  Expenses  PLUS  scheduled
maturities  of  Funded  Debt  (excluding  Employee  Loans),  in each case on a
consolidated basis determined in accordance with GAAP.

     "Foreign   Subsidiary"  means  a  Subsidiary  which  is  not  a  Domestic
Subsidiary.

     "Funded Debt" means, with respect to any Person, without duplication, (a)
all  Indebtedness of such Person other than the Indebtedness of such Person of
the types referred to in clauses (iv), (v),  (vii),  (ix), (x) and (xi) of the
definition  of  "Indebtedness"   set  forth  in  this  SECTION  1.1,  (b)  all
Indebtedness  of another  Person of the type  referred  to in clause (a) above
secured by (or for which the holder of such Funded Debt has an existing right,
contingent or otherwise,  to be secured by) any Lien on, or payable out of the
proceeds of  production  from,  property  owned or  acquired  by such  Person,
whether or not the  obligations  secured  thereby have been  assumed,  (c) all
guaranty  obligations of such Person with respect to  Indebtedness of the type
referred to in clause (a) above of another Person and (d)  Indebtedness of the
type  referred  to in clause (a) above of any  partnership  or  unincorporated
joint  venture in which such Person is a general  partner or a joint  venturer
(but only to the  extent to which  such  Person's  assets  are at risk in such
joint venture).

<PAGE>

     "GAAP"  means  generally  accepted  accounting  principles  in the United
States applied on a consistent basis.

     "General  Counsel"  means the person  holding the office,  under whatever
title,  most closely  corresponding to the typical duties of a general counsel
of a corporation or the person acting in such capacity.

     "General Exceptions" has the meaning stated in Section 4.3.

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

     "Guarantor"  means  the  Parent  and each of the  Subsidiary  Guarantors,
together with their successors and permitted assigns.

     "Incipient Default" has the meaning stated in Section 5.2(a).

     "Indebtedness"  means, with respect to any Person,  without  duplication.
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such  Person  under  conditional  sale or  other  title  retention  agreements
relating  to  property   purchased  by  such  Person  (other  than   customary
reservations or retentions of title under  agreements  with suppliers  entered
into in the ordinary course of business), (iii) all obligations of such Person
issued or assumed as the  deferred  purchase  price of  property  or  services
purchased  by such  Person  (other than trade debt  incurred  in the  ordinary
course of business and due within six months of the incurrence  thereof) which
would  appear as  liabilities  on a  balance  sheet of such  Person,  (iv) all
obligations of such Person under take-or-pay or similar  arrangements or under
commodities  agreements,  (v) all  Indebtedness  of others  secured by (or for
which the holder of such  Indebtedness  has an existing  right,  contingent or
otherwise,  to be secured by) any Lien on, or payable  out of the  proceeds of
production from, property owned or acquired by such Person, whether or not the
obligations  secured thereby have been assumed,  (vi) the principal portion of
all obligations of such Person under Capital Leases,  (vii) all obligations of
such Person in respect of Interest Rate Protection Agreements and/or any other
hedging or interest rate protection  agreements or other arrangements,  (viii)
the  maximum  amount  of all  standby  letters  of credit  issued or  bankers'
acceptances  facilities  created for the  account of such Person and,  without
duplication,  all drafts drawn thereunder (to the extent  unreimbursed),  (ix)
all preferred stock issued by such Person and required by the terms thereof to
be redeemed,  or for which mandatory sinking fund payments are due, by a fixed
date,  (x) the  principal  portion of all  obligations  of such  Person  under
synthetic  lease  transactions  and other similar  offbalance  sheet financing
arrangements,  and (xi) all guaranty and other contingent  obligations of such
Person  in  respect  of  Indebtedness  as  defined  in  this  definition.  The
Indebtedness  of any Person shall include the  Indebtedness of any partnership
or joint venture in which such Person is a general partner or a joint venturer
(but only to the  extent to which  such  Person's  assets  are at risk in such
joint venture).

     "IPO"  means the  initial  public  offering  of the  common  stock of the
Parent.

<PAGE>

     "Interbank  Offered  Rate"  means,  for  the  Interest  Period  for  each
Eurodollar Loan comprising part of the same borrowing (including  conversions,
extensions  and  renewals),  a per annum  interest rate (rounded  upwards,  if
necessary,  to the nearest whole multiple of 1/100 of 1%) equal to the rate of
interest,  determined  by the  Agent on the  basis of the  offered  rates  for
deposits in dollars for a period of time corresponding to such Interest Period
(and  commencing  on the  first day of such  Interest  Period),  appearing  on
Telerate  Page  3750  (or,  if,  for any  reason,  Telerate  Page  3750 is not
available,  the  Reuters  Screen  LIBO  Page) as of  approximately  11:00 A.M.
(London  time) two (2)  Business  Days  before the first day of such  Interest
Period. As used herein,  "Telerate Page 3750" means the display  designated as
page 3750 by Dow Jones  Markets,  Inc. (or such other page as may replace such
page on that  service  for the  purpose  of  displaying  the  British  Bankers
Association  London  interbank  offered rates) and "Reuters  Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may  replace the LIBO page on that  service for
the purpose of displaying London interbank offered rates of major banks).

     "Interest  Payment  Date" means (i) as to any  Employee  Loan,  the third
Business Day of the month  following  the  immediately  preceding  Calculation
Date,  any date of  repayment  of  principal  of such  Loan  and the  relevant
Termination  Date,  (ii) as to any Revolving  Credit Loan which is a Base Rate
Loan,  the third  Business Day of the month  immediately  following the end of
each preceding  month, any date of repayment of principal of such Loan and the
relevant  Termination Date, and (iii) as to any Revolving Credit Loan which is
a Eurodollar  Loan,  the last day of each Interest  Period for such Loan,  any
date of repayment of principal of such Loan and the relevant Termination Date,
and in  addition  where the  applicable  Interest  Period  is more than  three
months,  then also the date three  months from the  beginning  of the Interest
Period, and each three months thereafter. If an Interest Payment Date falls on
a date which is not a Business Day, such Interest Payment Date shall be deemed
to be the next succeeding  Business Day, EXCEPT THAT in the case of Eurodollar
Loans  where the next  succeeding  Business  Day falls in the next  succeeding
calendar month, then the next preceding Business Day.

     "Interest Period" means, as to Revolving Credit Loans that are Eurodollar
Loans,  a period of one, two, three or six month's  duration,  as the Borrower
may elect,  commencing in each case,  on the date of the borrowing  (including
conversions,  extensions and renewals); PROVIDED, HOWEVER, (A) if any Interest
Period would end on a day which is not a Business Day,  such  Interest  Period
shall be extended to the next succeeding Business Day (except that in the case
of Eurodollar  Loans where the next succeeding  Business Day falls in the next
succeeding  calendar month,  then on the next preceding  Business Day), (B) no
Interest  Period shall extend beyond the  Termination  Date,  and (C) where an
Interest   Period  begins  on  a  day  for  which  there  is  no   numerically
corresponding  day in the calendar  month in which the  Interest  Period is to
end, such Interest Period shall end on the last day of such calendar month.

     "Interest Rate Protection  Agreement" means an interest rate swap, cap or
collar agreement or similar arrangement between the Borrower and a Bank, or an
Affiliate  of a Bank,  providing  for the transfer or  mitigation  of interest
risks either generally or under specific contingencies.

     "Interest Swap Provider"  means a Bank, or an Affiliate of a Bank,  party
to an Interest Rate Protection Agreement with the Borrower.

<PAGE>

     "Investment" in any Person by a member of the  Consolidated  Group means:
(i) the amount  paid or  committed  to be paid,  or the value of  property  or
services  contributed  or committed to be  contributed,  by such member of the
Consolidated Group for or in connection with the acquisition by such member of
the Consolidated Group of any stock, bonds, note,  debentures,  partnership or
other ownership interests or other securities of or equity in such Person; and
(ii) the amount of any advance, loan or extension of credit to, or guaranty or
other similar  obligation with respect to any  Indebtedness of, such Person by
such member of the  Consolidated  Group and (without  duplication)  any amount
committed to be advanced,  loaned,  or extended to, or the payment of which is
committed  to be assured by a guaranty or similar  obligation  for the benefit
of, such Person by such member of the Consolidated Group.

     "Issuing Bank" means Bank of America.

     "Issuing Bank Fees" has the meaning stated in Section 2.9.

     "Joinder  Agreement" means a Joinder Agreement  substantially in the form
of EXHIBIT H hereto,  executed and delivered by an Additional  Credit Party in
accordance with the provisions of Section 6.10.

     "Lease  Expenses"  means,  for any period,  all rental payments due under
leases for such period, irrespective of the term of any thereof, determined in
accordance with GAAP.

     "Letter of Credit" means any irrevocable, standby letter of credit issued
by the Issuing  Bank for the  account of the  Borrower  or any  Subsidiary  in
accordance  with  the  terms  of  Section  2.5 and  those  letters  of  credit
outstanding on the Closing Date and listed on Schedule 6 hereto.

     "Leverage Ratio" means the ratio of (i) Consolidated  Funded Debt to (ii)
Consolidated EBITDA. For purposes of the Employee Notes, the Debt to Cash Flow
Ratio referred to therein used to calculate Cash Flow  Deficiency  referred to
therein shall be the Leverage Ratio as used herein.

     "Lien" means any mortgage,  pledge,  hypothecation,  assignment,  deposit
arrangement,  security interest,  encumbrance,  lien (statutory or otherwise),
preference,  priority or charge of any kind  (including  any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any  financing  or  similar  statement  or  notice  filed  under  the  Uniform
Commercial Code as adopted and in effect in the relevant jurisdiction or other
similar recording or notice statute, and any lease in the nature thereof).

     "Loan" and "Loans" have the meanings  stated in Section 2.2(a) herein and
shall  include all loans made under the Existing  Credit  Agreement  which are
outstanding on the date hereof.

     "LOC Documents" means, with respect to any Letter of Credit,  such Letter
of Credit,  any  amendments  thereto,  any  documents  delivered in connection
therewith,   any  application  therefor,  and  any  agreements,   instruments,
guarantees or other  documents  (whether  general in application or applicable

<PAGE>

only to such Letter of Credit)  governing or providing  for (i) the rights and
obligations  of the  parties  concerned  or at  risk or  (ii)  any  collateral
security for such obligations.

     "LOC Fees" has the meaning stated in Section 2.9.

     "LOC  Obligations"  means, at any time, the sum of (i) the maximum amount
which is, or at any time  thereafter  may become,  available to be drawn under
Letters of Credit then outstanding,  assuming compliance with all requirements
for  drawings  referred to in such  Letters of Credit plus (ii) the  aggregate
amount of all drawings under Letters of Credit honored by the Issuing Bank but
not theretofore reimbursed.

     "Majority Banks" means the Banks the Ratable Shares of which aggregate 51
percent or more of all Ratable Shares at any time, or if the Revolving  Credit
Commitments have been terminated,  Banks having more than 51% of the aggregate
principal amount of the Obligations  outstanding  (taking into account in each
case participation  interests or obligation to participate therein);  provided
that the Ratable Share of, and  outstanding  principal  amount of  Obligations
(taking into account  participation  interests therein) owing to, a Defaulting
Bank  shall be  excluded  for  purposes  hereof in making a  determination  of
Majority Banks.

     "Management Stock Agreements"  means any contractual  agreements  between
members of management of the Credit Parties imposing  restrictions on the sale
or other transfer of capital stock of the Parent.

     "Margin Stock Event" has the meaning stated in Section 2.8(b)(ii).

     "Material  Adverse  Effect"  means a material  adverse  effect on (i) the
financial  condition,  business,  properties,  operations  or prospects of the
members of the  Consolidated  Group taken as a whole,  (ii) the ability of any
Credit Party to perform any material  obligation under the Credit Documents to
which it is a party or (iii) the rights and  remedies  of the Banks  under the
Credit Documents.

     "Material  Domestic  Subsidiary"  means a Domestic  Subsidiary which is a
Material Subsidiary.

     "Material  Subsidiary"  means a Subsidiary of the Parent (i) the accounts
receivable  of which  comprise  two percent  (2%) or more of the  consolidated
accounts  receivable  of the  Consolidated  Group or (ii) the  assets of which
comprise  two  percent  (2%)  or  more  of  the  consolidated  assets  of  the
Consolidated Group.

     "Net Worth" means, as of any date with respect to the Consolidated  Group
on a consolidated basis,  shareholders'  equity or net worth, as determined in
accordance with GAAP.

     "Notes" means, collectively,  the Revolving Credit Notes and the Employee
Notes.

     "Notice of Borrowing" has the meaning stated in Section 5.2(b) hereof and
shall be in substantially the form of EXHIBIT F.

<PAGE>


     "Obligations"  means,  collectively,   all  of  the  obligations  of  the
Borrower,  the  Guarantors  and  the  Qualified  Employees  under  the  Credit
Documents.

     "Official" has the meaning stated in Section 8.1(e).

     "PBGC" has the meaning stated in Section 4.8.

     "Permitted  CSAP Loan"  means a loan  extended  under the  Canadian  Loan
Program to one of the  Borrower's  Canadian  employees  for which a Separation
Allowance  Account is maintained  having a balance not in excess of 90% of the
dollar amount credited from time to time to such account.

     "Permitted  Investments"  means Investments which are either (i) cash and
Cash Equivalents;  (ii) accounts receivable  created,  acquired or made in the
ordinary  course of business and payable or  dischargeable  in accordance with
customary trade terms;  (iii)  Investments  consisting of stock,  obligations,
securities or other  property  received in  settlement of accounts  receivable
(created in the ordinary  course of business)  from  bankrupt  obligors;  (iv)
Investments  existing as of the Closing Date and to be set forth on SCHEDULE 7
hereto within 30 days of the Closing Date,  (v) guaranty and other  contingent
obligations  permitted by Section 7.1; (vi) acquisitions  permitted by Section
7.3(c); (vii)(A) advances or loans to employees, directors, officers or agents
not to exceed $200,000 with respect to each such loan, (B) short term loans to
new or relocating  employees to cover moving and other relocation costs not to
exceed $500,000 with respect to each such loan, which loans under both clauses
(A)  and (B)  shall  not  exceed  in the  aggregate  at any  time  outstanding
$2,500,000;  (viii)  Investments in and to Domestic Credit  Parties;  and (ix)
Permitted CSAP Loans outstanding on the First Amendment Date.

     "Permitted  Liens"  means (i)  encumbrances  granted to the Agent and the
Banks hereunder;  (ii) encumbrances for taxes not yet due or contested in good
faith by appropriate  proceedings and with respect to which adequate  reserves
are being maintained in accordance with GAAP; (iii)  encumbrances  arising out
of equipment  leases in the ordinary  course of  business;  (iv)  encumbrances
arising out of the purchase of  equipment  in the ordinary  course of business
and limited to the specific equipment purchased,  provided,  however, that the
underlying  Indebtedness is permitted under Section 7.1(d) hereof; (v) pledges
or deposits in the ordinary  course of business in  connection  with  worker's
compensation or other forms of governmental insurance or benefits or to secure
performance  of statutory  obligations,  leases and contracts  (other than for
borrowed  money) entered into in the ordinary  course of business or to secure
obligations  on surety or appeal  bonds;  (vi)  encumbrances  of mechanics and
other  similar  encumbrances  arising in the  ordinary  course of  business in
respect of obligations  not delinquent or being contested in good faith and by
appropriate  proceedings and with respect to which adequate reserves are being
maintained  in accordance  with GAAP;  and (vii)  encumbrances  arising in the
ordinary  course of  business  for sums being  contested  in good faith and by
appropriate  proceedings and with respect to which adequate reserves are being
maintained  in  accordance  with GAAP, or for sums not due, and in either case
not  involving  any deposits or advances  for  borrowed  money or the deferred
purchase price of property or services.

<PAGE>

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

     "Plan" has the meaning stated in Section 4.8.

     "Prime Rate" means the per annum rate of interest  established  from time
to time by the Agent at its principal  office in Charlotte,  North Carolina as
its Prime Rate. Any change in the interest rate resulting from a change in the
Prime Rate shall  become  effective  as of 12:01 a.m. of the  Business  Day on
which each change in the Prime Rate is announced by the Agent.  The Prime Rate
is a reference rate used by the Agent in determining interest rates on certain
loans and is not  intended to be the lowest  rate of  interest  charged on any
extension of credit to any debtor.

     "Pro Forma  Basis"  means,  with  respect to any  transaction,  that such
transaction  shall be deemed to have  occurred as of the first day of the four
fiscal-quarter  period  ending  as of  the  most  recent  fiscal  quarter  end
preceding the date of such transaction.

     "Qualified   Employees"  means  those  employees  of  the  Borrower  that
purchased  common  stock of the Borrower  with the proceeds of Employee  Loans
made to such employees.

     "Ratable Share" has the meaning stated in Section 2.1(a) hereof.

     "Regulation  U"  means  Regulation  U of the  Board of  Governors  of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof.

     "Required  Financial  Information"  means, with respect to the applicable
Calculation  Date,  (i) the  financial  statements of the  Consolidated  Group
required to be  delivered  pursuant  to Section  6.4 for the fiscal  period or
quarter ending as of such  Calculation  Date,  and (ii) the  certificate of an
Authorized  Financial Officer required by Section 6.4 to be delivered with the
financial statements described in clause (i) above.

     "Requirement  of  Law"  means,  as to  any  Person,  the  certificate  of
incorporation and by-laws or other  organizational  or governing  documents of
such Person,  and any law,  treaty,  rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding  upon such  Person or to which any of its  material  property is
subject.

     "Revolving Credit Commitment" has the meaning stated in Section 2.1(a).

     "Revolving  Credit Loan  Commitment  Period"  has the  meaning  stated in
Section 2.1(b).

     "Revolving Credit Loans" has the meaning stated in Section 2.1(a).

     "Revolving Credit Note" has the meaning stated in Section 2.1(c).

<PAGE>

     "Security Agreement" means the Security Agreement dated as of the Closing
Date given by the Credit Parties to the Agent to secure the obligations of the
Credit Parties under the Credit Documents,  as such Security  Agreement may be
amended and modified from time to time.

     "Selected  Banks"  (A)  means the Banks  which  are  signatories  to this
Agreement and (B) the one hundred  largest  commercial  banks which either are
United States national banking associations or are chartered under the laws of
a state of the United  States and which have  ratings by  Thompson  BankWatch,
Inc. (or  successor)  no lower than the  following:  (i) for the largest fifty
banks in asset size: "C"; and (ii) for the next fifty banks in asset size: "B"
and (C)  banks  chartered  under the laws of  Canada  and of a quality  and/or
rating equivalent to or not less than the rating identified in (B)(ii) above.

     "Separation  Allowance  Account"  means the account  established  for the
Borrower's  qualified  Canadian  employees  to which,  from time to time,  the
Borrower may credit dollar  amounts  allocated to such employee  based on such
employee's  share in the CSAP.  For the  avoidance  of doubt,  no such account
shall be funded with actual dollars,  but the dollar amount  credited  thereto
shall be reflected as a liability on the balance sheet of the Borrower.

     "Subsidiaries"  means the Persons  identified on SCHEDULE 1 and any other
Person in which,  at any time  subsequent  to the  Closing  Date,  the Parent,
directly or  indirectly,  beneficially  or  legally,  (i) owns more than fifty
percent  (50%) of the stock having  ordinary  voting power for the election of
Directors, in the case of a corporation,  or (ii) owns more than fifty percent
(50%) of the ownership interests of a partnership,  limited liability company,
joint venture or other Person or is a general partner of a partnership.

     "Subsidiary Guaranteed Obligations" means, as to each Guarantor,  without
duplication,  (i) all obligations of the Borrower (including interest accruing
after an event  described  in  Section  8.1(e),  regardless  of  whether  such
interest is allowed as a claim under the Federal Bankruptcy Code) to the Banks
and the Agent, whenever arising, under this Credit Agreement, the Notes or the
other Credit  Documents,  and (ii) all liabilities and  obligations,  whenever
arising,  owing from the  Borrower to any Bank,  or any  Affiliate  of a Bank,
arising under any Interest Rate Protection  Agreement  relating to obligations
hereunder.

     "Subsidiary  Guarantor" means each of Domestic Subsidiaries of the Parent
identified as a "Subsidiary  Guarantor" on the signature pages hereto and each
other Person which may hereafter become a Subsidiary Guarantor by execution of
a Joinder Agreement, together with their successors and permitted assigns.

     "Termination  Date" means (i) as to the Revolving Credit Loans,  June 30,
2003, and (ii) as to any Employee Loan, the date of the final maturity of such
Employee Loan.

     "Treasurer"  means the person holding the office,  under whatever  title,
most  closely  corresponding  to  the  typical  duties  of  a  treasurer  of a
corporation or the person acting in such capacity.

<PAGE>

     "Unused  Aggregate  Revolving Credit  Commitment"  means, for any date of
calculation, the amount by which (a) the Aggregate Revolving Credit Commitment
exceeds (b) the sum of (i) the outstanding  aggregate  principal amount of all
Revolving Credit Loans and (ii) the LOC Obligations outstanding.

     "Unused Fee" has the meaning stated in Section 2.9.

     "Unused Fee Calculation Period" has the meaning stated in Section 2.9.

     "Vice President and Chief Financial Officer" means the person holding the
office, under whatever title, most closely corresponding to the typical duties
of a chief  financial  officer of a  corporation  or the person acting in such
capacity.

     "Voting Stock" means, with respect to any Person, capital stock issued by
such  Person  the  holders  of  which  are  ordinarily,   in  the  absence  of
contingencies,  entitled  to vote for the  election of  directors  (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.

     Section 1.2. ACCOUNTING TERMS AND DETERMINATIONS.

     Unless  otherwise  specified  herein,  all financial and accounting terms
used herein shall be  interpreted,  all  accounting  determinations  hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be  prepared  in  accordance  with GAAP,  applied on a basis  consistent
(except  for  changes  concurred  in  by  the  Borrower's  independent  public
accountants) with the most recent audited consolidated financial statements of
the Consolidated Group delivered to the Banks.

     Section 1.3. OTHER DEFINITIONAL PROVISIONS.

     References in this  Agreement to "Articles",  "Sections",  "Schedules" or
"Exhibits" shall be to Articles, Sections, Schedules or Exhibits of or to this
Agreement unless otherwise  specifically  provided.  Wherever used herein, the
singular number shall include the plural, and vice versa, whenever appropriate
to protect the interests of the Banks,  and the conjunctive  shall include the
disjunctive,  and vice versa, whenever so appropriate.  "Include",  "includes"
and "including" shall be deemed to be followed by "without limitation" whether
or not  they are in fact  followed  by such  words  or  words of like  import.
"Writing",  "written" and comparable terms refer to printing, typing and other
means of reproducing  words in a visible form.  References to any agreement or
contract  are  to  such   agreement  or  contract  as  amended,   modified  or
supplemented  from  time to time in  accordance  with  the  terms  hereof  and
thereof.  References to any Person  include the successors and assigns of such
Person.  References  "from"  or  "through"  any date  mean,  unless  otherwise
specified, "from and including" or "through and including", respectively.

<PAGE>

                        ARTICLE II. LOANS AND PAYMENTS

     Section 2.1. LOANS.

     (a)  REVOLVING  CREDIT  COMMITMENT.  Each of the Banks  hereby  severally
agrees to lend and the  Borrower  agrees to  accept,  subject to the terms and
conditions of this Agreement,  revolving credit loans not to exceed at any one
time  outstanding  to the Borrower,  together with the LOC  Obligations,  such
Bank's Ratable Share of  $95,000,000  (as such amount may be reduced from time
to time pursuant to Section 2.8, the "AGGREGATE  REVOLVING CREDIT COMMITMENT,"
and each Bank's  Ratable Share of the Aggregate  Revolving  Credit  Commitment
being  a  "REVOLVING  CREDIT   COMMITMENT").   Each  Bank's  Revolving  Credit
Commitment,  as such  amount  may be  reduced  from time to time  pursuant  to
Section  2.8, is set forth  beneath  such Bank's name on the  signature  pages
hereof  opposite the caption  "REVOLVING  CREDIT  COMMITMENT." As used herein,
"RATABLE  SHARE"  shall mean the  proportion  that a Bank's  Revolving  Credit
Commitment bears to the Aggregate  Revolving Credit  Commitment.  A "REVOLVING
CREDIT LOAN" shall mean a revolving credit loan made by a Bank to the Borrower
pursuant to this  Section  2.1, and  "REVOLVING  CREDIT  LOANS" shall mean the
Revolving Credit Loans of all the Banks to the Borrower.

     (b) AVAILABILITY OF REVOLVING  CREDIT LOANS.  Revolving Credit Loans will
be made in accordance with Section 2.2 and may be requested  during the period
beginning on the Closing Date and ending on the Termination Date for Revolving
Credit Loans (the "REVOLVING  CREDIT LOAN COMMITMENT  PERIOD").  All Revolving
Credit  Loans shall be in minimum  principal  amounts of $100,000 and integral
multiples of $100,000 in excess thereof.  Revolving Credit Loans for less than
$1,000,000  shall  consist  of Base Rate  Loans;  Revolving  Credit  Loans for
$1,000,000 and greater may consist of Base Rate Loans or Eurodollar  Loans, or
a combination thereof, as the Borrower may request; PROVIDED, HOWEVER, that no
more than five (5)  Eurodollar  Loans shall be  outstanding  hereunder  at any
time; PROVIDED,  FURTHER,  that no Eurodollar Loan shall be made for less than
$1,000,000.  Revolving Credit Loans may be repaid and reborrowed in accordance
with the  provisions  hereof.  For  purposes  hereof,  Eurodollar  Loans  with
different  Interest Periods shall be considered as separate  Eurodollar Loans,
even if they  begin on the same  date  and  have the same  duration,  although
borrowings,  extensions and conversions may, in accordance with the provisions
hereof,  be combined at the end of existing  Interest  Periods to constitute a
new Eurodollar Loan with a single Interest Period.

     (c) REVOLVING  CREDIT NOTES.  Each  Revolving  Credit Loan made by a Bank
under this Agreement shall be evidenced by a revolving  promissory note issued
by the Borrower to the Bank making such Revolving Credit Loan substantially in
the form of  EXHIBIT A and  maturing  on the  Termination  Date for  Revolving
Credit  Loans  (each  such note,  together  with all  amendments,  extensions,
renewals,  replacements,  or  refundings  thereof  in whole  or in part,  is a
"REVOLVING CREDIT NOTE" and such Revolving Credit Notes are, collectively, the
"REVOLVING CREDIT NOTES").

     (d) EMPLOYEE LOAN PARTICIPATIONS.

          (i) NO COMMITMENT TO MAKE ADDITIONAL EMPLOYEE LOANS. Under the terms
     of the Existing Credit Agreement, Bank of America agreed to make, and the

<PAGE>

     Banks agreed to purchase a participation interest in, terms loans made to
     certain  employees  of the  Borrower  to be  used by  such  employees  to
     purchase  common  stock  of  the  Borrower.  Effective  as of  the  First
     Amendment  Date,  the Borrower has  terminated  the commitment of Bank of
     America  to make any  additional  term loans to its  employees.  The term
     loans  outstanding on the First  Amendment Date shall remain  outstanding
     subject to the provisions of the Amended  Credit  Agreement and the other
     Credit Documents.

          (ii)  PURCHASE OF  PARTICIPATION  INTEREST IN  OUTSTANDING  EMPLOYEE
     LOANS. As of the date hereof, the aggregate outstanding principal balance
     of Employee Loans is $14,323,201.64.  Bank of America agrees to sell, and
     each Bank  hereby  agrees  to  purchase,  a  participation  interest  (an
     "EMPLOYEE LOAN PARTICIPATION") in the Employee Loans and all security now
     or hereafter  provided with respect  thereto equal to such Bank's Ratable
     Share of the Employee Loans and such  security.  Each Bank shall fund its
     Employee Loan  Participation of all Employee Loans on the First Amendment
     Date in an amount  equal to such  Bank's  Ratable  Share of all  Employee
     Loans in accordance  with this Section  2.1(d).  Simultaneously  with the
     funding  of  its   Employee   Loan   Participation,   each  Bank   shall,
     automatically  and  without  any  further  action  on the part of Bank of
     America or such Bank,  acquire a participation in an amount equal to such
     payment in the related  Employee Loan and in the interest  thereon and in
     the related  Employee Notes, and shall have a claim against the Qualified
     Employee with respect thereto.

          (iii) AVAILABILITY OF EMPLOYEE LOANS. Amounts repaid on the Employee
     Loans may not be reborrowed.

          (iv) EMPLOYEE  NOTES.  Each of the Employee  Loans is evidenced by a
     promissory note (together with all amendments,  extensions,  renewals, or
     replacements  thereof,  an "EMPLOYEE  NOTE" and,  collectively,  all such
     notes,  "EMPLOYEE  NOTES")  issued to Bank of  America  by the  Qualified
     Employee to whom the Employee Loan was made  substantially in the form of
     EXHIBIT B to the Existing Credit  Agreement.  Each existing Employee Note
     shall be amended, restated and replaced in its entirety by a new Employee
     Note  substantially  in the form of  EXHIBIT  B hereto  and each such new
     Employee  Note shall  evidence the Employee  Loans made to the  Qualified
     Employee  that issued the new Employee  Note.  Each  Employee  Loan shall
     mature on the seventh  September 30 following the original funding of the
     corresponding Employee Loan.

     Section 2.2. LOAN PROCEDURES; SERVICING

     (a)  REQUESTS.  Each request by the Borrower for a Revolving  Credit Loan
shall be submitted  to the Agent in  accordance  with  Section  5.2(b) of this
Agreement.

     (b) NOTICE TO BANKS.  The Agent  shall  notify each of the other Banks as
soon as  practicable  upon receipt of any request for a Revolving  Credit Loan
and that notice shall include the date that the Borrower desires the Revolving
Credit Loan to be made and such Bank's Ratable Share of such Revolving  Credit
Loan. All funds  constituting a Bank's Ratable Share of such Revolving  Credit
Loan shall be received by the Agent in  immediately  available  funds or other
funds  satisfactory  to the Agent not later than 2:00 p.m.,  Charlotte,  North
Carolina  time,  on the date on which the Borrower has requested the Revolving

<PAGE>

Credit  Loan to be  made.  Unless  the  Agent  shall  have  been  notified  by
telephone,  confirmed in writing, by any Bank by 12:00 noon, Charlotte,  North
Carolina  time,  on the day the Borrower  has  requested  that such  Revolving
Credit Loan be made,  that such Bank will not make  available the amount which
would constitute its Ratable Share of such requested  Revolving Credit Loan on
the date specified therefor, the Agent may assume that such Bank has made such
amount  available  to the Agent and, in reliance  upon such  assumption,  make
available to the Borrower or to an appropriate escrow account, as appropriate,
a  corresponding  amount.  If and to the extent  that such Bank shall not have
made such amount available to the Agent,  such Bank and the Borrower agrees to
repay the Agent forthwith on demand such  corresponding  amount, and such Bank
further agrees to pay to the Agent, upon demand,  interest  thereon,  for each
day from the date the Agent made such amount  available to the Borrower to the
date such amount is repaid to the Agent,  at the interest  rate  applicable at
the time to Revolving Credit Loans of the same type funded by the Agent.

     (c) SERVICING.  The Borrower  agrees to act as servicer for the Agent and
Bank of America  with  respect to the Employee  Loans (in such  capacity,  the
"SERVICER").  On behalf of the Agent and Bank of America,  the  Servicer  will
administer,  service and collect  payments in respect of all  Employee  Loans,
which  duties shall  include,  without  limitation,  (i)  collecting  payments
submitted  by  Qualified  Employees  pursuant  to  the  Employee  Notes,  (ii)
recordkeeping  regarding  current loan balances and other matters  relating to
Employee  Loans,  (iii)  responding  to questions  about  Employee  Loans from
Qualified  Employees and (iv)  providing to the Agent,  within fifty (50) days
after the end of each calendar  quarter,  an Employee Loan delinquency  report
for the  immediately  preceding  calendar  quarter.  The Agent  shall have the
exclusive  right to remove the  Servicer  at any time for cause and during the
continuation of an Event of Default, and, upon 30 days written notice, without
cause.  Upon any such removal,  the Agent shall  promptly  appoint a successor
Servicer  who  shall  be  reasonably  acceptable  to the  Borrower;  PROVIDED,
HOWEVER,  that no  approval  of the  Borrower  shall be  required  during  the
continuance  of an Event of  Default.  The  Borrower,  with the prior  written
consent of the Agent, which consent shall not be unreasonably withheld,  shall
be permitted to appoint a subservicer  to perform its  obligations  under this
Section 2.2(c).

     Section 2.3. THE BANKS' OBLIGATIONS UNDER THE LOANS.

     Each Bank shall be obligated  to fund  Revolving  Credit Loans  requested
under Section  5.2(b) and its  participation  in Employee  Loans in accordance
with its Ratable Share and Sections 2.1 and 2.2. The  obligations of each Bank
hereunder  are several  and not joint.  The failure of any Bank to perform its
obligations  hereunder  shall not affect the  obligations of any other Bank or
the Borrower to any other  party,  nor shall any other party be liable for the
failure of such Bank to perform its obligations hereunder.

     Section 2.4. EXTENSION AND CONVERSION.

     Subject to the terms of Section 5.2, the Borrower  shall have the option,
on any  Business  Day,  to  extend  existing  Revolving  Credit  Loans  into a
subsequent  permissible  Interest Period or to convert  Revolving Credit Loans
into  Revolving  Credit Loans of another  type;  PROVIDED,  HOWEVER,  that (i)
except as provided in Section  2.14,  Eurodollar  Loans may be converted  into

<PAGE>

Base  Rate  Loans  only on the  last  day of the  Interest  Period  applicable
thereto,  (ii)  Eurodollar  Loans may be extended,  and Base Rate Loans may be
converted  into  Eurodollar  Loans,  only if no Incipient  Default or Event of
Default  is in  existence  on the  date  of  extension  or  conversion,  (iii)
Revolving Credit Loans extended as, or converted into,  Eurodollar Loans shall
be subject to the terms of the definition of "INTEREST PERIOD" and shall be in
such  minimum  amounts  as  provided  in Section  2.1(b),  (iv) no more than 5
separate  Eurodollar Loans shall be outstanding  hereunder at any time and (v)
any request for extension or conversion of a Eurodollar  Loan which shall fail
to specify an Interest  Period shall be deemed to be a request for an Interest
Period of one month.  Each such  extension or conversion  shall be effected by
the Borrower by giving a Notice of  Extension/Conversion  (or telephone notice
promptly  confirmed  in writing) to the Agent prior to 11:00 A.M.  (Charlotte,
North  Carolina time) on the Business Day of, in the case of the conversion of
a Eurodollar  Loan into a Base Rate Loan,  and on the third Business Day prior
to, in the case of the  extension of a Eurodollar  Loan as, or conversion of a
Base Rate Loan into, a Eurodollar Loan, the date of the proposed  extension or
conversion,  specifying the date of the proposed extension or conversion,  the
Revolving Credit Loans to be so extended or converted,  the types of Revolving
Credit Loans into which such  Revolving  Credit Loans are to be converted and,
if appropriate,  the applicable  Interest Periods with respect  thereto.  Each
request for  extension or conversion  shall  constitute a  representation  and
warranty by the Borrower of the matters  specified in Section  5.2(a).  In the
event the Borrower fails to request  extension or conversion of any Eurodollar
Loan in accordance  with this Section,  or any such conversion or extension is
not  permitted  or  required  by  this  Section,   then  such  Loan  shall  be
automatically  converted  into a Base  Rate  Loan at the  end of the  Interest
Period applicable  thereto.  The Agent shall give each Bank notice as promptly
as  practicable  of any such proposed  extension or  conversion  affecting any
Loan.

     Section 2.5. LETTERS OF CREDIT.

     (a) ISSUANCE.  Subject to the terms and conditions  hereof and of the LOC
Documents,  if any, and any other terms and conditions  which the Issuing Bank
may  reasonably  require,  the Issuing  Bank agrees from time to time to issue
Letters of Credit during the Revolving  Credit Loan  Commitment  Period as the
Borrower may request,  in a form  acceptable  to the Issuing  Bank;  PROVIDED,
HOWEVER, that (i) the LOC Obligations outstanding shall not at any time exceed
$10,000,000 and (ii) the sum of the aggregate  principal amount of outstanding
Revolving Credit Loans PLUS LOC Obligations  outstanding shall not at any time
exceed  the  Aggregate  Revolving  Credit  Commitment.   Except  as  otherwise
expressly  agreed  upon by all the  Banks,  no Letter of Credit  shall have an
original expiry date more than two years from the date of issuance;  PROVIDED,
FURTHER, that no Letter of Credit, as originally issued or as extended,  shall
have an expiry date extending  beyond the day before the Termination  Date for
Revolving  Credit  Loans.  Each Letter of Credit shall comply with the related
LOC Documents.  The issuance and expiry date of each Letter of Credit shall be
a Business Day.

     (b) NOTICE AND  REPORTS.  The  request  for the  issuance  of a Letter of
Credit  shall be  submitted by the Borrower to the Issuing Bank at least three
(3) Business  Days prior to the requested  date of issuance.  The Issuing Bank
will, at least quarterly and more frequently upon request, disseminate to each
of the Banks a detailed report specifying the Letters of Credit which are then
issued and  outstanding  and any activity with respect  thereto which may have

<PAGE>

occurred  since the date of the prior  report,  and including  therein,  among
other things,  the account party, the beneficiary,  the face amount and expiry
date as well as any  payment  or  expirations  which  may  have  occurred.  In
addition,  the Issuing Bank will,  upon the issuance of each Letter of Credit,
disseminate  to each of the Banks a statement  with  respect to such Letter of
Credit  specifying the account party,  the beneficiary,  the face amount,  the
issue date and the expiry date.

     (c) PARTICIPATION.  Each Bank, upon issuance of a Letter of Credit, shall
be deemed to have purchased  without  recourse a risk  participation  from the
Issuing Bank in such Letter of Credit and the obligations  arising thereunder,
in each case in an amount equal to its pro rata share of the obligations under
such Letter of Credit (based on the  respective  Ratable  Shares of the Banks)
and shall  absolutely,  unconditionally  and  irrevocably  assume,  as primary
obligor  and  not as  surety,  and be  obligated  to pay to the  Issuing  Bank
therefor and discharge when due, its pro rata share of the obligations arising
under such  Letter of Credit.  Without  limiting  the scope and nature of each
Bank's  participation in any Letter of Credit,  to the extent that the Issuing
Bank has not been reimbursed as required hereunder or under any such Letter of
Credit,  each such Bank  shall pay to the  Issuing  Bank its pro rata share of
such unreimbursed  drawing in same day funds on the day of notification by the
Issuing  Bank  of an  unreimbursed  drawing  pursuant  to  the  provisions  of
subsection (d) hereof. The obligation of each Bank to so reimburse the Issuing
Bank shall be  absolute  and  unconditional  and shall not be  affected by the
occurrence  of an  Incipient  Default,  an  Event  of  Default  or  any  other
occurrence  or event.  Any such  reimbursement  shall not relieve or otherwise
impair the  obligation of the Borrower to reimburse the Issuing Bank under any
Letter of Credit, together with interest as hereinafter provided.

     (d)  REIMBURSEMENT.  In the  event of any  drawing  under  any  Letter of
Credit,  the  Issuing  Bank will  promptly  notify  the  Borrower.  Unless the
Borrower shall  immediately  notify the Issuing Bank that the Borrower intends
to otherwise  immediately  reimburse  the Issuing Bank for such  drawing,  the
Borrower  shall be deemed to have  requested  that the Banks make a  Revolving
Credit Loan in the amount of the drawing as provided in subsection  (e) hereof
on the related Letter of Credit, the proceeds of which will be used to satisfy
the related reimbursement obligations.  The Borrower promises to reimburse the
Issuing Bank on the day of drawing under any Letter of Credit (either with the
proceeds of a Revolving  Credit Loan obtained  hereunder or otherwise) in same
day  funds.  If the  Borrower  shall fail to  reimburse  the  Issuing  Bank as
provided  hereinabove  (and Revolving Credit Loans are not available to effect
such  reimbursement),  the  unreimbursed  amount of such  drawing  shall  bear
interest at a per annum rate equal to the Base Rate plus two percent (2%). The
Borrower's   reimbursement   obligations   hereunder  shall  be  absolute  and
unconditional  under all  circumstances  irrespective of any rights of setoff,
counterclaim  or defense to payment the Borrower may claim or have against the
Issuing Bank, the Agent,  the Banks,  the  beneficiary of the Letter of Credit
drawn upon or any other Person, including without limitation any defense based
on any  failure of the  applicable  account  party or the  Borrower to receive
consideration or the legality, validity, regularity or unenforceability of the
Letter of Credit. The Issuing Bank will promptly notify the other Banks of the
amount of any  unreimbursed  drawing and each Bank shall  promptly  pay to the
Agent for the  account  of the  Issuing  Bank in  dollars  and in  immediately
available funds, the amount of such Bank's pro rata share of such unreimbursed
drawing. Such payment shall be made on the day such notice is received by such
Bank from the  Issuing  Bank if such notice is received at or before 2:00 P.M.
(Charlotte,  North Carolina time);  otherwise such payment shall be made at or
before 12:00 Noon  (Charlotte,  North  Carolina time) on the Business Day next
succeeding  the day such  notice is  received.  If such Bank does not pay such

<PAGE>

amount to the Issuing  Bank in full upon such  request,  such Bank  shall,  on
demand,  pay to the Agent for the account of the Issuing Bank  interest on the
unpaid  amount during the period from the date of such drawing until such Bank
pays such amount to the Issuing  Bank in full at a rate per annum equal to, if
paid within two (2) Business  Days of the date of drawing,  the Federal  Funds
Rate and thereafter at a rate equal to the Base Rate.  Each Bank's  obligation
to make such payment to the Issuing Bank, and the right of the Issuing Bank to
receive the same, shall be absolute and  unconditional,  shall not be affected
by any  circumstance  whatsoever and without regard to the termination of this
Agreement or the Revolving Credit Commitments  hereunder,  the existence of an
Incipient  Default or Event of Default or the  acceleration of the obligations
of the Borrower  hereunder  and shall be made  without any offset,  abatement,
withholding or reduction  whatsoever.  Simultaneously  with the making of each
such payment by a Bank to the Issuing Bank, such Bank shall, automatically and
without  any  further  action on the part of the  Issuing  Bank or such  Bank,
acquire a  participation  in an amount  equal to such payment  (excluding  the
portion of such payment  constituting  interest  owing to the Issuing Bank) in
the related  unreimbursed  drawing  portion of the LOC  Obligation  and in the
interest  thereon  and in the related  LOC  Documents,  and shall have a claim
against the Borrower with respect thereto.

     (e)  REPAYMENT  WITH  REVOLVING  CREDIT  LOANS.  On any day on which  the
Borrower shall have requested,  or been deemed to have requested,  a Revolving
Credit Loan to reimburse a drawing  under a Letter of Credit,  the Agent shall
give notice to the Banks that a Revolving  Credit Loan has been  requested  or
deemed requested by the Borrower to be made in connection with a drawing under
a Letter of Credit,  in which case a Revolving Credit Loan comprised solely of
Base  Rate  Loans  shall be  immediately  made to the  Borrower  by all  Banks
(notwithstanding  any termination of the Revolving Credit Commitments pursuant
to Section 8.2) pro rata based on the  respective  Ratable Shares of the Banks
(determined  before giving effect to any  termination of the Revolving  Credit
Commitments  pursuant to Section 8.2) and the proceeds  thereof  shall be paid
directly  to  the  Issuing  Bank  for   application   to  the  respective  LOC
Obligations.  Each such Bank  hereby  irrevocably  agrees to make its pro rata
share of each such Revolving  Credit Loan immediately upon any such request or
deemed  request in the amount,  in the manner and on the date specified in the
preceding  sentence  NOTWITHSTANDING  (i) the amount of such borrowing may not
comply  with the  minimum  amount  for  advances  of  Revolving  Credit  Loans
otherwise required hereunder, (ii) whether any conditions specified in Section
5.2 are then  satisfied,  (iii)  whether an  Incipient  Default or an Event of
Default  then exists,  (iv) failure of any such request or deemed  request for
Revolving  Credit Loans to be made by the time otherwise  required  hereunder,
(v) whether the date of such  borrowing  is a date on which  Revolving  Credit
Loans are otherwise  permitted to be made hereunder or (vi) any termination of
the Revolving  Credit  Commitments  relating thereto  immediately  prior to or
contemporaneously with such borrowing.  In the event that any Revolving Credit
Loan  cannot  for any  reason  be made on the date  otherwise  required  above
(including,  without  limitation,  as  a  result  of  the  commencement  of  a
proceeding  under  the  Federal  Bankruptcy  Code with  respect  to any of the
Borrower),  then each such Bank hereby agrees that it shall forthwith purchase
(as of the date such borrowing would otherwise have occurred, but adjusted for
any  payments  received  from the  Borrower on or after such date and prior to
such purchase) from the Issuing Bank such participation in the outstanding LOC
Obligations as shall be necessary to cause each such Bank to share in such LOC
Obligations  ratably  (based upon the  respective  Ratable Shares of the Banks
(determined  before giving effect to any  termination of the Revolving  Credit

<PAGE>

Commitments pursuant to Section 8.2)),  provided that at the time any purchase
of  participation  pursuant to this sentence is actually  made, the purchasing
Bank shall be required to pay to the Issuing  Bank,  to the extent not paid to
the Issuing Bank by the Borrower in  accordance  with the terms of  subsection
(d) hereof,  interest on the principal amount of  participation  purchased for
each day from and including the day upon which such borrowing  would otherwise
have occurred to but excluding the date of payment for such participation,  at
the rate  equal to, if paid  within two (2)  Business  Days of the date of the
Revolving  Credit Loan, the Federal Funds Rate, and thereafter at a rate equal
to the Base Rate.

     (f)  DESIGNATION  OF  SUBSIDIARIES  AS ACCOUNT  PARTIES.  Notwithstanding
anything  to the  contrary  set  forth in this  Agreement,  including  without
limitation  subsection  (a) hereof,  a Letter of Credit  issued  hereunder may
contain a statement to the effect that such Letter of Credit is issued for the
account of a Subsidiary of the Borrower,  provided that  notwithstanding  such
statement,  the Borrower shall be the actual account party for all purposes of
this Agreement for such Letter of Credit and such  statement  shall not affect
the Borrower's reimbursement obligations hereunder with respect to such Letter
of Credit.

     (g) RENEWAL,  EXTENSION. The renewal or extension of any Letter of Credit
shall,  for  purposes  hereof,  be  treated  in all  respects  the same as the
issuance of a new Letter of Credit hereunder.

     (h) UNIFORM CUSTOMS AND PRACTICES.  The Issuing Bank may have the Letters
of Credit be subject to The  Uniform  Customs  and  Practice  for  Documentary
Credits (the "UCP") or the International Standby Practices 1998 (the "ISP98"),
in  either  case as  published  as of the date of  issue by the  International
Chamber of Commerce, in which case the UCP or the ISP98, as applicable, may be
incorporated therein and deemed in all respects to be a part thereof.

     (i) INDEMNIFICATION; NATURE OF ISSUING BANK'S DUTIES.

          (i) In addition to its other obligations under this Section 2.5, the
     Borrower  hereby agrees to protect,  indemnify,  pay and save the Issuing
     Bank harmless from and against any and all claims, demands,  liabilities,
     damages,  losses,  costs,  charges  and  expenses  (including  reasonable
     attorneys'  fees) that the  Issuing  Bank may incur or be subject to as a
     consequence,  direct or  indirect,  of (A) the  issuance of any Letter of
     Credit or (B) the failure of the Issuing Bank to honor a drawing  under a
     Letter of Credit as a result of any act or omission,  whether rightful or
     wrongful,  of any  present  or future de jure or de facto  government  or
     governmental  authority  (all  such  acts  or  omissions,  herein  called
     "GOVERNMENT ACTS").

          (ii) As between the  Borrower  and the Issuing  Bank,  the  Borrower
     shall assume all risks of the acts,  omissions or misuse of any Letter of
     Credit  by  the  beneficiary  thereof.  The  Issuing  Bank  shall  not be
     responsible:   (A)  for  the  form,  validity,   sufficiency,   accuracy,
     genuineness  or legal  effect of any  document  submitted by any party in
     connection with the application for and issuance of any Letter of Credit,
     even if it should  in fact  prove to be in any or all  respects  invalid,

<PAGE>

     insufficient,  inaccurate,  fraudulent or forged; (B) for the validity or
     sufficiency of any instrument  transferring or assigning or purporting to
     transfer  or  assign  any  Letter of  Credit  or the  rights or  benefits
     thereunder or proceeds thereof, in whole or in part, that may prove to be
     invalid  or  ineffective  for  any  reason;  (C) for  errors,  omissions,
     interruptions  or delays in transmission or delivery of any messages,  by
     mail,  cable,  telegraph,  telex or otherwise,  whether or not they be in
     cipher;  (D)for any loss or delay in the transmission or otherwise of any
     document  required in order to make a drawing under a Letter of Credit or
     of the proceeds thereof; and (E) for any consequences arising from causes
     beyond the control of the Issuing Bank,  including,  without  limitation,
     any Government Acts. None of the above shall affect,  impair,  or prevent
     the vesting of the Issuing Bank's rights or powers hereunder.

          (iii) In  furtherance  and  extension  and not in  limitation of the
     specific provisions hereinabove set forth, any action taken or omitted by
     the Issuing Bank, under or in connection with any Letter of Credit or the
     related  certificates,  if taken or omitted in good faith,  shall not put
     such Issuing Bank under any resulting  liability to the  Borrower.  It is
     the intention of the parties that this  Agreement  shall be construed and
     applied to protect and  indemnify  the Issuing  Bank  against any and all
     risks  involved in the  issuance  of the Letters of Credit,  all of which
     risks are hereby assumed by the Borrower  including,  without limitation,
     any and all  Government  Acts. The Issuing Bank shall not, in any way, be
     liable for any  failure  by the  Issuing  Bank or anyone  else to pay any
     drawing under any Letter of Credit as a result of any Government  Acts or
     any other cause beyond the control of the Issuing Bank.

          (iv)  Nothing  in this  subsection  (i) is  intended  to  limit  the
     reimbursement  obligations  of the Borrower  contained in subsection  (d)
     above.  The  obligations of the Borrower under this  subsection (i) shall
     survive the  termination  of this  Agreement.  No act or omissions of any
     current  or prior  beneficiary  of a Letter  of  Credit  shall in any way
     affect or impair the  rights of the  Issuing  Bank to enforce  any right,
     power or benefit under this Agreement.

          (v)  Notwithstanding  anything  to the  contrary  contained  in this
     subsection  (i), the Borrower  shall have no  obligation to indemnify the
     Issuing  Bank in respect of any claims,  demands,  liabilities,  damages,
     losses,  costs,  charges or expenses  incurred  by the  Issuing  Bank (A)
     arising out of the gross negligence or willful  misconduct of the Issuing
     Bank, as determined by a court of competent  jurisdiction,  or (B) caused
     by the  Issuing  Bank's  failure to pay under any Letter of Credit  after
     presentation  to it of a request  strictly  complying  with the terms and
     conditions  of such  Letter  of  Credit,  as  determined  by a  court  of
     competent  jurisdiction,  unless such payment is  prohibited  by any law,
     regulation, court order or decree.

     (j) RESPONSIBILITY OF ISSUING BANK. It is expressly understood and agreed
that the obligations of the Issuing Bank hereunder to the Banks are only those
expressly  set forth in this  Agreement  and that the  Issuing  Bank  shall be

<PAGE>

entitled to assume that the conditions precedent set forth in Section 5.2 have
been satisfied  unless it shall have acquired  actual  knowledge that any such
condition precedent has not been satisfied;  PROVIDED,  HOWEVER,  that nothing
set forth in this  Section 2.5 shall be deemed to  prejudice  the right of any
Bank to recover from the Issuing Bank any amounts made  available by such Bank
to the  Issuing  Bank  pursuant  to this  Section  2.5 in the event that it is
determined by a court of competent  jurisdiction that the payment with respect
to a Letter of Credit  constituted  gross negligence or willful  misconduct on
the part of the Issuing Bank.

     (k) CONFLICT  WITH LOC  DOCUMENTS.  In the event of any conflict  between
this Agreement and any LOC Document, this Agreement shall control.

     Section 2.6. REPAYMENT.

     The Borrower  shall repay the  outstanding  principal  balance  under the
Revolving  Credit Notes in full on the Termination  Date for Revolving  Credit
Loans.  The Borrower shall also repay the amount of the outstanding  principal
balance  under any Employee  Note that is due and payable  under such Employee
Note,  whether by  acceleration  of maturity or otherwise,  30 days after such
amount  becomes  due and  payable  if such  amount is then  unpaid,  provided,
however,  that at any time that defaults under all or substantially all of the
Employee  Notes  have  occurred  and  are   continuing,   the  Borrower  shall
immediately  repay  the  aggregate  principal  amount  outstanding  under  the
Employee Notes upon demand therefor by the Agent.

     Section 2.7. INTEREST.

     (a) REVOLVING  CREDIT LOANS.  Subject to the provisions of subsection (d)
below,  each  Revolving  Credit Loan shall bear  interest  on the  outstanding
principal balance thereunder at a per annum rate equal to:

          (i) Base Rate Loans.  During such  periods as any  Revolving  Credit

<PAGE>

     Loan (or portion  thereof)  shall  consist of Base Rate  Loans,  at a per
     annum rate equal to the Base Rate plus the Applicable Percentage for Base
     Rate Loans in effect from time to time.

          (ii) EURODOLLAR  LOANS.  During such periods as any Revolving Credit
     Loan (or any portion thereof) shall consist of Eurodollar Loans, at a per
     annum  rate  equal to the sum of the  Eurodollar  Rate  for the  Interest
     Period in effect for such Eurodollar Loan plus the Applicable  Percentage
     for Eurodollar Loans in effect from time to time.

     (b) EMPLOYEE  LOANS.  Subject to the  provisions of subsection (d) below,
each Employee Loan shall bear interest on the  outstanding  principal  balance
thereunder at a per annum rate equal to the Applicable Rate.

     (c) PAYMENTS AND ACCRUALS.  Interest  shall be payable in arrears on each
Interest  Payment  Date  applicable  to the Loan (or portion  thereof)  unless
otherwise  specified  herein.  The interest due on each Interest  Payment Date
shall be (i) with respect to Revolving  Credit Loans that are Base Rate Loans,
the interest accrued during the immediately preceding month, (ii) with respect

<PAGE>

to Revolving  Credit Loans that are  Eurodollar  Loans,  the interest  accrued
during the applicable Interest Period or, where the applicable Interest Period
is more than three  months,  the  immediately  preceding  three-month  portion
thereof and (iii) with respect to Employee Loans,  the interest accrued during
the immediately  preceding  calendar  quarter.  Unless otherwise  specifically
provided  herein or in the Notes,  all late payments of principal and interest
shall bear interest at the rate specified in clause (d) immediately below.

     (d) DURING AN EVENT OF DEFAULT.  Notwithstanding the foregoing,  upon the
occurrence, and during the continuance,  of an Event of Default, the principal
of and, to the extent  permitted  by law,  interest on the Loans and any other
amounts  owing  hereunder  or under the  Notes,  the  Borrower  Guaranty,  the
Employee Pledge Agreements and any other Credit Documents shall bear interest,
payable on demand,  at a per annum rate 2% greater  than the rate which  would
otherwise be applicable  (or if no rate is  applicable,  whether in respect of
interest, fees or other amounts, then 2% greater than the Base Rate).

     Section   2.8. PREPAYMENTS;   COMMITMENT   INCREASE;   REDUCTION  OR
TERMINATION.

     (a) VOLUNTARY  PREPAYMENTS.  The Borrower  shall have the right to prepay
the  Revolving  Credit  Loans  in whole  or in part  from  time to time on any
Business Day without premium or penalty; PROVIDED, HOWEVER, that (i) Revolving
Credit Loans that are  Eurodollar  Loans may only be prepaid on three Business
Days' prior written notice to the Agent  specifying the applicable Loans to be
prepaid;  (ii) any  prepayment of Revolving  Credit Loans that are  Eurodollar
Loans will be subject to Section 2.17;  (iii) each such partial  prepayment of
Loans shall be (A) in the case of Revolving  Credit Loans that are  Eurodollar
Loans, in a minimum  principal amount of $1,000,000 and in integral  multiples
of $100,000 in excess  thereof and (B) in the case of  Revolving  Credit Loans
that are Base Rate Loans,  in a minimum  principal  amount of $100,000  and in
integral  multiples of $100,000 in excess  thereof.  Subject to the  foregoing
terms,  amounts prepaid  hereunder shall be applied as the Borrower may elect;
PROVIDED,  that  if the  Borrower  shall  fail  to  specify  application  of a
voluntary  prepayment then such prepayment shall be applied first to Base Rate
Loans  and  then to  Eurodollar  Loans in  direct  order  of  Interest  Period
maturities.

     (b) MANDATORY PREPAYMENTS; PURCHASE OF EMPLOYEE NOTES.

          (i)  OVERADVANCE.  If at any time the sum of the aggregate amount of
     outstanding Revolving Credit Loans PLUS LOC Obligations outstanding shall
     exceed the Aggregate  Revolving Credit Commitment,  the Borrower promises
     to prepay immediately the outstanding  principal balance on the Revolving
     Credit Loans and/or provide cash collateral in respect of LOC Obligations
     in an amount sufficient to eliminate such excess.

          (ii)  MARGIN  STOCK  EVENT.  In the event  that any of the  Employee
     Pledged  Shares  become  "margin  stock" as  defined by  Regulation  U (a
     "MARGIN STOCK EVENT"),  the Borrower  promises to prepay  immediately the
     outstanding  principal  balance on the  Revolving  Credit Loans and/or to
     purchase  Employee Loans in an amount  sufficient to bring the Loans into
     compliance with Regulation U.

<PAGE>

          (iii) SALE OF EMPLOYEE PLEDGED SHARES. Upon the sale of any Employee
     Pledged Shares by a Qualified  Employee,  such  Qualified  Employee shall
     immediately  prepay the principal of the Employee Note of such  Qualified
     Employee in an amount  equal to the product of (a) the  quotient  (i) the
     number of Employee  Pledged  Shares sold divided by (ii) the total number
     of Employee  Pledged  Shares of such  Qualified  Employee  (including the
     shares sold), multiplied by (b) the outstanding principal of the Employee
     Note (for  example,  if the Employee  Note is secured by 10,000  Employee
     Pledged  Shares and the  Qualified  Employee  sells 2,500 of those shares
     (which  represents 25% of the Employee Pledged Shares securing payment of
     the Employee Note), then the Qualified Employee must prepay the principal
     of the  Employee  Note  by an  amount  equal  to  25% of the  outstanding
     principal thereof).

          (iv)  TERMINATION  OF QUALIFIED  EMPLOYEE.  In the event a Qualified
     Employee is terminated (whether voluntary or involuntary) from the Parent
     or  any  of  its  Subsidiaries  (such  termination  is,  hereinafter,   a
     "TERMINATION"), the Qualified Employee shall prepay his (or her) Employee
     Note in the amounts and on the dates set forth below:

               (A) if on the date of  Termination  the  Qualified  Employee is
          permitted  to  sell  all  of  its  Employee   Pledged  Shares  under
          applicable   securities   laws  and  under  the   Management   Stock
          Agreements,  then the  Qualified  Employee  shall repay its Employee
          Loans  in full on the  date  thirty  (30)  days  after  his (or her)
          Termination;

               (B) if on the date of  Termination  the  Qualified  Employee is
          permitted to sell a portion,  but not all, of its  Employee  Pledged
          Shares under  applicable  securities  laws and under the  Management
          Stock  Agreements,  then the  Qualified  Employee  shall  repay  its
          Employee Loans:

                    (x) on the  date  thirty  (30)  days  after  his (or  her)
               Termination  by an amount equal to the lesser of (1) the unpaid
               principal  amount of its  Employee  Loans and (2) the  proceeds
               (net of broker commissions, if any) from the sale of all of its
               Employee  Pledged Shares  permitted to be sold under applicable
               securities laws and under the Management Stock Agreements;

                    (y)  subject to clause (z) below,  on the date thirty (30)
               days after the  Qualified  Employee  is  permitted  to sell any
               additional Employee Pledged Shares under applicable  securities
               laws and under the  Management  Stock  Agreements  by an amount
               equal to the lesser of (1) the unpaid  principal  amount of its
               Employee Loans and (2) the proceeds (net of broker commissions,
               if any)  from the sale of all of its  Employee  Pledged  Shares
               permitted to be sold under applicable securities laws and under
               the Management Stock Agreements; and

                    (z) on the date  thirty  (30)  days  after  the  Qualified
               Employee  is  permitted  to sell  all of its  Employee  Pledged
               Shares  under   applicable   securities   laws  and  under  the

<PAGE>

               Management  Stock  Agreements  by an amount equal to the unpaid
               principal amount of its Employee Loans.

               (C) if on the date of Termination the Qualified Employee is not
          permitted to sell all or any portion of its Employee  Pledged Shares
          under  applicable  securities  laws and under the  Management  Stock
          Agreements,  then the  Qualified  Employee  shall repay its Employee
          Loans:

                    (x)  subject to clause (y) below,  on the date thirty (30)
               days after the  Qualified  Employee  is  permitted  to sell any
               Employee  Pledged Shares under  applicable  securities laws and
               under the Management Stock Agreements by an amount equal to the
               lesser of (1) the unpaid principal amount of its Employee Loans
               and (2) the proceeds (net of broker  commissions,  if any) from
               the sale of all of its Employee  Pledged Shares permitted to be
               sold under applicable  securities laws and under the Management
               Stock Agreements; and

                    (z) on the date  thirty  (30)  days  after  the  Qualified
               Employee  is  permitted  to sell  all of its  Employee  Pledged
               Shares  under   applicable   securities   laws  and  under  the
               Management  Stock  Agreements  by an amount equal to the unpaid
               principal amount of its Employee Loans.

          (v)  APPLICATION.  All  prepayments  made  pursuant to this  Section
     2.8(b)(i)  and Section  2.8(b)(ii)  shall (A) be subject to Section 2.17,
     and (B) be applied first to Base Rate Loans and then to Eurodollar  Loans
     in direct order of Interest Period maturities.

     (c) NOTICE OF PREPAYMENTS;  REBORROWING. The Borrower will provide notice
to the Agent of any prepayment by 12:00 noon (Charlotte,  North Carolina time)
on the date of prepayment in the case of prepayments of Base Rate Loans and on
the  third  Business  Day  prior  to the  date of  prepayment  in the  case of
prepayments of Revolving Credit Loans that are Eurodollar Loans.  Amounts paid
on the  Revolving  Credit  Loans under this Section 2.8 may be  reborrowed  in
accordance with the provisions hereof.

     (d)  REDUCTION  OR  TERMINATION.  The  Borrower  may  (i)  terminate  the
Revolving  Credit  Commitments at any time if no Loans or LOC  Obligations are
outstanding at such time, and (ii) ratably and permanently reduce from time to
time,  by an  aggregate  amount of not less  than  $3,000,000  and  additional
increments  of  $1,000,000,   the  unused  portion  of  the  Revolving  Credit
Commitments.

     Section 2.9. FEES.

     (a) UNUSED  FEE.  In  consideration  of the  Aggregate  Revolving  Credit
Commitments made available by the Banks hereunder,  the Borrower agrees to pay
to the Agent for the  account  of the  Banks a fee (the  "UNUSED  FEE") on the
Unused Aggregate  Revolving Credit Commitment computed at a per annum rate for
each day during the  applicable  Unused Fee  Calculation  Period  (hereinafter
defined)  equal to the  Applicable  Percentage for such Unused Fee. The Unused

<PAGE>

Fee shall  commence to accrue on the Closing Date and shall be due and payable
in arrears on the third (3rd)  Business Day of each January,  April,  July and
October  (and the  Termination  Date)  for the  immediately  preceding  fiscal
quarter (or portion  thereof) (each such fiscal quarter or portion thereof for
which the Unused Fee is  payable  hereunder  being  herein  referred  to as an
"UNUSED FEE  CALCULATION  PERIOD"),  beginning with the first of such dates to
occur after the Closing Date.

     (b) ADMINISTRATIVE FEES. The Borrower agrees to pay to the Agent, for its
own  account,  the  annual  administrative  fee set forth in the  Agent's  Fee
Letter,  payable on each  anniversary  of the Closing Date until and including
the last occurring Termination Date (the "AGENT'S FEE").

     (c) LETTER OF CREDIT FEES.

          (i) The  Borrower  agrees  to pay to the Agent  for  account  of the
     Banks,  a fee for each Letter of Credit issued  hereunder (the "LOC FEE")
     on the available  amount to be drawn under such Letter of Credit computed
     at a per  annum  rate  for  each  day  during  the  applicable  LOC  Term
     (hereinafter  defined)  equal to the  Applicable  Percentage for such LOC
     Fee. The LOC Fee shall  commence to accrue on the issuance  date for each
     Letter of Credit  and shall be due and  payable  in  arrears on the third
     (3rd) Business Day of each January,  April,  July and October (and on the
     expiry date thereof) for the  immediately  preceding  fiscal  quarter (or
     portion  thereof) (each such fiscal quarter or portion  thereof for which
     the LOC Fee is payable  hereunder  being  herein  referred  to as an "LOC
     TERM"), beginning with the first of such dates to occur after the date of
     issuance of each Letter of Credit.

          (ii) In  addition  to the Letter of Credit Fee  payable  pursuant to
     clause (i) above,  the Borrower shall pay to the Issuing Bank for its own
     account  without sharing by the other Banks the letter of credit fronting
     fees of (i) 0.125% on the available  amount to be drawn under such Letter
     of Credit computed at a per annum rate for each day during the applicable
     LOC Term and (ii) the customary  charges from time to time of the Issuing
     Bank with respect to the issuance, amendment,  transfer,  administration,
     cancellation and conversion of, and drawing under, such Letters of Credit
     (collectively, the "ISSUING BANK FEES").

     Section 2.10. METHOD OF PAYMENT.

     Unless  otherwise  provided  herein,  whenever any payment of  principal,
interest,  fees or any other payment to be made hereunder becomes due on a day
other than a Business  Day,  such  payment may be made on the next  succeeding
Business Day, and such extension of time shall in such case be included in the
computation  of the  amount of  interest  then to be paid.  All  payments  and
prepayments  by the Borrower  hereunder and the makers of Employee Notes shall
be made to the Agent,  at its address  stated in Section 10.8 hereof,  in such
money of the United States as at the time of payment shall be legal tender for
the payment of public and private debts and in  immediately  available  funds,
without setoff,  deduction or counterclaim.  The Borrower and the Banks hereby
authorize  the Agent to debit the  deposit  accounts  of the  Borrower,  or to
advance  Revolving  Credit  Loans on the  Borrower's  behalf,  at the time any
payment by the  Borrower  to the Agent  under this  Agreement  is due,  in the

<PAGE>

amount of the required payment.  A payment must be received by the Agent or an
instruction  must be given the Agent to debit one or more deposit  accounts of
the Borrower and having collected balances  sufficient to make such payment no
later than 2:00 p.m., Charlotte, North Carolina, time, in order to be credited
to the Borrower on the day of receipt.  Except as expressly provided otherwise
herein,  all  computations  of interest and fees shall be made on the basis of
actual number of days elapsed over a year of 360 days,  except with respect to
computation  of interest on Base Rate Loans and Employee  Loans which  (unless
such rate is  determined  by  reference  to the  Federal  Funds Rate) shall be
calculated based on a year of 365 or 366 days, as appropriate.

     Section 2.11. APPLICATION OF COLLECTIONS.

          (a)  DISTRIBUTION  TO BANKS.  All payments of  principal,  interest,
     fees,  and costs or expenses by the Borrower  prior to the occurrence and
     continuance  of an Event of Default under Article VIII hereof,  or by the
     issuer of an Employee Note prior to the occurrence  and  continuance of a
     default under such Employee  Note,  shall be  distributed to the Banks by
     the Agent as  provided  in this  Section.  If any other Bank shall at any
     time receive  payment on any Loans directly or indirectly from any assets
     of the  Borrower  (including,  without  limitation,  through  exercise of
     setoff rights under Section 8.3 hereof) or the maker of any Employee Note
     in a  greater  amount  than the  proportionate  amount of  principal  and
     interest due it under this  Agreement,  then such Bank shall purchase for
     cash  (immediately  prior  to  such  payment,  if  necessary)  a  ratable
     proportion of the Revolving Credit Loans or the amounts outstanding under
     Employee  Loan  Participations  held by the other  Banks,  including  the
     Agent,  so that all  recoveries of principal and interest shall be shared
     by the Banks in  accordance  with  their  Ratable  Shares.  If all or any
     portion of such excess  payment is thereafter  recovered  from such Bank,
     such purchase  shall be rescinded and the purchase  price restored to the
     extent of such recovery, but without interest.

          (b) APPLICATION OF COLLECTIONS  PRIOR TO EVENT OF DEFAULT.  Prior to
     the occurrence and  continuance of an Event of Default  hereunder or of a
     default under an Employee Note, the Agent shall apply all  Collections to
     the  payment  of  costs  or  expenses,   interest,  fees,  and  principal
     attributable to the Notes to which the Collections  apply, in that order.
     After the occurrence and continuance of any Event of Default hereunder or
     a default under an Employee Note, all such applications  shall be made in
     accordance  with the terms of clause  (c)  immediately  below.  The Agent
     shall remit to the Banks in immediately  available  funds,  or retain for
     its own account,  as applicable:  (i) out of the principal portion of any
     such  Collections,  each Bank's,  including  the Agent's,  Ratable  Share
     thereof;  (ii)  out of the fees  portion  of any  such  Collections  each
     Bank's,  including the Agent's,  Ratable Share thereof;  (iii) out of the
     interest  portion of any such  Collections,  each Bank's,  including  the
     Agent's,  Ratable  Share  thereof;  and (iv) out of the costs or expenses
     portion of any such  Collections,  each  Bank's,  including  the Agent's,
     costs or  expenses,  pursuant to Section 10.6  hereof,  as incurred.  All
     remittances of principal, interest, fees, and costs or expenses hereunder
     to each of the other Banks shall be made as soon as  practicable,  but in
     no instance  later than the Business Day of their receipt by the Agent in
     immediately  available  funds, if such receipt occurs no later than 12:00
     noon  Charlotte,  North  Carolina time, or the next Business Day, if such

<PAGE>

     receipt occurs later than 12:00 noon, and all such  remittances  shall be
     effected by the Agent's  initiating wire transfers or by such other means
     as are  agreed  in  writing  by both  the  Agent  and such  Bank.  Unless
     otherwise dictated by a court of competent jurisdiction, the Agent shall,
     however,  have no  obligation  to pay any Bank any amounts  except out of
     those amounts actually received in collected funds for application to the
     Obligations,  except as  otherwise  specifically  provided  in clause (c)
     immediately below.

          (c)   APPLICATION   OF   COLLECTIONS   AFTER   EVENT   OF   DEFAULT.
     Notwithstanding  any other  provisions  of this Credit  Agreement  to the
     contrary,  after the occurrence and during the continuance of an Event of
     Default,  all amounts  collected  or received by the Agent or any Bank in
     connection  with the Loans or the Notes or on account of the  Obligations
     or any other amounts  outstanding under any of the Credit Documents shall
     be paid over or delivered as follows:

          FIRST,  to the  payment of all  reasonable  out-of-pocket  costs and
     expenses (including without limitation reasonable attorneys' fees) of the
     Agent in  connection  with  enforcing  the rights of the Banks  under the
     Credit Documents;

          SECOND, to payment of any fees owed to the Agent;

          THIRD,  to the  payment of all  reasonable  out-of-pocket  costs and
     expenses  (including without limitation,  reasonable  attorneys' fees) of
     each of the Banks in  connection  with  enforcing  its  rights  under the
     Credit  Documents or otherwise with respect to the  Obligations  owing to
     such Bank;

          FOURTH,  to the  payment of all accrued  interest  and fees on or in
     respect of the Obligations;

          FIFTH,  to the payment of the  outstanding  principal  amount of the
     Obligations  (including  the  payment  or cash  collateralization  of the
     outstanding LOC Obligations);

          SIXTH, to all other  Obligations and other  obligations  which shall
     have become due and payable  under the Credit  Documents or otherwise and
     not repaid pursuant to clauses "FIRST" through "FIFTH" above; and

          SEVENTH,  to the payment of the  surplus,  if any, to whoever may be
     lawfully entitled to receive such surplus.

In carrying out the  foregoing,  (i) amounts  received shall be applied in the
numerical  order  provided  until  exhausted  prior to application to the next
succeeding category;  and (ii) each of the Banks shall receive an amount equal
to its pro rata  share  (based  on the  proportion  that the then  outstanding
Obligations  held  by  such  Bank  bears  to the  aggregate  then  outstanding
Obligations) of amounts  available to be applied  pursuant to clauses "THIRD",
"FOURTH",  "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts
available for  distribution  pursuant to clause "FIFTH" above are attributable
to the issued  but  undrawn  amount of  outstanding  Letters  of Credit,  such
amounts  shall be held by the Agent in a cash  collateral  account and applied
(A) first,  to reimburse the Issuing Bank for any drawings  under such Letters

<PAGE>

of Credit and (B) then,  following the expiration of all Letters of Credit, to
all other  obligations of the types  described in clauses  "FIFTH" and "SIXTH"
above in the manner provided in this Section 2.11(c).

     Section 2.12. CAPITAL ADEQUACY.

     If, after the date hereof,  any Bank has determined  that the adoption or
the becoming effective of, or any change in, or any change by any Governmental
Authority,  central bank or comparable agency charged with the  interpretation
or administration  thereof in the  interpretation  or  administration  of, any
applicable law, rule or regulation  regarding capital adequacy,  or compliance
by such Bank with any request or directive regarding capital adequacy (whether
or not  having  the  force  of law) of any  such  authority,  central  bank or
comparable agency, has or would have the effect of reducing the rate of return
on such  Bank's  capital  or assets as a  consequence  of its  commitments  or
obligations  hereunder  to a level  below  that  which  such Bank  could  have
achieved but for such adoption,  effectiveness,  change or compliance  (taking
into  consideration  such Bank's  policies with respect to capital  adequacy),
then,  upon  notice  from such Bank to the  Borrower,  the  Borrower  shall be
obligated  to pay to such  Bank such  additional  amount  or  amounts  as will
compensate such Bank for such reduction.  Each  determination by any such Bank
of  amounts  owing  under  this  Section  shall,  absent  manifest  error,  be
conclusive and binding on the parties hereto.

     Section 2.13. INABILITY TO DETERMINE INTEREST RATE.

     If prior to the first day of any  Interest  Period,  the Agent shall have
determined  (which  determination  shall be  conclusive  and binding  upon the
Borrower,  absent manifest error) that, by reason of  circumstances  affecting
the  relevant  market,   adequate  and  reasonable  means  do  not  exist  for
ascertaining  the Eurodollar  Rate for such Interest  Period,  the Agent shall
give  telecopy or telephonic  notice  thereof to the Borrower and the Banks as
soon as  practicable  thereafter.  If such notice is given (x) any  Eurodollar
Loans  requested to be made on the first day of such Interest  Period shall be
made as Base Rate Loans, (y) any Revolving Credit Loans that were to have been
converted  on the  first  day of  such  Interest  Period  to or  continued  as
Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z)
any outstanding Eurodollar Loans shall be converted,  on the first day of such
Interest Period,  to Base Rate Loans.  Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made or continued as such, nor
shall the  Borrower  have the right to convert  Base Rate Loans to  Eurodollar
Loans.

     Section 2.14. ILLEGALITY.

     Notwithstanding  any other  provision  herein,  if the adoption of or any
change  in any  Requirement  of Law or in the  interpretation  or  application
thereof  occurring  after the Closing Date shall make it unlawful for any Bank
to make or maintain Eurodollar Loans as contemplated by this Credit Agreement,
(a) such Bank shall promptly give written notice of such  circumstances to the
Borrower  and the  Agent  (which  notice  shall  be  withdrawn  whenever  such
circumstances  no longer exist),  (b) the commitment of such Bank hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate
Loans to Eurodollar  Loans shall forthwith be canceled and, until such time as
it shall no longer be unlawful  for such Bank to make or  maintain  Eurodollar

<PAGE>

Loans,  such Bank shall then have a  commitment  only to make a Base Rate Loan
when a Eurodollar Loan is requested and (c) such Bank's Loans then outstanding
as Eurodollar  Loans,  if any, shall be converted  automatically  to Base Rate
Loans on the respective  last days or the then current  Interest  Periods with
respect to such Loans or within such earlier period as required by law. If any
such conversion of a Eurodollar Loan occurs on a day which is not the last day
of the then current Interest Period with respect  thereto,  the Borrower shall
pay to such Bank such amounts,  if any, as may be required pursuant to Section
2.17.

     Section 2.15. REQUIREMENTS OF LAW.

     If the  adoption  of or any  change in any  Requirement  of Law or in the
interpretation or application thereof applicable to any Bank, or compliance by
any Bank with any  request or  directive  (whether  or not having the force of
law) from any central bank or other Governmental  Authority, in each case made
subsequent  to the  Closing  Date (or,  if later,  the date on which such Bank
becomes a Bank):

          (a) shall subject such Bank to any tax of any kind  whatsoever  with
     respect to any Letter of Credit or any Eurodollar Loans made by it or its
     obligation to make  Eurodollar  Loans, or change the basis of taxation of
     payments to such Bank in respect thereof (except for  Non-Excluded  Taxes
     covered by Section 2.16 (including  Non-Excluded  Taxes imposed solely by
     reason of any failure of such Bank to comply with its  obligations  under
     Section  2.16) and  changes  in taxes  measured  by or  imposed  upon the
     overall net income,  or franchise tax (imposed in lieu of such net income
     tax),  of such Bank or its  applicable  lending  office,  branch,  or any
     affiliate thereof);

          (b) shall impose,  modify or hold  applicable  any reserve,  special
     deposit,  compulsory loan or similar  requirement against assets held by,
     deposits or other  liabilities in or for the account of, advances,  loans
     or other  extensions of credit by, or any other  acquisition of funds by,
     any  office  of  such  Bank  which  is  not  otherwise  included  in  the
     determination of the Eurodollar Rate hereunder; or

          (c) shall impose on such Bank any other condition (excluding any tax
     of any kind whatsoever);

     and the result of any of the  foregoing  is to increase  the cost to such
     Bank,  by an amount  which  such Bank  deems to be  material,  of making,
     converting into, continuing or maintaining  Eurodollar Loans or to reduce
     any amount  receivable  hereunder in respect  thereof,  then, in any such
     case,  upon notice to the Borrower from such Bank,  through the Agent, in
     accordance herewith, the Borrower shall be obligated to promptly pay such
     Bank,  upon its demand,  any additional  amounts  necessary to compensate
     such Bank for such increased cost or reduced amount receivable,  PROVIDED
     that, in any such case,  the Borrower may elect to convert the Eurodollar
     Loans made by such Bank  hereunder to Base Rate Loans by giving the Agent
     at least one Business  Day's notice of such  election,  in which case the
     Borrower  shall  promptly  pay  to  such  Bank,   upon  demand,   without
     duplication, such amounts, if any, as may be required pursuant to Section
     2.17.  If any Bank  becomes  entitled  to claim  any  additional  amounts
     pursuant to this  subsection,  it shall provide  prompt notice thereof to

<PAGE>

     the Borrower,  through the Agent,  certifying  (x) that one of the events
     described in this paragraph (a) has occurred and describing in reasonable
     detail the nature of such event,  (y) as to the increased cost or reduced
     amount  resulting  from such  event and (z) as to the  additional  amount
     demanded  by such  Bank  and a  reasonably  detailed  explanation  of the
     calculation  thereof.  Such a certificate  as to any  additional  amounts
     payable pursuant to this subsection  submitted by such Bank,  through the
     Agent,  to the Borrower  shall be  conclusive  and binding on the parties
     hereto in the absence of manifest error.  This covenant shall survive the
     termination  of this Agreement and the payment of the Loans and all other
     amounts payable hereunder.

     Section 2.16......Taxes.

          (a) Except as provided below in this  subsection,  all payments made
     by the  Borrower on behalf of itself or on behalf of any other  Person in
     connection  with the Employee Loans under this  Agreement,  the Revolving
     Credit Notes and the Employee  Notes shall be made free and clear of, and
     without  deduction  or  withholding  for or on account of, any present or
     future income, stamp or other taxes, levies,  imposts,  duties,  charges,
     fees,  deductions  or  withholdings,  now or hereafter  imposed,  levied,
     collected,  withheld  or  assessed by any court,  or  governmental  body,
     agency or other official, excluding taxes measured by or imposed upon the
     overall net income of any Bank or its applicable  lending office,  or any
     branch or affiliate thereof, and all franchise taxes, branch taxes, taxes
     on doing  business  or taxes on the  overall  capital or net worth of any
     Bank  or its  applicable  lending  office,  or any  branch  or  affiliate
     thereof, in each case imposed in lieu of net income taxes,  imposed:  (i)
     by the jurisdiction under the laws of which such Bank, applicable lending
     office,  branch or affiliate is organized or is located,  or in which its
     principal  executive  office is located,  or any nation within which such
     jurisdiction is located or any political  subdivision thereof; or (ii) by
     reason of any connection  between the jurisdiction  imposing such tax and
     such Bank,  applicable  lending office,  branch or affiliate other than a
     connection  arising solely from such Bank having  executed,  delivered or
     performed its obligations,  or received  payment under or enforced,  this
     Agreement.  If any such  non-excluded  taxes,  levies,  imposts,  duties,
     charges,  fees,  deductions or  withholdings  ("NON-EXCLUDED  TAXES") are
     required to be withheld from any amounts payable to the Agent or any Bank
     hereunder,  (A) the amounts so payable to the Agent or such Bank shall be
     increased  to the  extent  necessary  to yield to the  Agent or such Bank
     (after  payment of all  Non-Excluded  Taxes)  interest  or any such other
     amounts  payable  hereunder  at the rates or in the amounts  specified in
     this Agreement, PROVIDED, HOWEVER, that the Borrower shall be entitled to
     deduct and withhold any  Non-Excluded  Taxes and shall not be required to
     increase any such amounts payable to any Bank that is not organized under
     the laws of the United  States of America or a state thereof if such Bank
     fails to comply with the requirements of paragraph (b) of this subsection
     whenever any Non-Excluded  Taxes are payable by the Borrower,  and (B) as
     promptly as possible  thereafter the Borrower shall send to the Agent for
     its own  account or for the  account of such Bank,  as the case may be, a
     certified copy of an original  official  receipt received by the Borrower
     showing payment  thereof.  If the Borrower fails to pay any  Non-Excluded
     Taxes when due to the  appropriate  taxing  authority or fail to remit to
     the Agent the required receipts or other required  documentary  evidence,
     the Borrower shall  indemnify the Agent and the Banks for any incremental

<PAGE>

     taxes,  interest or penalties that may become payable by the Agent or any
     Bank as a result of any such failure.  The agreements in this  subsection
     shall survive the  termination  of this  Agreement and the payment of the
     Loans and all other amounts payable hereunder.

          (b) Each Bank that is not incorporated  under the laws of the United
     States of America or a state thereof shall:

               (X) (i) on or before the date of any  payment  by the  Borrower
          under this  Agreement to such Bank,  deliver to the Borrower and the
          Agent (A) two (2) duly  completed  copies of United States  Internal
          Revenue Service Form 1001 or 4224, or successor  applicable form, as
          the case may be,  certifying that it is entitled to receive payments
          under this Agreement  without deduction or withholding of any United
          States federal income taxes and (B) an Internal Revenue Service Form
          W-8 or W-9,  or  successor  applicable  form,  as the  case  may be,
          certifying  that it is entitled to an exemption  from United  States
          backup withholding tax;

               (ii)  deliver  to the  Borrower  and the Agent two (2)  further
          copies of any such form or  certification on or before the date that
          any such form or certification expires or becomes obsolete and after
          the  occurrence  of any event  requiring a change in the most recent
          form previously delivered by it to the Borrower; and

               (iii)  obtain such  extensions  of time for filing and complete
          such forms or  certifications  as may reasonably be requested by the
          Borrower or the Agent; or

               (Y) in the case of any such  Bank  that is not a "bank"  within
          the meaning of Section  881(c)(3)(A)  of the Internal  Revenue Code,
          (i)  represent to the Borrower  (for the benefit of the Borrower and
          the  Agent)  that it is not a bank  within  the  meaning  of Section
          881(c)(3)(A) of the Internal  Revenue Code, (ii) agree to furnish to
          the  Borrower on or before the date of any payment by the  Borrower,
          with a copy to the  Agent two (2)  accurate  and  complete  original
          signed  copies of Internal  Revenue  Service  Form W-8, or successor
          applicable form  certifying to such Bank's legal  entitlement at the
          date of such  certificate to an exemption from U.S.  withholding tax
          under the provisions of Section 881(c) of the Internal  Revenue Code
          with  respect to  payments to be made under this  Agreement  (and to
          deliver to the Borrower and the Agent two (2) further copies of such
          form on or before the date it expires or becomes  obsolete and after
          the occurrence of any event  requiring a change in the most recently
          provided  form and,  if  necessary,  obtain any  extensions  of time
          reasonably  requested  by the  Borrower  or the Agent for filing and
          completing  such  forms),  and (iii)  agree,  to the extent  legally
          entitled  to do so,  upon  reasonable  request by the  Borrower,  to
          provide to the  Borrower  (for the benefit of the  Borrower  and the
          Agent)  such other forms as may be  reasonably  required in order to
          establish the legal  entitlement  of such Bank to an exemption  from
          withholding with respect to payments under this Agreement;

<PAGE>

          unless in any such case any change in treaty,  law or regulation has
          occurred after the date such Person  becomes a Bank hereunder  which
          renders all such forms inapplicable or which would prevent such Bank
          from duly completing and delivering any such form with respect to it
          and such Bank so advises  the  Borrower  and the Agent.  Each Person
          that shall  become a Bank or a  participant  of a Bank  pursuant  to
          Section 10.2 shall,  upon the effectiveness of the related transfer,
          be  required  to  provide  all  of  the  forms,  certifications  and
          statements  required  pursuant to this subsection,  PROVIDED that in
          the  case  of a  participant  of a  Bank  the  obligations  of  such
          participant  of a Bank  pursuant  to this  subsection  (b)  shall be
          determined as if the  participant  of a Bank were a Bank except that
          such  participant  of a Bank shall furnish all such required  forms,
          certifications  and  statements  to the Bank from which the  related
          participation shall have been purchased.

     Section 2.17. INDEMNITY.

     The  Borrower  promises  to  indemnify  each  Bank and to hold  each Bank
harmless  from any loss or expense which such Bank may sustain or incur (other
than  through  such  Bank's  gross  negligence  or  willful  misconduct)  as a
consequence  of  (a)  default  by the  Borrower  in  making  a  borrowing  of,
conversion  into or  continuation  of Eurodollar  Loans after the Borrower has
given a notice  requesting the same in accordance  with the provisions of this
Agreement,  (b)  default  by  the  Borrower  in  making  any  prepayment  of a
Eurodollar  Loan after the Borrower has given a notice  thereof in  accordance
with the  provisions  of this  Agreement or (c) the making of a prepayment  of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect  thereto.  With respect to Revolving  Credit Loans that are Eurodollar
Loans, such indemnification may include an amount equal to the excess, if any,
of (i) the  amount of  interest  which  would  have  accrued  on the amount so
prepaid, or not so borrowed,  converted or continued,  for the period from the
date of such  prepayment or of such failure to borrow,  convert or continue to
the last day of the applicable  Interest  Period (or, in the case of a failure
to borrow,  convert or continue, the Interest Period that would have commenced
on the date of such failure) in each case at the  applicable  rate of interest
for such  Eurodollar  Loans  provided  for  herein  (excluding,  however,  the
Applicable  Percentage  included  therein,  if any)  over  (ii) the  amount of
interest (as  reasonably  determined by such Bank) which would have accrued to
such Bank on such amount by placing  such  amount on deposit for a  comparable
period with leading banks in the interbank  Eurodollar  market.  This covenant
shall survive the  termination  of this Agreement and the payment of the Loans
and all other amounts payable hereunder.


                             ARTICLE III. GUARANTY

     Section 3.1. THE GUARANTEE.

     Each of the Guarantors  hereby  jointly and severally  guarantees to each
Bank, to each Affiliate of a Bank that enters into an Interest Rate Protection
Agreement and to the Agent as  hereinafter  provided the prompt payment of the
Subsidiary  Guaranteed  Obligations  in  full  when  due  (whether  at  stated
maturity,  as a  mandatory  prepayment,  by  acceleration,  a  mandatory  cash
collateralization or otherwise) strictly in accordance with the terms thereof.

<PAGE>

The Guarantors  hereby further agree that if any of the Subsidiary  Guaranteed
Obligations  are not paid in full when due (whether at stated  maturity,  as a
mandatory prepayment, by acceleration,  as mandatory cash collateralization or
otherwise), the Guarantors will, jointly and severally, promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Subsidiary Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
as a mandatory  prepayment,  by  acceleration or otherwise) in accordance with
the terms of such extension or renewal.

     Notwithstanding  any provision to the contrary contained herein or in any
other of the Credit Documents or Interest Rate Protection  Agreements,  to the
extent the  obligations  of a Guarantor  shall be adjudicated to be invalid or
unenforceable for any reason (including,  without  limitation,  because of any
applicable  state  or  federal  law  relating  to  fraudulent  conveyances  or
transfers) then the  obligations of each Guarantor  hereunder shall be limited
to the maximum  amount  that is  permissible  under  applicable  law  (whether
federal or state and including,  without  limitation,  the Federal  Bankruptcy
Code).

     Section 3.2. OBLIGATIONS UNCONDITIONAL.

     The obligations of the Guarantors  under Section 3.1 hereof are joint and
several,  absolute and unconditional,  irrespective of the value, genuineness,
validity,  regularity  or  enforceability  of any of the Credit  Documents  or
Interest  Rate  Protection  Agreements,  or any other  agreement or instrument
referred to  therein,  or any  substitution,  release or exchange of any other
guarantee of or security  for any of the  Subsidiary  Guaranteed  Obligations,
and, to the fullest extent  permitted by applicable  law,  irrespective of any
other  circumstance  whatsoever  which might  otherwise  constitute a legal or
equitable  discharge or defense of a surety or Guarantor,  it being the intent
of this Section 3.2 that the obligations of the Guarantors  hereunder shall be
absolute and  unconditional  under any and all  circumstances.  Each Guarantor
agrees  that such  Guarantor  shall have no right of  subrogation,  indemnity,
reimbursement  or contribution  against the Borrower or any other Guarantor of
the Subsidiary  Guaranteed  Obligations  for amounts paid under this Section 3
until  such time as the  Banks  (and any  Affiliates  of Banks  entering  into
Interest Rate  Protection  Agreements)  have been paid in full,  the Revolving
Credit  Commitment  under this Credit  Agreement  have been  terminated and no
Person or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Banks in connection with monies received under
the Credit Documents or Interest Rate Protection Agreements.  Without limiting
the  generality of the  foregoing,  it is agreed that,  to the fullest  extent
permitted by law, the occurrence of any one or more of the following shall not
alter or impair the  liability of any Guarantor  hereunder  which shall remain
absolute and unconditional as described above:

          (i) at any  time  or  from  time  to  time,  without  notice  to any
     Guarantor,  the time for any performance of or compliance with any of the
     Subsidiary Guaranteed  Obligations shall be extended, or such performance
     or compliance shall be waived;

          (ii) any of the acts  mentioned in any of the  provisions  of any of
     the Credit Documents, any Interest Rate Protection Agreement or any other
     agreement or instrument  referred to in the Credit  Documents or Interest
     Rate Protection Agreements shall be done or omitted;

<PAGE>

          (iii) the maturity of any of the Subsidiary  Guaranteed  Obligations
     shall be  accelerated,  or any of the Subsidiary  Guaranteed  Obligations
     shall be modified,  supplemented or amended in any respect,  or any right
     under any of the Credit Documents, any Interest Rate Protection Agreement
     or any other agreement or instrument  referred to in the Credit Documents
     or  Interest  Rate  Protection  Agreements  shall be  waived or any other
     guarantee of any of the Subsidiary Guaranteed Obligations or any security
     therefor  shall be released or exchanged in whole or in part or otherwise
     dealt with;

          (iv) any Lien  granted  to, or in favor of, the Agent or any Bank or
     Banks as security for any of the Subsidiary Guaranteed  Obligations shall
     fail to attach or be perfected; or

          (v) any of the Subsidiary Guaranteed Obligations shall be determined
     to be void or voidable (including, without limitation, for the benefit of
     any creditor of any Guarantor) or shall be  subordinated to the claims of
     any  Person  (including,   without   limitation,   any  creditor  of  any
     Guarantor).

With respect to its obligations  hereunder,  each Guarantor  hereby  expressly
waives  diligence,  presentment,  demand of  payment,  protest and all notices
whatsoever,  and any requirement that the Agent or any Bank exhaust any right,
power or  remedy  or  proceed  against  any  Person  under  any of the  Credit
Documents,  any Interest Rate  Protection  Agreement or any other agreement or
instrument  referred to in the Credit  Documents or Interest  Rate  Protection
Agreements,  or against  any other  Person  under any other  guarantee  of, or
security for, any of the Subsidiary Guaranteed Obligations.

     Section 3.3. REINSTATEMENT.

     The  obligations  of  the  Guarantors  under  this  Section  3  shall  be
automatically  reinstated if and to the extent that for any reason any payment
by or on  behalf  of  any  Person  in  respect  of the  Subsidiary  Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Subsidiary Guaranteed Obligations,  whether as a result of any proceedings
in bankruptcy or reorganization  or otherwise,  and each Guarantor agrees that
it will indemnify the Agent and each Bank on demand for all  reasonable  costs
and expenses  (including,  without  limitation,  fees and expenses of counsel)
incurred  by the Agent or such Bank in  connection  with  such  rescission  or
restoration,  including  any such costs and  expenses  incurred  in  defending
against  any  claim  alleging  that such  payment  constituted  a  preference,
fraudulent  transfer or similar  payment under any  bankruptcy,  insolvency or
similar law.

     Section 3.4. CERTAIN ADDITIONAL WAIVERS.

     Without limiting the generality of the provisions of this Section 3, each
Guarantor hereby  specifically  waives the benefits of N.C. Gen. Stat. SS 26-7
through 26-9,  inclusive.  Each  Guarantor  further agrees that such Guarantor
shall have no right of  recourse  to security  for the  Subsidiary  Guaranteed
Obligations, except through the exercise of the rights of subrogation pursuant
to Section 3.2.

<PAGE>

     Section 3.5. REMEDIES.

     The  Guarantors  agree that, to the fullest  extent  permitted by law, as
between the  Guarantors,  on the one hand, and the Agent and the Banks, on the
other  hand,  the  Subsidiary  Guaranteed  Obligations  may be  declared to be
forthwith  due and  payable as  provided  in Section  8.2 hereof (and shall be
deemed to have  become  automatically  due and  payable  in the  circumstances
provided   in  said   Section   8.2)  for   purposes  of  Section  3.1  hereof
notwithstanding  any stay,  injunction or other  prohibition  preventing  such
declaration (or preventing the Subsidiary Guaranteed Obligations from becoming
automatically  due and payable) as against any other  Person and that,  in the
event of such  declaration  (or the Subsidiary  Guaranteed  Obligations  being
deemed  to  have  become  automatically  due  and  payable),   the  Subsidiary
Guaranteed  Obligations  (whether or not due and payable by any other  Person)
shall forthwith  become due and payable by the Guarantors for purposes of said
Section 3.1.

     Section 3.6. RIGHTS OF CONTRIBUTION.

     The Guarantors hereby agree, as among  themselves,  that if any Guarantor
shall  become an Excess  Funding  Guarantor  (as  defined  below),  each other
Guarantor  shall,  on demand of such Excess Funding  Guarantor (but subject to
the  succeeding  provisions of this Section 3.6),  pay to such Excess  Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined  below).  The payment  obligation  of any  Guarantor to any Excess
Funding  Guarantor  under this Section 3.6 shall be subordinate and subject in
right of  payment  to the prior  payment  in full of the  obligations  of such
Guarantor  under the  other  provisions  of this  Section  3, and such  Excess
Funding  Guarantor shall not exercise any right or remedy with respect to such
excess until payment and satisfaction in full of all of such obligations.  For
purposes hereof,  (i) "EXCESS FUNDING GUARANTOR" shall mean, in respect of any
obligations  arising under the other  provisions of this Section 3 (hereafter,
the "GUARANTEED  OBLIGATIONS"),  a Guarantor that has paid an amount in excess
of its Pro Rata Share of the  Guarantied  Obligations;  (ii) "EXCESS  PAYMENT"
shall mean, in respect of any  Guarantied  Obligations,  the amount paid by an
Excess  Funding  Guarantor in excess of its Pro Rata Share of such  Guarantied
Obligations; and (iii) "PRO RATA SHARE", for the purposes of this Section 3.6,
shall mean,  for any Guarantor,  the ratio  (expressed as a percentage) of (a)
the amount by which the aggregate  present fair  saleable  value of all of its
assets and properties  exceeds the amount of all debts and liabilities of such
Guarantor (including  contingent,  subordinated,  unmatured,  and unliquidated
liabilities, but excluding the obligations of such Guarantor hereunder) to (b)
the amount by which the aggregate  present fair  saleable  value of all assets
and other  properties  of the Borrower and all of the  Guarantors  exceeds the
amount   of  all  of  the  debts  and   liabilities   (including   contingent,
subordinated,  unmatured,  and  unliquidated  liabilities,  but  excluding the
obligations of the Borrower and the Guarantors  hereunder) of the Borrower and
all of the Guarantors,  all as of the Closing Date (if any Guarantor becomes a
party hereto  subsequent  to the Closing  Date,  then for the purposes of this
Section 3.6 such subsequent Guarantor shall be deemed to have been a Guarantor
as of the Closing Date and the information  pertaining to, and only pertaining
to, such Guarantor as of the date such Guarantor  became a Guarantor  shall be
deemed true as of the Closing Date).

<PAGE>

     Section 3.7. CONTINUING GUARANTEE.

     The  guarantee  in this Section 3 is a  continuing  guarantee,  and shall
apply to all Subsidiary Guaranteed Obligations whenever arising.


                  ARTICLE IV. REPRESENTATIONS AND WARRANTIES

     In order to induce the Agent and the Banks to enter into this  Agreement,
each Credit Party hereby  warrants and represents to the Agent and each of the
Banks,  as of the Closing  Date and as of the date of funding of each Loan and
the issuance of each Letter of Credit, as follows:

     Section 4.1. ORGANIZATION.

     Each member of the Consolidated Group is a corporation, limited liability
company or limited  partnership,  as the case may be, validly  existing and in
good standing under the laws of the jurisdiction of its organization,  is duly
qualified to do business in every  jurisdiction  where such  qualification  is
necessary  (except for jurisdictions the failure in which to qualify would not
reasonably  be  expected to have a Material  Adverse  Effect),  will  promptly
correct any failure to qualify upon receipt of notice of such failure, has the
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all necessary certificates, franchises, and licenses
(collectively  "LICENSES")  for the  operation  of the business in which it is
engaged,  except for  Licenses  the absence of which would not  reasonably  be
expected to have a Material Adverse Effect.

     Section 4.2. AUTHORIZATION.

          (a) The execution,  delivery and performance of the Credit Documents
     required to be delivered by each Credit Party

               (i) are within the organizational powers of such Credit Party;

               (ii) have been duly authorized by all necessary  organizational
          action of such Credit Party;

               (iii)  do  not  violate  any   provision  of  the  Articles  or
          Certificate  of  Incorporation  or Bylaws of such Credit Party or of
          any law or material rule, regulation (including, without limitation,
          Regulation   U),  order,   writ,   judgment,   injunction,   decree,
          determination or award presently in effect and having  applicability
          to such Credit Party;

               (iv) are not in conflict  with and do not result in a breach of
          or constitute a default under any material indenture, loan or credit
          agreement,  or any other material agreement,  lease or instrument to
          which such Credit Party is a party or by which it or its  properties
          may be bound or affected; and

<PAGE>

               (v) do not result in, or require the creation or imposition of,
          any mortgage,  deed of trust, pledge,  lien,  security,  interest or
          other  charge or  encumbrance  of any nature upon or with respect to
          any of the properties now owned or hereafter acquired by such Credit
          Party,  except for the encumbrances  granted or to be granted to the
          Agent,  for the  benefit  of the  Banks,  pursuant  to the  Security
          Agreement and the Credit Party Pledge Agreement.

          (b) Except as listed on SCHEDULE 2, each member of the  Consolidated
     Group is in compliance  with all  applicable  laws,  rules,  regulations,
     writs, judgments, orders, injunctions,  decrees, determinations or awards
     applicable to it and is not  materially  in default under any  indenture,
     agreement, lease or instrument, where such noncompliance or default would
     reasonably  be  expected  to have a  Material  Adverse  Effect  (the term
     "default"  as used  herein  includes  any Event of Default  or  Incipient
     Default, as defined in Sections 8.1 and 5.2(a), respectively).

     Section 4.3. VALIDITY.

     Each  Credit  Document  to which it is a party have been or shall be duly
executed and delivered by each Credit Party under the terms of this Agreement,
and, when so executed,  constitute the legal, valid and binding obligations of
such Credit Party, enforceable against such Credit Party and the Collateral in
accordance  with their  terms,  except as such  enforcement  may be limited by
applicable   bankruptcy,   reorganization,   or  similar  laws  affecting  the
enforceability  of  creditors'  rights in general  and  except  for  generally
applicable principles of equity (collectively, the "GENERAL EXCEPTIONS").

     Section 4.4. GOVERNMENTAL APPROVALS.

     No filing with or action or approval of any Governmental  Authority is or
will be required  under existing law in connection  with the valid  execution,
delivery or performance by each of the Credit Parties of the Credit  Documents
to which it is a party, or in connection with the validity and  enforceability
of the security  interests in the Collateral,  except as has been accomplished
or  obtained  and none of which has been or is  threatened  to be  rejected or
revoked,  and except for the filing of the financing statements required under
the Security Agreement.

     Section 4.5. LITIGATION.

     Except  as  identified  on  SCHEDULE  3,  there  are no  actions,  suits,
investigations or other proceedings pending or, to the knowledge of the Credit
Parties,  threatened against or affecting any member of the Consolidated Group
or any of their properties  before any court or Governmental  Authority which,
if  determined  adversely  to such  member of the  Consolidated  Group,  would
reasonably be expected to have a Material Adverse Effect.

     Section 4.6. FINANCIAL CONDITION.

          (a) The  financial  statements  delivered  to the Agent  pursuant to
     Section 5.1(k) fairly  present the financial  condition of the members of
     the Consolidated  Group, on a consolidated  basis, as of the dates stated
     therein,  and  the  results  of  the  operations  of the  members  of the
     Consolidated  Group, on a consolidated  basis, for the accounting periods

<PAGE>

     covered  therein;  except as stated on SCHEDULE 2, as of the Closing Date
     no member of the  Consolidated  Group has any material  contingent tax or
     other  liability  not  disclosed  by or  reserved  against in the balance
     sheets  delivered  as part of such  financial  statements;  there  are no
     material  unrealized  or  anticipated  losses from any  commitment of any
     member of the  Consolidated  Group; and since the date and period covered
     by such financial statements, there has been no circumstance, development
     or event which would  reasonably  be expected to have a Material  Adverse
     Effect.

          (b) As of the Closing  Date,  each Credit  Party had a positive  net
     worth of at least one dollar.

     Section 4.7. RECORDS, BUSINESS LOCATION AND SUBSIDIARIES.

     The chief executive office and principal place of business of each of the
Credit  Parties  and the office  where each of the  Credit  Parties  keeps its
corporate  and  accounting   records   (including   records  relating  to  the
Collateral)  is and, in the absence of 15 days'  prior  written  notice to the
Agent will remain,  located at (a) prior to October 27, 2000,  6707  Democracy
Blvd., Suite 800,  Bethesda,  Maryland 20817, and (b) on and after October 27,
2000, 1717 H Street,  NW, 8th Floor,  Washington,  DC 20006. The Subsidiaries,
including all Domestic and Foreign Subsidiaries, of each of the Credit Parties
are identified on SCHEDULE 1.

     Section 4.8. ERISA.

     With respect to any employee benefit plan for the benefit of employees of
any member of the Consolidated  Group ("PLAN") that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),  and regulations
issued  pursuant  to  ERISA,  the  members  of the  Consolidated  Group are in
compliance in all material  respects with the applicable  provisions of ERISA,
except  as  stated  in  SCHEDULE  2; no Plan  maintained  by a  member  of the
Consolidated  Group has  incurred  any  "accumulated  funding  deficiency"  as
defined in Section 302 of ERISA or Section 412 of the Internal  Revenue  Code;
no  Reportable  Event as  defined in  Section  4043(b) of ERISA that  requires
notification of the Pension Benefit Guaranty Corporation ("PBGC") has occurred
with respect to any Plan;  and no provision of this Agreement will result in a
Reportable Event or violation of ERISA.

     Section 4.9. ENCUMBRANCES.

     None of the  Collateral  is  subject to any Lien,  except  for  Permitted
     Liens.

     Section 4.10. MARGIN STOCK.

     The  Employee  Pledged  Shares  are not  "margin  stock"  as  defined  by
Regulation  U. No part of the proceeds of the Loans will be used,  directly or
indirectly,  for the  purpose of  purchasing  or carrying  any "margin  stock"
within the meaning of  Regulation  U. If requested by any Lender or the Agent,
the  Borrower  will  furnish to the Agent and each Lender a  statement  to the

<PAGE>

foregoing  effect in conformity with the  requirements of FR Form U-1 referred
to in  Regulation  U. None of the  transactions  contemplated  by this  Credit
Agreement  (including,  without limitation,  the direct or indirect use of the
proceeds of the Loans) will violate or result in a violation of the Securities
Act of 1933, as amended,  or the Securities  Exchange Act of 1934, as amended,
or regulations issued pursuant thereto, or Regulation T, U or X.

     Section 4.11. GOVERNMENTAL REGULATIONS.

     No member of the  Consolidated  Group is subject to regulation  under the
Public  Utility  Holding  Company Act of 1935,  the  Federal  Power Act or the
Investment Company Act of 1940, each as amended. In addition, no member of the
Consolidated Group is (i) an "investment company" registered or required to be
registered  under  the  Investment  Company  Act of 1940,  as  amended,  or is
controlled by such a company,  or (ii) a "holding  company",  or a "subsidiary
company" of a "holding  company",  or an "affiliate" of a "holding company" or
of a  "subsidiary"  of a "holding  company",  within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

     Section 4.12. TAXES.

     Each member of the Consolidated  Group has filed all United States income
tax returns and all state and  municipal  tax returns which are required to be
filed,  and has paid,  or made  provision  for the payment of, all taxes which
have  become due  pursuant  to said  returns  or  pursuant  to any  assessment
received  by it,  except such taxes,  if any, as are being  contested  in good
faith  and as to which  adequate  reserves  have  been  provided  or which the
failure to pay would not  reasonably  be expected  to have a Material  Adverse
Effect.

     Section 4.13. BURDENSOME DOCUMENTS.

     Except as identified on SCHEDULE 4, no member of the  Consolidated  Group
is a party  to or bound  by,  nor are any of their  respective  properties  or
operations   materially  affected  by,  any  agreement,   ordinance,   decree,
regulation, order, injunction, award or judgment that, to the actual knowledge
of the  Borrower's  Vice  President  and Chief  Financial  Officer  or General
Counsel, would reasonably be expected to have a Material Adverse Effect.

     Section 4.14. ENVIRONMENTAL MATTERS.

     No member of the  Consolidated  Group  owns any real  property  except as
listed  on  SCHEDULE  5.  Neither  the  Borrower's  Vice  President  and Chief
Financial  Officer nor its General Counsel has received any actual notice that
any property owned, leased or operated by any member of the Consolidated Group
has been  listed or  proposed  for  listing on the  National  Priorities  List
established by the United States  Environmental  Protection  Agency, or on any
other list developed or maintained by any federal, state or local governmental
entity and purporting to identify properties posing the threat of pollution or
contamination  due to the  presence of  hazardous  substances,  nor has either
received  notice  or  knowledge  of such  pollution  or  contamination  of any
property owned, leased, or operated by any member of the Consolidated Group.

<PAGE>

     Section 4.15. EMPLOYEE LOANS; STOCK PLAN; QUALIFIED EMPLOYEE STATUS.

     The  Borrower's  annual stock  purchase  plan for  employees  (the "STOCK
PLAN") and the Employee Loan program offered in connection therewith under the
terms and provisions of the Existing Credit Agreement,  this Agreement and the
Employee Notes (the "EMPLOYEE LOAN PROGRAM")  comply in all material  respects
with all  applicable  laws.  The  Borrower has  complied  with all  applicable
federal and state securities laws in its disclosure to the Qualified Employees
of the attendant  risks and burdens of purchasing the Borrower's  common stock
under the Stock Plan.  Each person  receiving an Employee Loan was at the time
of the making thereof,  permitted to own common stock in the Borrower pursuant
to the Borrower's Bylaws.

     Section 4.16. USE OF PROCEEDS.

     Letters of Credit and all proceeds of the Revolving Credit Loans shall be
used by the Borrower for working  capital,  capital  expenditures  and general
corporate purposes,  PROVIDED,  HOWEVER, that proceeds of the Revolving Credit
Loans shall not be used to make payments of principal, interest, or fees under
or in connection  with the Employee  Loans at any time that defaults under all
or substantially all of the Employee Notes have occurred and are continuing.

     Section 4.17. ACCURACY AND COMPLETENESS OF INFORMATION.

     All  factual  information  heretofore,   contemporaneously  or  hereafter
furnished by or on behalf of any member of the  Consolidated  Group in writing
to the Agent or any Bank for  purposes  of or in  connection  with this Credit
Agreement or any Credit Documents,  or any transaction  contemplated hereby or
thereby is or will be true and accurate in all  material  respects on the date
as of which such  information  is dated or  certified  and not  incomplete  by
omitting to state any material  fact  necessary to make such  information  not
misleading at such time. There is no fact now known to the President, CEO, any
Authorized  Financial  Officer  or the  General  Counsel  of any member of the
Consolidated  Group,  after due inquiry,  which has, or would have, a Material
Adverse  Effect which fact has not been set forth  herein,  in the  financials
statements   previously   delivered  to  the  Agent  and  the  Banks,  or  any
certificate,  opinion or other  written  statement  made or  furnished  by the
Borrower to the Agent.

     Section 4.18. EMPLOYEE LOAN BALANCE.

     As of the First  Amendment  Date,  the  aggregate  outstanding  principal
balance under the Employee Notes is $14,323,201.64.


                        ARTICLE V. CONDITIONS PRECEDENT

     Section 5.1. [RESERVED].

<PAGE>

     Section  5.2. CONDITIONS  PRECEDENT TO LOANS AND ISSUANCE OF LETTERS
OF CREDIT.

     (a) ALL LOANS AND  LETTERS OF CREDIT.  As a  condition  precedent  to the
funding of a Loan or the  issuance of a Letter of Credit  hereunder (a "CREDIT
EVENT"),  (i) there  shall  exist no Event of Default or event (an  "INCIPIENT
DEFAULT")  which,  with notice or lapse of time, or both,  would constitute an
Event of Default,  either immediately prior to, or after giving effect to such
Credit Event (ii) the Borrower  shall have complied with all of the conditions
stated in Section  5.1,  (iii) a Margin  Stock Event shall not have  occurred,
(iv) all  necessary  deliveries  and filings to perfect  the Agent's  security
interests  in the  Collateral  shall  have  been  accomplished,  and  (v)  the
representations  and  warranties of the Credit Parties set forth in Article IV
hereof  shall be true and correct as if made and  restated on the date of such
Credit Event.

     (b)  REVOLVING  CREDIT  LOANS.  As a further  condition  precedent to the
funding of a Revolving  Credit Loan,  the Borrower  shall  request a Revolving
Credit  Loan  borrowing  by  written  notice  (or  telephone  notice  promptly
confirmed in writing) to the Agent not later than 12:00 noon (Charlotte, North
Carolina  time) on the Business Day of the requested  borrowing in the case of
Base  Rate  Loans,  and on the  third  Business  Day  prior to the date of the
requested  borrowing in the case of Eurodollar  Loans. Each such request for a
borrowing (a "NOTICE OF BORROWING") shall be irrevocable and shall specify (A)
that a  Revolving  Credit  Loan is  requested,  (B) the date of the  requested
borrowing (which shall be a Business Day), (C) the aggregate  principal amount
to be borrowed,  and (D) whether the borrowing shall be comprised of Base Rate
Loans,  Eurodollar Loans or a combination thereof, and if Eurodollar Loans are
requested,  the Interest  Period(s)  therefor.  If the Borrower  shall fail to
specify in any such Notice of Borrowing (I) an applicable  Interest  Period in
the case of a  Eurodollar  Loan,  then  such  notice  shall be  deemed to be a
request for an  Interest  Period of one month,  or (II) the type of  Revolving
Credit Loan requested,  then such notice shall be deemed to be a request for a
Base Rate Loan hereunder.

     (c) FUNDING  OBLIGATIONS.  In no event shall the Agent or Bank of America
be required to fund any portion of the Loans requested  hereunder in an amount
in excess of the  actual  funds  received  from the Banks  (including  Bank of
America in its capacity as a Bank) pursuant to a Notice of Borrowing.


                       ARTICLE VI. AFFIRMATIVE COVENANTS

     Each of the Credit  Parties  covenants and agrees that,  until all of its
obligations under the Credit Documents have been satisfied in full (or waived)
and until the Revolving Credit Commitments have been terminated:

     Section 6.1. PAYMENTS HEREUNDER.

     Each Credit Party shall make all payments of principal,  interest,  fees,
and all other payments required  hereunder,  under the Revolving Credit Notes,
under the  Borrower  Guaranty and under any other  agreements  with any of the
Banks to which such Credit Party is party, as and when due.

<PAGE>

     Section 6.2. EXISTENCE AND GOOD STANDING; INSURANCE; CONDUCT.

     Each  member of the  Consolidated  Group shall do or cause to be done all
things necessary, with respect to itself and each of its Subsidiaries,  (a) to
preserve  and keep in full  force and  effect its  existence,  employee  stock
plans,  rights,  licenses,   permits,  and  franchises  and  comply  with  all
applicable laws and all rules,  regulations  and orders of federal,  state and
local regulatory  bodies having  jurisdiction  applicable to it except for any
noncompliance  with which  would  reasonably  be  expected  to have a Material
Adverse Effect;  (b) to maintain and protect its material assets or properties
used or useful in the conduct of its operations in a prudent manner including,
without  limitation,  the  maintenance at all times of such insurance upon its
insurable  properties,  operations  and  professional  services with reputable
insurers as would be prudent for companies in the same or similar  business as
such  member of the  Consolidated  Group;  (c) to conduct its  operations  and
continue the conduct of its  business  without any  substantial  change in the
general  nature  of such  operations  or  business  from that in effect on the
Closing  Date;  and (d) to keep proper  books of records and accounts in which
full, true and correct entries in conformity with GAAP and Requirements of Law
shall be made of all dealings and transactions in relation to its business and
activities.

     Section 6.3. TAXES AND CHARGES.

     Each member of the Consolidated  Group shall, and shall cause each of its
Subsidiaries to, timely file returns and pay and discharge all material taxes,
assessments and  governmental  fees,  charges or levies imposed upon it or its
income or profits or upon its properties or any part thereof,  before the same
shall be in default,  as well as all lawful  claims  which,  if unpaid,  might
become a lien or charge upon such  properties or any part  thereof;  PROVIDED,
HOWEVER, that no member of the Consolidated Group shall be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity or amount  thereof shall be contested in
good  faith  by  appropriate  proceedings  and the  applicable  member  of the
Consolidated  Group  shall  have set  aside  on its  books  adequate  reserves
therefor.

     Section 6.4. FINANCIAL STATEMENTS.

     The Borrower  shall deliver or cause to be delivered to the Agent and the
     Banks,

          (a)  within  120  days  after  the  end of each  fiscal  year of the
     Consolidated   Group,  (i)  the  annual   financial   statements  of  the
     Consolidated Group, on a consolidated  basis,  containing a balance sheet
     as at the end of such fiscal year and  statements of income,  cash flows,
     and changes in  stockholders'  equity for such fiscal  year,  prepared in
     accordance with GAAP,  certified as to fair and complete  presentation by
     an Authorized Financial Officer and certified by independent  accountants
     of recognized  standing  acceptable to the Agent, which accountants shall
     also include an opinion  stating that their  examination of the financial
     statements was conducted in accordance with generally  accepted  auditing
     standards and, if they have prepared a management letter as part of their
     responsibilities  to the  Consolidated  Group, a copy of such  management
     letter  promptly upon completion of such letter;  and (ii)  calculations,

<PAGE>

     reviewed and certified by an Authorized  Financial  Officer,  showing the
     Credit  Parties'  compliance  with  the  applicable  financial  standards
     contained in Section 7.6;

          (b) within 50 days after the end of each of the first three quarters
     of each fiscal year of the  Consolidated  Group  (except  with respect to
     item (b)(ii)  below,  which shall be required to be  delivered  within 50
     days  after  the end of each of the  second  and third  quarters  of each
     fiscal year of the Borrower only) (i) a balance sheet of the Consolidated
     Group and related  statements of income,  cash flow,  and net worth,  all
     prepared on a  consolidated  basis and in accordance  with GAAP,  and all
     certified as to fair and complete presentation by an Authorized Financial
     Officer  as of the  close of and for such  period;  (ii) a  statement  of
     projected  net worth and  income,  prepared on a  consolidated  basis and
     certified as to fair and complete presentation by an Authorized Financial
     Officer of the Borrower for the Consolidated  Group's then-current fiscal
     year;  and (iii)  calculations,  reviewed and  certified by an Authorized
     Financial Officer,  showing the Borrower's compliance with the applicable
     financial standards contained in Section 7.6 hereof;

          (c) no later than 120 days  after the  commencement  of each  fiscal
     year of the  Consolidated  Group,  a projected  balance  sheet and income
     statement for such fiscal year, on a consolidated basis;

          (d)  concurrently  with the  delivery  of the  financial  statements
     referred to in Sections 6.4(a) and 6.4(b), a certificate as to the Credit
     Parties'  compliance  with clause (viii) of the  definition of "Permitted
     Investments"  and  specifying  the aggregate  balance (i) credited to all
     Separation Allowance Accounts and (ii) the aggregate balance of Permitted
     CSAP Loans, reviewed and certified by an Authorized Financial Officer;

          (e)  upon the  written  request  of the  Agent  and with  reasonable
     notice,  such other  financial  statements  and  reports as the Agent may
     reasonably deem necessary to provide current financial information; and

          (f) concurrently  with the delivery of the financial  statements and
     calculations  required  under  subsections  (a)-(f)  of this  Section,  a
     certificate of an Authorized  Financial  Officer  certifying the fair and
     complete  presentation  of the data and  information  used in making  the
     calculations and stating that such annual financial  statements have been
     prepared  in  accordance  with  GAAP and that  there  exists  no Event of
     Default or Incipient Default hereunder.

     Section 6.5. REPORTS.

     Each Credit Party shall deliver to the Agent and the Banks:

          (a) as soon as reasonably  possible,  and, in any event, within five
     Business Days after the Credit Party receives notice or knowledge thereof
     or learns  facts  which  would  lead a  reasonable  Person  to  undertake
     diligent inquiry,  a report or statement  executed by a senior officer of
     the Credit Party with  respect to (i) the  occurrence  of any  Reportable
     Event as  defined  by ERISA  and  regulations  thereunder  that  requires

<PAGE>

     notification  to the PBGC, (ii) the occurrence of any Event of Default or
     Incipient  Default or the  material  failure  to  observe or perform  any
     covenant set forth herein or in any other agreement with any of the Banks
     to which any member of the Consolidated  Group is a party, and any action
     taken or contemplated with respect thereto,  and (iii) (A) any pending or
     threatened  litigation or  administrative  proceedings or  investigations
     against or  affecting  any member of the  Consolidated  Group  which,  if
     determined  adversely  to such member of the  Consolidated  Group,  would
     reasonably  be expected to have a Material  Adverse  Effect,  and (B) any
     reserves  set  aside  or  to  be  set  aside  in  connection   with  such
     proceedings, in accordance with GAAP; and

          (b)  such  other  reports  as the  Agent  may,  from  time to  time,
     reasonably request in writing from the Borrower.

     Section 6.6. LOAN BALANCES.

     The aggregate  outstanding  principal  balance under the Revolving Credit
Notes,  PLUS LOC Obligations  will, at no time,  exceed an amount equal to the
Aggregate Revolving Credit Commitment.

     Section 6.7. POSITIVE NET WORTH.

     Each Credit Party shall  maintain at all times a positive net worth of at
     least one dollar.

     Section 6.8. BORROWER GUARANTY.

     All Employee  Loans shall be  unconditionally  guaranteed by the Borrower
under a guaranty in the form of Exhibit C in the full  amount of the  Employee
Loans (the "Borrower Guaranty").

     Section 6.9. EMPLOYEE PLEDGE AGREEMENTS; EMPLOYEE PLEDGED SHARES.

     (a)  EMPLOYEE  PLEDGE  AGREEMENTS.  The  common  stock  of  the  Borrower
purchased or refinanced with the proceeds of the Employee Loans and all common
stock of the  Parent  issued in  exchange  therefor  or  otherwise  in respect
thereof (the  "EMPLOYEE  PLEDGED  SHARES") shall be pledged to Bank of America
and the Banks, to the extent of their participations, by the purchasers of the
Employee Pledged Shares pursuant to stock pledge letter agreements  ("EMPLOYEE
PLEDGE  AGREEMENTS")  substantially in the form of Exhibit D-1 (for individual
purchasers) or D-2 (for personal holding companies).

     (b)  DELIVERY  OF  STOCK  CERTIFICATES.  The  Borrower  shall  cause  all
certificates and any other  instruments or documents  evidencing  ownership of
Employee  Pledged  Shares,  if any, to be  delivered to Bank of America at the
address specified in Section 10.8 hereof, shall cause all such certificates to
be accompanied by executed assignments separate from the certificates in blank
in the form of EXHIBIT E hereto ("EMPLOYEE STOCK POWERS"), and shall cause the
following legend to be placed on all such certificates:

<PAGE>

          "In the event the shares  represented by this  certificate are sold,
     the purchaser may be required to remit the purchase price directly to the
     Company  to  be  applied  in  payment  of  certain  indebtedness  of  the
     registered  holder to Bank of  America,  N.A.,  as agent for  itself  and
     certain other banks."

     (c) BOOK ENTRIES.  With respect to any Employee Pledged Stock that is not
evidenced by any  certificates or other  instruments or documents,  the Parent
shall (i) mark its books and records to reflect the security  interest granted
to the Agent in the Employee  Pledged  Stock and (ii) execute and deliver such
control  agreements  and  other  agreements  and  documents  as the  Agent may
reasonable  request to perfect,  protect and maintain  the  security  interest
granted to the Agent in the Employee Pledged Stock.

     Section  6.10. ADDITIONAL   GUARANTIES,  STOCK  PLEDGES  AND  FURTHER
ASSURANCES.

     (a)  DOMESTIC  SUBSIDIARIES,  ETC..  At any time  any  Person  becomes  a
Material Domestic Subsidiary of the Parent, the Borrower shall promptly notify
the Agent thereof,  and shall (i) promptly  cause such Domestic  Subsidiary to
become a Guarantor by execution of a Joinder Agreement,  (ii) deliver with the
Joinder Agreement, supporting resolutions, incumbency certificates,  corporate
formation  and  organizational  documentation  and  opinions of counsel as the
Agent may reasonably request, and (iii) deliver stock certificates and related
pledge agreements or pledge joinder  agreements  evidencing the pledge of 100%
of the Voting Stock of such  Domestic  Subsidiary  and all  Material  Domestic
Subsidiaries of such Domestic Subsidiary and, upon the request of the Agent or
the Majority  Banks,  65% of the Voting Stock of all Foreign  Subsidiaries  of
such Domestic  Subsidiary and such other ownership  interests of such Domestic
Subsidiary in foreign Persons,  together,  in each case, with undated stock or
other transfer powers executed in blank.

     (b) FOREIGN SUBSIDIARIES,  ETC.. At any time any Person becomes a Foreign
Subsidiary  or the  Borrower  or any  Guarantor  shall  acquire  an  ownership
interest in any foreign  Person,  the Borrower shall promptly notify the Agent
thereof,  and shall,  upon  request of the Agent or the  Majority  Banks,  (i)
deliver supporting resolutions, incumbency certificates, corporation formation
and  organizational  documentation  and opinions of counsel,  and (ii) deliver
stock  certificates  or  other  evidence  of  ownership  (where  required  for
perfection  under local law) and a related  pledge  agreement  evidencing  the
pledge of 65% of the Voting Stock of such Foreign  Subsidiary or, if less, all
of the  ownership  interests in such other Person  acquired by the Borrower or
any such  Guarantor,  together  with undated  stock or other  transfer  powers
executed in blank.

     (c) FURTHER ASSURANCES.  Each Credit Party shall, and shall cause each of
its  Subsidiaries  to, take such action at its own expense as requested by the
Agent, to ensure that the Agent has a first priority  perfected lien to secure
the Obligations in all personal  property of the Credit Parties located in the
United  States and Canada and, to the extent  deemed  material by the Agent or
the Majority  Banks,  in its or their sole  reasonable  discretion,  all other
personal  property of the Credit Parties now or hereafter owned or acquired by
the Credit  Parties.  Each  Credit  Party  shall,  and shall cause each of its

<PAGE>

Subsidiaries  to, adhere to the  covenants  regarding the location of personal
property as set forth in the Security Agreement.

     Section  6.11. ADDITIONAL   GUARANTIES,  STOCK  PLEDGES  AND  FURTHER
ASSURANCES.

     With  respect to each  Employee  Loan which will not be repaid in full in
connection  with the sale of Employee  Pledged  Shares in the IPO,  the Parent
shall cause to be  delivered  to the Agent within fifty (50) days of the First
Amendment Date, (i) the stock certificate(s),  if any, issued to the Qualified
Employee  by the Parent in  connection  with the IPO and an  undated  Employee
Stock  Power for each such stock  certificate  executed  in blank,  (ii) a new
Employee Note in the form of EXHIBIT B Executed by the Qualified Employee,  and
(iii) a new  Employee  Pledge  Agreement  in the  form  of  Exhibit  D-1  (for
individual purchasers) or D-2 (for personal holding companies) executed by the
Qualified  Employee  (provided that in the case of any Employee Pledged Shares
pledged by a personal holding company, the Employee Stock Power, Employee Note
and  Employee  Pledge  Agreement  shall have been  executed  by such  personal
holding company and by the Qualified  Employee,  as appropriate).  Each Credit
Party agrees that in the event the items  described  in clauses (i),  (ii) and
(iii)  above  are not  delivered  to the  Agent by the date  fifty  (50)  days
following the First  Amendment Date, the Borrower shall  immediately  repay in
full the Employee Loans of each  Qualified  Employee for which such items were
not delivered to the Agent by such date.

     Section 6.12. FURTHER ASSURANCES IN CONNECTION WITH RESTRUCTURING.

     Within thirty (30) days after the IPO, the Parent shall deliver (or cause
to be delivered) to the Administrative Agent the following items:

     (a) (i) a pledge joinder agreement in form and substance  satisfactory to
the  Administrative  Agent  pursuant  to which the Parent  pledges  all of its
ownership  interest  in the  Borrower  pursuant  to the  terms  of the  Pledge
Agreement and (ii) the stock certificates evidencing the ownership interest of
the  Parent in the  Borrower,  together  with  related  undated  stock  powers
executed in blank;

     (b) (i) a copy of the articles or certificates of  incorporation or other
charter documents of the Parent, as amended and/or restated in connection with
the  IPO,  certified  to be  true  and  complete  as of a  recent  date by the
appropriate governmental authority of the state of incorporation of the Parent
and  certified by a secretary or assistant  secretary of the Parent to be true
and correct as of the date of  delivery;  and (ii) a copy of the bylaws of the
Parent, as amended and/or restated in connection with the IPO,  certified by a
secretary or  assistant  secretary of the Parent to be true and correct and in
force and effect as of the date of delivery; and

     (c) (i) a copy of the articles or certificates of  incorporation or other
charter  documents of the Borrower,  as amended and/or  restated in connection
with the IPO,  certified  to be true and  complete  as of a recent date by the
appropriate  governmental  authority  of the  state  of  incorporation  of the
Borrower and certified by a secretary or assistant  secretary of the Parent to
be true and correct as of the date of delivery;  and (ii) a copy of the bylaws
of the  Borrower,  as amended  and/or  restated  in  connection  with the IPO,

<PAGE>

certified by a secretary or assistant secretary of the Borrower to be true and
correct and in force and effect as of the date of delivery.


                        ARTICLE VII. NEGATIVE COVENANTS

     Each of the Credit Parties  covenants and agrees that, until such time as
all  obligations  under the Credit  Documents  have been satisfied in full (or
waived) and until the Revolving Credit Commitments have been terminated:

     Section 7.1. INDEBTEDNESS.

     No member of the Consolidated Group shall contract, create, incur, assume
or permit to exist any Indebtedness, except:

          (a) Indebtedness arising or existing under this Credit Agreement and
     the other Credit Documents;

          (b)  Indebtedness  outstanding  on the date  hereof and set forth in
     Schedule 6, and renewals,  refinancings  and extensions  thereof on terms
     and conditions no less favorable than for such existing Indebtedness;

          (c)  Indebtedness  to any  Interest  Swap  Provider  relating to the
     obligations hereunder;

          (d) purchase money Indebtedness (including obligations in respect of
     Capital  Leases)  hereafter  incurred  to finance  the  purchase of fixed
     assets,  PROVIDED that (i) the total of all such Indebtedness  (including
     any such Indebtedness  referred to in Section (b) above) shall not exceed
     an aggregate  principal amount of $1,000,000 at any one time outstanding,
     (ii) such  Indebtedness when incurred shall not exceed the purchase price
     of the  asset(s)  financed,  and  (iii)  no such  Indebtedness  shall  be
     refinanced  for a  principal  amount in excess of the  principal  balance
     outstanding thereon at the time of such refinancing;

          (e)  unsecured   Indebtedness   incurred  in  connection   with  any
     acquisition or Investment permitted under Section 7.3(c) hereof;

          (f) guaranty  and other  contingent  obligations  of the Borrower in
     favor of its Subsidiaries in connection with Indebtedness permitted under
     this Section 7.1.

     Section 7.2. LIENS.

     No member of the Consolidated Group shall contract, create, incur, assume
or permit to exist any Lien with respect to any of their  respective  property
or assets of any kind  (whether  real or  personal,  tangible or  intangible),
whether now owned or hereafter acquired, except for Permitted Liens.

<PAGE>

     Section 7.3. CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.

     No member of the Consolidated Group shall:

     (a) Enter into a  transaction  of merger or  consolidation,  EXCEPT (i) a
member of the  Consolidated  Group (other than the Parent) may be a party to a
transaction of merger or consolidation with another member of the Consolidated
Group (other than the Parent) and (ii) any acquisition  permitted  pursuant to
clause  (c)  immediately  below may be  effected  by a merger  with and into a
Credit Party (other than the Parent) or  Subsidiary  of a Credit Party so long
as, in either case, (A) if the Borrower is a party thereto, the Borrower shall
be the surviving corporation, (B) if a Subsidiary Guarantor is a party thereto
and the Borrower is not a party thereto, the Subsidiary Guarantor shall be the
surviving corporation,  and (C) no Incipient Default or Event of Default shall
exist either immediately prior to or immediately after giving effect thereto;

     (b) Sell, lease, transfer or otherwise dispose of assets, property and/or
operations  (including any sale-leaseback  transaction,  but excluding (x) the
sale of  inventory  in the  ordinary  course of  business  and (y) the sale or
disposition of plant,  property and equipment which is no longer useful in the
business  or as to which  the  proceeds  therefrom  are  reinvested  in plant,
property and equipment within six months thereof, unless

          (i) the book value of such assets, property and/or operations do not
     in the aggregate exceed $5,000,000 in any fiscal year, and

          (ii) no Incipient  Default or Event of Default exists or would exist
     after giving effect thereto on a Pro Forma Basis,

without the prior written consent of the Majority Banks;

     (c) Acquire all or any  portion of the capital  stock or other  ownership
interest  in any  Person  or all or any  substantial  portion  of the  assets,
property  and/or  operations  of  any  Person  (each  such   acquisition,   an
"ACQUISITION"),  without  the prior  written  consent of the  Majority  Banks,
UNLESS

          (i) the total cash consideration  (including  Indebtedness  assumed)
     for all Acquisitions shall not exceed $20,000,000 in the aggregate in any
     fiscal year; and

          (ii) the total consideration (cash and non-cash,  including, without
     limitation,  Indebtedness  assumed, the amount of contingent  obligations
     (including,  without  limitation,  obligations to make earn-out payments)
     incurred, and the fair value of capital stock of the Borrower issued) for
     any single  Acquisition  (or series of  related  Acquisitions)  shall not
     exceed $50,000,000; and

          (iii) the total consideration (cash and non-cash, including, without
     limitation,  Indebtedness  assumed, the amount of contingent  obligations
     (including,  without  limitation,  obligations to make earn-out payments)

<PAGE>

     incurred,  and the fair value of capital stock of the Borrower  issued to
     the seller) for all  Acquisitions  shall not exceed  $100,000,000  in the
     aggregate in any fiscal year; and

          (iv) the Board of Directors (or its  equivalent) of the Person which
     is the subject of the  acquisition  shall have approved the  acquisition;
     and

          (v) no  Incipient  Default or Event of  Default  would  exist  after
     giving effect thereto on a Pro Forma Basis; or

     (d) In the case of the Parent,  the Borrower and any Material  Subsidiary
which is not wholly-owned, liquidate, wind-up or dissolve, whether voluntarily
or involuntarily (or suffer to permit any such liquidation or dissolution).

     Section 7.4. FISCAL YEAR; GOVERNING DOCUMENTS.

     None of the Credit  Parties shall (a) change its fiscal year,  unless (i)
required to do so by law,  (ii) 60 days'  advance  written  notice  thereof is
given to the Agent,  and (iii)  covenants and agreements in this Agreement are
amended as  appropriate  to  accommodate  such change,  (b) amend or alter its
certificate of incorporation in a manner  materially  adverse to the interests
of the Lenders or (c) amend or alter its Bylaws in a manner materially adverse
to the interests of the Lenders.

     Section 7.5. INVESTMENTS.

     No member of the Consolidated  Group shall lend money or extend credit or
make advances to any Person, or purchase or acquire any stock,  obligations or
securities of, or any other interest in, or make any capital  contribution to,
or  otherwise   make  an  Investment  in,  any  Person  except  for  Permitted
Investments.

     Section 7.6. FINANCIAL COVENANTS.

     The Borrower shall not:

     (a) As of the end of each fiscal quarter, cause or suffer Net Worth to be
less than the the sum of  $60,000,000,  increased on a cumulative  basis as of
the end of each fiscal year,  commencing  with the fiscal year ending June 30,
2001,  by an amount  equal to 50% of  Consolidated  Net  Income (to the extent
positive) for the fiscal year then ended.

     (b) As of the end of each  fiscal  quarter,  cause or  suffer  the  Fixed
Charge Coverage Ratio to be less than 1.5 to 1 for the  immediately  preceding
four fiscal quarters as of each Calculation Date.

     (c) As of the end of each fiscal  quarter,  cause or suffer the  Leverage
Ratio to be greater than 2.5 to 1.0 for the immediately  preceding four fiscal
quarters as of each Calculation Date.

<PAGE>

     Section 7.7. FRANCHISES.

     No member of the  Consolidated  Group shall suffer the final  revocation,
suspension,  material  amendment or termination  of any franchise,  agreement,
permit,  or license as a result of which it is  reasonably  likely to suffer a
Material Adverse Effect.

     Section 7.8. CAPITAL EXPENDITURES.

     The  members  of  the   Consolidated   Group  shall  not  incur   Capital
Expenditures  in excess of  $40,000,000  in the  aggregate  in any fiscal year
PLUS,  for fiscal years  occurring  after the current  fiscal year, the unused
portion from the  immediately  preceding  fiscal year beginning with the first
fiscal year to occur after the Closing Date.

     Section 7.9. TRANSACTION WITH AFFILIATES.

     No member of the  Consolidated  Group shall enter into or permit to exist
any  transaction  or  series  of  transactions  with  any  officer,  director,
shareholder,   subsidiary   or   Affiliate  of  such  Person  other  than  (a)
transactions  permitted  by Section 7.1,  Section 7.2,  Section 7.3 or Section
7.5, (b) normal  compensation  and  reimbursement  of expenses of officers and
directors,  (c) provision of financial  and other  services and the sharing of
know-how,  technology and office space in the ordinary course of business, and
(d)  except  as  otherwise  specifically  limited  in  this  Agreement,  other
transactions  which are entered into in the ordinary  course of such  Person's
business on terms and conditions  substantially as favorable to such Person as
would be  obtainable  by it in a comparable  arms-length  transactions  with a
Person other than an officer, director, shareholder, subsidiary or Affiliate.

     Section  7.10. LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND
OTHER DISTRIBUTIONS, ETC.

     No member of the Consolidated Group shall, directly or indirectly, create
or  otherwise  cause,  incur,  assume,  suffer  or  permit  to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Person to (a) pay  dividends or make any other  distribution  on any of
such Person's capital stock, (b) subject to subordination provisions,  pay any
Indebtedness owed to the Borrower,  (c) make loans or advances to the Borrower
or (d) transfer any of its property to the Borrower,  except for  encumbrances
or  restrictions  existing under or by reason of (i) customary  non-assignment
provisions in any lease governing a leasehold interest,  (ii) any agreement or
other  instrument of a Person  existing at the time it becomes a Subsidiary of
the Borrower in accordance with Section 7.5, PROVIDED that such encumbrance or
restriction  is not  applicable  to any other  Person,  or any property of any
other Person, other than such Person becoming a Subsidiary of the Borrower and
was not entered into in  contemplation of such Person becoming a Subsidiary of
the Borrower and (iii) this Agreement and the other Credit Documents.

<PAGE>

     Section 7.11. ISSUANCE AND SALE OF SUBSIDIARY STOCK.

     No member of the Consolidated  Group will, except to qualify directors or
other nominees (of nominal amounts of stock) where required by applicable law,
sell,  transfer or otherwise dispose of, any shares of capital stock of any of
its Subsidiaries or permit any of its Subsidiaries to issue, sell or otherwise
dispose  of,  any shares of capital  stock of any of its  Subsidiaries  to any
Person other than a Credit Party.

     Section 7.12. LIMITATIONS ON PARENT.

     Notwithstanding  any other  provisions  of this Credit  Agreement  to the
contrary,  the Parent shall not (a) hold any assets other than (i) the capital
stock of the  Borrower  and  (ii)  the  capital  stock  of a  special  purpose
Subsidiary that does not have, and will not incur, any liabilities  other than
(A)  Indebtedness  arising  under  the  Credit  Documents,   (B)  intercompany
Indebtedness  to the extent  permitted by Section 7.5, (C) tax  liabilities in
the  ordinary  course  of  business  and  (D)  corporate,  administrative  and
operating   expenses  in  the  ordinary  course  of  business,   (b) have  any
liabilities  other  than  (i) the  liabilities  under  the  Credit  Documents,
(ii) tax  liabilities  in the ordinary  course of  business,  (iii) corporate,
administrative  and operating  expenses in the ordinary course of business and
(iv)  intercompany  Indebtedness  to the extent  permitted  by Section 7.5, or
(C) engage  in any business  other than  (i) owning  the capital  stock of the
Borrower and  activities  incidental or related  thereto and  (ii) acting as a
Guarantor  hereunder and pledging its assets to the Agent,  for the benefit of
the Banks, pursuant to the Credit Documents.


                             ARTICLE VIII. DEFAULT

     Section 8.1. EVENTS OF DEFAULT.

     Each of the  following  events  shall  constitute  an "EVENT OF  DEFAULT"
hereunder if such event shall not be remedied within the time period set forth
below:

          (a) The  Borrower  shall  fail to pay (i) any  amount  of  principal
     (except  required  prepayments)  hereunder or under the Revolving  Credit
     Notes when due and  payable,  or (ii) any amount of  interest or required
     prepayment of principal or fee required to be paid hereunder, within five
     days after the date when due and payable;

          (b) Any  member  of the  Consolidated  Group  shall  fail to pay any
     Indebtedness  in excess of $3,000,000  (other than under this  Agreement)
     when due  (whether by  scheduled  maturity,  by required  prepayment,  by
     acceleration, by demand or otherwise), shall fail to meet its obligations
     under the terms of the Borrower  Guaranty or any other material  guaranty
     when called upon to do so, or shall fail to perform  any  material  term,
     covenant or agreement on its part to be performed  under any agreement or
     instrument evidencing or securing or relating to any such Indebtedness or
     guaranty when required to be performed, if the effect of any such failure
     is to accelerate, or to permit the holder or holders of such Indebtedness
     or the trustee under any such agreement or instrument to accelerate,  the
     maturity of such Indebtedness or of any obligation guaranteed by a member

<PAGE>

     of the Consolidated  Group, and the member of the Consolidated  Group has
     not cured such failure within the grace period provided by the applicable
     agreement or instrument, whether or not such holders or trustees elect to
     exercise such remedy or to waive such failure;

          (c) Any  representation  or warranty made by any Credit Party herein
     or  in  any  certificate,  agreement,  instrument,  report  or  statement
     contemplated  by or  made  or  delivered  pursuant  to  or in  connection
     herewith  or any  other  agreement  with any of the  Banks to which  such
     Credit  Party is a party,  shall be, at the time of the  making or deemed
     making of such  representation  or  warranty,  incorrect  in any material
     respect;

          (d) Any Credit  Party shall fail to observe or perform any  covenant
     or  agreement  contained  in (i)  Section 2.6 (as it pertains to Employee
     Notes),  Section 2.8(b), the  organizational  existence clause of Section
     6.2(a),  Section 6.4, Section 6.5(a),  Section 6.11 or Sections 7.1, 7.2,
     7.3,  7.5,  7.6,  7.9,  7.11 and 7.12,  or (ii) any other Section of this
     Agreement and such failure shall continue for more than 20 days after the
     Borrower  shall  have  notice,  knowledge  or reason to know of any cause
     giving rise to such failure;

          (e) The  Parent,  the  Borrower  or any  Material  Subsidiary  shall
     generally  not pay its debts as they  become due or admit in writing  its
     inability  generally so to pay its debts, make a material  assignment for
     the benefit of creditors, seek an order for relief in bankruptcy,  become
     insolvent within the meaning of the Federal Bankruptcy Code,  petition or
     apply to any tribunal for the  appointment  of any  receiver,  custodian,
     liquidator,  trustee, or similar official (hereinafter "OFFICIAL") for it
     or any substantial part of its property, commence any proceeding relating
     to it under any bankruptcy, reorganization,  arrangement, readjustment of
     debt,  dissolution  or  liquidation  law or statute  of any  jurisdiction
     (including,  without  limitation,  the Federal  Bankruptcy Code) or there
     shall be  commenced  against the  Parent,  the  Borrower or any  Material
     Subsidiary any such proceeding  which remains unstayed or undismissed for
     a  period  of 60  days,  or the  Parent,  the  Borrower  or any  Material
     Subsidiary  shall  consent  to,  approve  of or  acquiesce  in  any  such
     proceeding or the appointment of any such Official;

          (f) Any member of the  Consolidated  Group shall suffer the entry of
     judgment against it by any court of record having jurisdiction over it or
     any of its properties  for the payment of money,  if the aggregate of all
     such judgments outstanding against the members of the Consolidated Group,
     on a consolidated basis, is in excess of $3,000,000,  or shall suffer the
     issuance of a writ of attachment  of any material  portion of its assets,
     and the applicable  member of the Consolidated  Group shall not discharge
     the same,  fully bond or insure  against its  discharge,  provide for its
     discharge in  accordance  with its terms,  or procure a stay of execution
     thereon within 45 days from the date of entry thereof,  unless  execution
     thereon is effectively stayed pending further proceedings;

          (g) Any  security  interest  or lien  granted or  reaffirmed  in the
     Security  Agreement or the Credit Party Pledge  Agreement in any material
     portion of the Collateral shall, in any material respect,  for any reason
     cease to be a valid and perfected security interest,  encumbrance or lien
     having first priority as provided therein;

<PAGE>

          (h) Any Reportable  Event (as defined in Section 4043 of ERISA) that
     requires  notification to the PBGC and which the Agent determines in good
     faith might constitute grounds for the termination of any Plan covered by
     Title IV of ERISA or for the appointment by the appropriate United States
     District  Court of a  trustee  to  administer  any such Plan  shall  have
     occurred and be continuing  45 days after  written  notice to such effect
     shall have been  given to the  Borrower  by the  Agent,  or any such Plan
     shall be  terminated,  or a trustee shall be appointed by an  appropriate
     United States  District  Court to  administer  any such Plan, or the PBGC
     shall  institute  proceedings  to terminate any such Plan or to appoint a
     trustee to administer  any such Plan,  and in any such case the aggregate
     amount of vested  unfunded  liabilities  under  such  Plan  shall  exceed
     $3,000,000;

          (i) Defaults  under all or  substantially  all of the Employee Notes
     have occurred and are continuing;

          (j) The Borrower  Guaranty  shall be held  invalid or  unenforceable
     against  the  Borrower,  or the  Borrower  shall  deny or  disaffirm  its
     obligations thereunder;

          (k) Except to the extent permitted under this Credit Agreement,  the
     guaranty  given by any  Guarantor  hereunder  or any  material  provision
     thereof  shall  cease to be in full force and  effect,  or any  Guarantor
     hereunder or any Person  acting by or on behalf of such  Guarantor  shall
     deny or disaffirm such Guarantor's  obligations  under such guaranty,  or
     any Guarantor  shall default in the due  performance or observance of any
     term,  covenant  or  agreement  on its part to be  performed  or observed
     pursuant to such guaranty; or

          (l) A Change of Control shall occur.

     Section 8.2. ACCELERATION.

     Upon the  occurrence  of any Event of Default,  the  Majority  Banks,  by
written  notice to the Agent and the  Borrower,  may  terminate  the Revolving
Credit  Commitments and instruct the Agent to declare the entire  Indebtedness
of  the  Credit  Parties  then  outstanding   hereunder  or  under  the  Notes
immediately  due and  payable  (including  the payment of cash  collateral  as
additional  security for the LOC  Obligations)  without  presentment,  demand,
protest,  notice of protest or any other notice of any kind,  all of which are
hereby  expressly  waived.  Notwithstanding  the foregoing  provisions of this
section,  the entire  Indebtedness  of the  Credit  Parties  then  outstanding
hereunder or under the Notes shall become immediately due and payable (and the
Borrower shall pay one hundred percent cash collateral as additional  security
for the LOC Obligations) and the Revolving Credit Commitments shall terminate,
without  notice or election of any kind and without need for any action by the
Banks or the Agent, if an Event of Default  specified in Section 8.1(e) hereof
shall occur.  The Banks shall have no obligation to make any Loans or disburse
any loan  proceeds  during the  existence of any Event of Default or Incipient
Default.

<PAGE>

     Section 8.3. RIGHT OF SETOFF.

     Upon the  occurrence  and during the  continuance of any Event of Default
not  cured in  accordance  with  this  Agreement,  each of the Banks is hereby
authorized  at any time and from time to time,  without  notice to the  Credit
Parties (any such notice being hereby expressly waived by the Credit Parties),
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held, and any other Indebtedness at any time
owing,  by such Bank to or for the credit or the  account of any Credit  Party
against all of the  obligations of such Credit Party,  irrespective of whether
or not the Agent shall have made any demand under this Agreement or the Notes,
and although such obligations may be unmatured.  All amounts set off by a Bank
pursuant  to this  Section  shall  be  applied  to all of the  Credit  Party's
obligations  to such Bank,  including  those under or in connection  with this
Agreement,  and to  such  Bank's  Employee  Loan  Participation  pro  rata  in
accordance with the amount then outstanding  under each such  obligation.  For
purposes  of this  Section,  each of the  Banks  shall be  considered  to be a
"creditor"  under the Federal  Bankruptcy Code with respect to this Agreement,
the Revolving Credit Notes, the Employee Notes and the Borrower Guaranty.  The
Banks agree to act in good faith and  promptly to notify the  affected  Credit
Party after any such setoff and application, provided that the failure to give
such notice shall not affect the validity of such setoff and application.  The
rights of the Banks under this  Section  are in  addition to other  rights and
remedies  (including,  without  limitation,  other rights of setoff) which the
Banks may have.


                         ARTICLE IX. AGENCY PROVISIONS

     Section 9.1. APPOINTMENT.

     Each Bank  hereby  designates  and  appoints  Bank of  America,  N.A.  as
administrative  agent of such Bank to act as  specified  herein  and the other
Credit Documents, and each such Bank hereby authorizes the Agent, as Agent for
such Bank,  to take such  action on its behalf  under the  provisions  of this
Credit  Agreement  and the other Credit  Documents and to exercise such powers
and perform such duties as are expressly  delegated by the terms hereof and of
the other Credit Documents,  together with such other powers as are reasonably
incidental  thereto.  Each Bank further  directs and  authorizes  the Agent to
execute  releases (or similar  agreements) to give effect to the provisions of
this Credit Agreement and the other Credit Documents,  including  specifically
without limitation the provisions of Section 7.3 hereof.  Notwithstanding  any
provision to the contrary  elsewhere herein and in the other Credit Documents,
the  Agent  shall  not have  any  duties  or  responsibilities,  except  those
expressly set forth herein and therein, or any fiduciary relationship with any
Bank,  and  no  implied  covenants,   functions,   responsibilities,   duties,
obligations or liabilities  shall be read into this Credit Agreement or any of
the other Credit  Documents,  or shall otherwise exist against the Agent.  The
provisions  of this  Section  are solely for the  benefit of the Agent and the
Banks and none of the Credit  Parties  shall have any rights as a third  party
beneficiary of the provisions  hereof.  In performing its functions and duties
under this Credit  Agreement and the other Credit  Documents,  the Agent shall
act  solely as Agent of the Banks and does not  assume and shall not be deemed
to have assumed any obligation or  relationship of agency or trust with or for
any Credit Party or any of their respective Affiliates.

<PAGE>

     Section 9.2. DELEGATION OF DUTIES.

     The Agent may  execute  any of its  duties  hereunder  or under the other
Credit  Documents  by or  through  agents  or  attorneys-in-fact  and shall be
entitled  to advice of  counsel  concerning  all  matters  pertaining  to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.

     Section 9.3. EXCULPATORY PROVISIONS.

     The   Agent   and   its   officers,    directors,    employees,   agents,
attorneys-in-fact  or  affiliates  shall  not be (i)  liable  for  any  action
lawfully  taken  or  omitted  to be  taken  by it or such  Person  under or in
connection  herewith or in connection  with any of the other Credit  Documents
(except for its or such Person's own gross negligence or willful  misconduct),
or (ii)  responsible  in any  manner  to any of the  Banks  for any  recitals,
statements,  representations  or warranties  made by any of the Credit Parties
contained  herein  or  in  any  of  the  other  Credit  Documents  or  in  any
certificate,  report,  document,  financial statement or other written or oral
statement referred to or provided for in, or received by the Agent under or in
connection  herewith or in  connection  with the other  Credit  Documents,  or
enforceability  or sufficiency  therefor of any of the other Credit Documents,
or for any failure of any Credit Party to perform its obligations hereunder or
thereunder.   The  Agent  shall  not  be  responsible  to  any  Bank  for  the
effectiveness,   genuineness,  validity,  enforceability,   collectability  or
sufficiency of this Agreement, or any of the other Credit Documents or for any
representations,  warranties, recitals or statements made herein or therein or
made  by the  Borrower  or any  other  Credit  Party  in any  written  or oral
statement  or in any  financial  or other  statements,  instruments,  reports,
certificates  or any other  documents  in  connection  herewith  or  therewith
furnished  or made by the Agent to the Bank or by or on  behalf of the  Credit
Parties to the Agent or any Bank or be required to  ascertain or inquire as to
the  performance  or observance of any of the terms,  conditions,  provisions,
covenants or  agreements  contained  herein or therein or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or of the  existence
or  possible  existence  of any  Incipient  Default  or Event of Default or to
inspect the properties, books or records of the Credit Parties or any of their
respective Affiliates.

     Section 9.4. RELIANCE ON COMMUNICATIONS.

     The Agent  shall be  entitled to rely,  and shall be fully  protected  in
relying, upon any note, writing,  resolution,  notice,  consent,  certificate,
affidavit,  letter, cablegram,  telegram, telecopy, telex or teletype message,
statement,  order or  other  document  or  conversation  believed  by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation,  counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable  care). The Agent may deem
and treat the Banks as the owners of their respective  interests hereunder for
all purposes  unless a written notice of  assignment,  negotiation or transfer
thereof  shall  have been  filed  with the Agent in  accordance  with  Section
10.2(b)  hereof.  The Agent shall be fully justified in failing or refusing to
take any  action  under  this  Agreement  or  under  any of the  other  Credit
Documents  unless it shall first  receive  such advice or  concurrence  of the
Majority Banks as it deems appropriate or it shall first be indemnified to its
satisfaction  by the Banks against any and all liability and expense which may

<PAGE>

be incurred by it by reason of taking or  continuing  to take any such action.
The Agent shall in all cases be fully  protected in acting,  or in  refraining
from  acting,  hereunder  or  under  any  of the  other  Credit  Documents  in
accordance with a request of the Majority Banks (or to the extent specifically
provided  in Section  10.10,  all the Banks) and such  request  and any action
taken or failure to act pursuant  thereto  shall be binding upon all the Banks
(including their successors and assigns).

     Section 9.5. NOTICE OF DEFAULT.

     The  Agent  shall  not be  deemed  to have  knowledge  or  notice  of the
occurrence of any Incipient  Default or Event of Default  hereunder unless the
Agent has  received  notice  from a Bank or a Credit  Party  referring  to the
Credit  Document,  describing  such Incipient  Default or Event of Default and
stating that such notice is a "notice of default." In the event that the Agent
receives  such a notice,  the Agent  shall give prompt  notice  thereof to the
Banks. The Agent shall take such action with respect to such Incipient Default
or Event of Default as shall be reasonably directed by the Majority Banks.

     Section 9.6. NON-RELIANCE ON AGENT AND OTHER BANKS.

     Each Bank expressly acknowledges that each of the Agent and its officers,
directors, employees, agents, attorneys-in-fact or affiliates has not made any
representations  or  warranties  to it and  that  no act by the  Agent  or any
affiliate thereof  hereinafter  taken,  including any review of the affairs of
any Credit  Party or any of their  respective  Affiliates,  shall be deemed to
constitute any  representation or warranty by the Agent to any Bank. Each Bank
represents to the Agent that it has,  independently  and without reliance upon
the Agent or any other Bank, and based on such documents and information as it
has deemed  appropriate,  made its own appraisal of and investigation into the
business,  assets,  operations,  property,  financial  and  other  conditions,
prospects and  creditworthiness  of the Borrower,  the other Credit Parties or
their  respective  Affiliates  and made  its own  decision  to make its  Loans
hereunder and enter into this  Agreement.  Each Bank also  represents  that it
will, independently and without reliance upon the Agent or any other Bank, and
based on such documents and  information  as it shall deem  appropriate at the
time,  continue to make its own credit  analysis,  appraisals and decisions in
taking  or  not  taking  action  under  this  Agreement,   and  to  make  such
investigation  as it deems  necessary  to inform  itself  as to the  business,
assets, operations,  property,  financial and other conditions,  prospects and
credit-worthiness  of  the  Borrower,  the  other  Credit  Parties  and  their
respective  Affiliates.  Except  for  notices,  reports  and  other  documents
expressly  required to be furnished to the Banks by the Agent  hereunder,  the
Agent shall not have any duty or  responsibility  to provide any Bank with any
credit or other  information  concerning  the  business,  operations,  assets,
property, financial or other conditions,  prospects or creditworthiness of the
Borrower, the other Credit Parties or any of their respective Affiliates which
may come into the  possession of the Agent or any of its officers,  directors,
employees, agents, attorneys-in-fact or affiliates.

<PAGE>

     Section 9.7. INDEMNIFICATION.

     The Banks agree to  indemnify  the Agent in its  capacity as such (to the
extent not  reimbursed by the Borrower and without  limiting the obligation of
the Borrower to do so), ratably according to their respective Revolving Credit
Commitments  (or if the  Revolving  Credit  Commitments  have  expired or been
terminated, in accordance with the respective principal amounts of outstanding
Loans and participation  interests of the Banks), from and against any and all
liabilities,  obligations,  losses, damages,  penalties,  actions,  judgments,
suits,  costs,  expenses or  disbursements of any kind whatsoever which may at
any time (including without limitation at any time following the final payment
of all of the obligations of the Borrower hereunder and under the other Credit
Documents)  be imposed on,  incurred  by or asserted  against the Agent in its
capacity as such in any way  relating to or arising out of this  Agreement  or
the other Credit  Documents or any  documents  contemplated  by or referred to
herein or therein or the  transactions  contemplated  hereby or thereby or any
action  taken or omitted by the Agent under or in  connection  with any of the
foregoing;  PROVIDED  that no Bank  shall be  liable  for the  payment  of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments,  suits, costs,  expenses or disbursements  resulting from the gross
negligence or willful  misconduct of the Agent. If any indemnity  furnished to
the Agent for any purpose shall,  in the opinion of the Agent, be insufficient
or become impaired,  the Agent may call for additional indemnity and cease, or
not  commence,  to do the  acts  indemnified  against  until  such  additional
indemnity is  furnished.  The  agreements  in this Section  shall  survive the
repayment of the Loans, LOC Obligations and other obligations under the Credit
Documents and the termination of the Revolving Credit Commitments hereunder.

     Section 9.8. AGENT IN ITS INDIVIDUAL CAPACITY.

     The Agent and its affiliates may make loans to, accept  deposits from and
generally  engage in any kind of business with the members of the Consolidated
Group or their  respective  Affiliates  as though the Agent were not the Agent
hereunder.  With  respect  to the  Loans  made by and all  obligations  of the
Borrower hereunder and under the other Credit Documents,  the Agent shall have
the same rights and powers  under this  Agreement as any Bank and may exercise
the same as though it were not the Agent,  and the terms  "Bank"  and  "Banks"
shall include the Agent in its individual capacity.

     Section 9.9. SUCCESSOR AGENT.

     The Agent may, at any time,  resign upon 20 days'  written  notice to the
Banks,  and may be removed,  upon show of cause, by the Majority Banks upon 30
days' written notice to the Agent.  Upon any such resignation or removal,  the
Majority  Banks  shall  have the right to  appoint a  successor  Agent.  If no
successor Agent shall have been so appointed by the Majority Banks,  and shall
have accepted such appointment, within 30 days after the notice of resignation
or notice of removal,  as appropriate,  then the retiring Agent shall select a
successor  Agent  provided such  successor is a Bank hereunder or a commercial
bank organized  under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $400,000,000.  Upon
the  acceptance of any  appointment  as Agent  hereunder by a successor,  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

<PAGE>

Agent  shall be  discharged  from its  duties  and  obligations  as Agent,  as
appropriate,  under this  Agreement  and the other  Credit  Documents  and the
provisions  of this  Section  9.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.


                           ARTICLE X. MISCELLANEOUS

     Section 10.1. RIGHTS AND WAIVERS.

     All rights,  remedies and powers granted to the Agent or the Banks herein
or in any  other  Credit  Document,  whether  express  or  implied,  shall  be
cumulative and may be exercised singly or concurrently  with such other rights
as the Agent or the Banks may have, and shall include, without limitation, the
right to apply to a court of equity for any injunction to restrain a breach or
threatened  breach of this  Agreement and all rights as stated in Article VIII
hereof.  No  failure  or  delay  on the  part of the  Agent  or the  Banks  in
exercising any right,  power or privilege  hereunder or under any other Credit
Document,  or under  applicable  law, shall operate as a waiver  thereof;  nor
shall  any  single  or  partial  exercise  of any  right,  power or  privilege
hereunder or thereunder  preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. No waiver or modification of
any right,  power or privilege of the Agent or the Banks or of any  obligation
of the  Borrower  or any other  Credit  Party shall be  effective  unless such
waiver or  modification  is in writing,  signed by the Agent or the Banks,  as
required  herein,  and then only to the extent set forth therein.  A waiver by
the Agent or the Banks of any right, power or privilege hereunder or under any
other Credit  Document on any one occasion shall not be construed as a bar to,
or a waiver  of, any such  right,  power or  privilege  which the Agent or the
Banks otherwise would have on any subsequent  occasion.  Neither the Agent nor
the Banks shall have any  liability  to the Borrower or any other Credit Party
for failure to fund any loan on the date set for such  funding if such failure
is due to forces or circumstances beyond the control of the Banks,  including,
without limitation,  Acts of God, concerted work stoppages,  or delays in wire
transfer systems.

     Section 10.2. BINDING EFFECT; ASSIGNMENT.

          (a) This  Agreement  shall  bind and  inure  to the  benefit  of the
     parties, their legal representatives, successors and assigns, except that
     neither the Borrower nor any  Guarantor may assign or transfer its rights
     hereunder or any interests  herein  without the prior written  consent of
     all the Banks.

          (b)  Each  Bank  may  assign  all or a  portion  of its  rights  and
     obligations hereunder (including, without limitation, all or a portion of
     its Revolving  Credit  Commitments  or its Loans) to (i) a Bank,  (ii) an
     affiliate  of a Bank or (iii)  any  other  commercial  bank or  financial
     institution reasonably acceptable to the Agent and, so long as no Default
     or Event of Default has occurred  and is  continuing,  the Borrower  (the
     consent of the Borrower shall not be unreasonably withheld or delayed and
     such consent  shall be deemed  given if the Borrower  does not notify the
     assigning  Bank and the Agent of any  objection  within two Business Days
     after the Borrower has been provided notice of the proposed assignment by

<PAGE>

     the assigning Bank or the Agent);  PROVIDED that (i) any such  assignment
     shall be in a minimum  aggregate  amount of $5,000,000  (or, if less, the
     remaining  amount of the  Revolving  Credit  Commitment  of the assigning
     Bank) of the Revolving  Credit  Commitments and in integral  multiples of
     $1,000,000  above such amount and (ii) any such assignment  shall be of a
     constant, not varying,  percentage of all the assigning Bank's rights and
     obligations  under this Agreement.  Upon receipt by the assigning Bank of
     the Agent's and  Borrower's  (provided no Default or Event of Default has
     occurred and is continuing)  written consent,  the execution and delivery
     to the Agent of an assignment  agreement  between the assigning  Bank and
     the  assignee,  the  delivery  to the Agent of a  transfer  fee of $3,500
     payable to the Agent for its own  account,  and the making of any payment
     by the assignee  required by the assigning  Bank, this Agreement shall be
     deemed to be amended to the extent, and only to the extent,  necessary to
     reflect the addition of such  assignee,  and the  assignee  shall for all
     purposes  be a Bank party  hereto and shall  have,  to the extent of such
     assignment, the same rights and obligations as a Bank hereunder. Upon the
     consummation of any assignment, the assigning Bank shall be relieved from
     its  obligations  hereunder to the extent of the obligations so assigned.
     Notwithstanding  anything  herein to the contrary,  nothing  herein shall
     prevent an assignment by any Bank to a Federal Reserve Bank in support of
     borrowings made by such Bank from such Federal Reserve Bank.

          (c) Each  Bank may  grant  participations  in all or any part of its
     Revolving Credit Loans and may grant subparticipations in all or any part
     of its  Employee  Loan  Participations  to any  commercial  bank or other
     financial institution.  Each participation shall be in an amount equal to
     or in excess of $5,000,000. A participant shall not have any rights under
     this  Agreement or any other  document  delivered in connection  herewith
     (the   participant's   rights   against  the  Bank  in  respect  of  such
     participation to be those set forth in the agreement executed by the Bank
     in  favor of the  participant  relating  thereto,  which  agreement  with
     respect to such  participation  shall not restrict the Bank's  ability to
     make any modification,  amendment or waiver to this Agreement without the
     consent  of the  participant,  except  that the Bank may  agree  with any
     participant that the Bank will not, without such  participant's  consent,
     (i) extend or increase the amount of the Revolving Credit  Commitments or
     the Employee Loan Participations, (ii) agree to extend the final maturity
     of the Notes,  (iii) agree to reduce the principal  amount of, or rate of
     interest  on, the Notes,  (iv)  except as the result of or in  connection
     with a disposition  permitted under Section 7.3(b),  agree to release all
     or substantially all of the Collateral, and (v) except as permitted under
     Section  7.3(a)  or  (b),  agree  to  release  the  Borrower  or  all  or
     substantially  all  of  the  Guarantors  from  its  or  their  respective
     obligations  under the  Credit  Documents).  All  amounts  payable by the
     Borrower  under this  Agreement  shall be determined as if a Bank had not
     sold such  participation.  The Borrower  acknowledges and agrees that any
     participant described in this Section 10.2 will, for purposes of Sections
     2.12,  2.14,  2.16 and 2.17, be deemed to be a Bank  hereunder,  provided
     that such participant  shall not be entitled to receive any more than the
     Bank would have  received had such  participation  not been made.  In the
     event  of  any  such  sale  by a Bank  of  participating  interests  to a
     participant,  such Bank's  obligations  under this Agreement shall remain
     unchanged,  such Bank shall remain solely responsible for the performance
     thereof,  such Bank shall  remain the  holder of any  obligation  for all

<PAGE>

     purposes  under this  Agreement,  and the Borrower shall continue to deal
     solely and directly with such Bank in  connection  with the Bank's rights
     and obligations under this Agreement.

     Section 10.3. SEVERABILITY.

     Any  provision  of  this   Agreement   prohibited  by  the  laws  of  any
jurisdiction  shall, as to such jurisdiction,  be ineffective to the extent of
such prohibition,  or modified to conform with such laws, without invalidating
the remaining  provisions of this Agreement,  and any such  prohibition in any
jurisdiction shall not invalidate such provisions in any other jurisdiction.

     Section 10.4. INTERPRETATION.

     All parties have participated in the drafting of this Agreement, and this
Agreement shall be interpreted  without  reference to any rule of construction
providing for interpretation of documents against the Persons drafting them.

     Section 10.5. GOVERNING LAW; JURY TRIAL.

     This  Agreement  and the other  Credit  Documents  shall be  construed in
accordance  with  and  governed  by the  internal  laws of the  State of North
Carolina,   excluding  its  choice  of  law  rules.  The  parties  hereto  (a)
individually  with  respect  to each  instance  and each issue as to which the
right to a trial by jury would otherwise accrue, waive and elect not to assert
their  right to trial by jury on any issue  triable  of right by a jury to the
full extent that any such right shall now or hereafter exist, and certify that
no  representative  or agent  of the  Agent or the  Banks  (including  without
limitation the Agent's  counsel) has represented,  expressly or otherwise,  to
any Credit  Party  that the Agent or the Banks  will not seek to enforce  this
waiver of right to jury trial  provision,  (b) consent to the  jurisdiction of
the courts of the State of North  Carolina,  including  its  federal  district
courts,  and (c)  consent to service of  process by  registered  mail,  return
receipt requested.

     Section 10.6. PAYMENT OF EXPENSES AND TAXES; INDEMNIFICATION.

          (a) The Borrower  agrees to pay all out of pocket costs and expenses
     of the Agent,  including the reasonable fees and disbursements of special
     counsel for the Agent, in connection with the  negotiation,  preparation,
     execution  and  delivery  of this  Agreement,  the  Notes,  the  Borrower
     Guaranty, the Employee Pledge Agreements,  and any other Credit Document,
     to pay all  reasonable  out of pocket  costs and expenses of the Banks in
     connection  with the enforcement of this  Agreement,  the Notes,  and any
     other  Credit  Document,   including   reasonable   attorneys'  fees  and
     disbursements  arising in  connection  therewith  (whether or not suit is
     instituted), and also to pay all reasonable actual out-of-pocket costs of
     the  Banks  in  connection  with  any  inspections,   investigations,  or
     examinations performed under the Security Agreement.

          (b) The Borrower  agrees to  indemnify  the Agent and the Banks from
     and against any and all liabilities, losses, damages, penalties, actions,
     judgments,  costs,  expenses (including,  without limitation,  reasonable
     attorneys' fees and disbursements) or disbursements of any kind or nature

<PAGE>

     whatsoever  which may be imposed on, incurred by, or asserted against the
     Agent  and the  Banks  in any  litigation,  proceeding  or  investigation
     instituted  or  conducted  by any  Person  other than the  Borrower  with
     respect to any aspect of, or any transaction contemplated by, or referred
     to in, or any matter  related  to, any Loans made  hereunder,  including,
     without  limitation,  in connection  with the  Borrower's  servicing role
     hereunder and any consumer  lending or securities law violations  arising
     from or related to the Employee  Loans.  The Borrower also agrees to pay,
     and to save the Banks  harmless  from any delay in paying,  all stamp and
     other taxes,  if any, which may be payable or determined to be payable in
     connection with the execution and delivery of this Agreement,  the Notes,
     the Borrower  Guaranty,  the Employee  Pledge  Agreements,  and any other
     Credit Document,  or any modification  hereof or thereof,  and all filing
     and recording fees in connection therewith.

     Section 10.7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

     All  representations  and  warranties  made in this  Agreement and in any
certificates  or other documents  delivered  pursuant hereto shall survive the
execution  and  delivery  of  this  Agreement  and  the  making  of the  Loans
hereunder,  and the  provisions of Section 10.6 shall  survive  payment of the
Notes.

     Section 10.8. NOTICES.

     Except as  otherwise  expressly  provided  herein,  all notices and other
communications  shall  have been duly  given and shall be  effective  (a) when
delivered,  (b) when  transmitted via telecopy (or other facsimile  device) to
the number set out below,  (c) the Business Day following the day on which the
same has been delivered prepaid to a reputable  national overnight air courier
service,  or (d) the third Business Day following the day on which the same is
sent by certified or registered  mail,  postage  prepaid,  in each case to the
respective  parties at the address,  in the case of the Credit Parties and the
Agent,  set forth below,  and, in the case of the Banks, set forth on SCHEDULE
9, or at such other address as such party may specify by written notice to the
other parties hereto:

          (a) if to the Agent:

              Bank of America, N.A.
              6610 Rockledge Drive, 6th Floor
              Bethesda, Maryland 20817
              Attention:   Michael R. Heredia, Managing Director
              Telephone: 301-571-0724
              Telecopy:  301-571-0719

<PAGE>

              with a copy to:

              Bank of America, N.A.
              101 North Tryon Street, 15th Floor
              NC1-001-15-04
              Charlotte, NC 28255
              Attention:  Tammie Cotton
              Telephone: 704-388-3918
              Telecopy:  704-409-0016

          (b) if to any Credit Party:

              Prior to October 27, 2000:

              Watson Wyatt & Company
              6707 Democracy Blvd., Suite 800
              Bethesda, Maryland 20817
              Attention:  Eric B. Schweizer, Treasurer
              Telephone: 301-581-4526
              Telecopy:  301-581-4930

              with a copy to:

              Watson Wyatt & Company
              6707 Democracy Blvd., Suite 800
              Bethesda, Maryland 20817
              Attention:   Walter W. Bardenwerper, Esq., General Counsel
              Telephone: 301-581-4581
              Telecopy:  301-581-4935

              On and after October 27, 2000:

              Watson Wyatt & Company
              1717 H Street, NW, 8th Floor
              Washington, DC 20006
              Attention:  Eric B. Schweizer, Treasurer
              Telephone: 301-581-4526
              Telecopy:  301-581-4930

<PAGE>

              with a copy to:

              Watson Wyatt & Company
              1717 H Street, NW, 8th Floor
              Washington, DC 20006
              Attention:   Walter W. Bardenwerper, Esq., General Counsel
              Telephone: 301- 581-4581
              Telecopy:  301-581-4935

     Section 10.9. EXECUTION.

     This Agreement may be executed by the parties hereto  individually  or in
any combination of the parties hereto in several separate  counterparts,  each
of which shall be an original and all of which taken together shall constitute
one and the same Agreement.

     Section 10.10. AMENDMENTS.

     Neither this Agreement nor any other Credit Document nor any of the terms
hereof or thereof may be amended,  changed,  waived,  discharged or terminated
unless such amendment,  change, waiver, discharge or termination is in writing
entered  into by, or  approved  in  writing  by,  the  Majority  Banks and the
Borrower, PROVIDED, HOWEVER, that:

          (a) without the consent of each Bank affected thereby,  neither this
     Agreement nor any of the other Credit Documents may be amended to

               (i)  extend  the  final  maturity  of any  Loan or the  time of
          payment of any  reimbursement  obligation,  or any portion  thereof,
          arising from drawings  under  Letters of Credit,  or extend or waive
          any  principal  amortization  payment  of any Loan,  or any  portion
          thereof,

               (ii)  reduce the rate or extend the time of payment of interest
          (other than as a result of waiving the applicability of any increase
          in interest  rates after the occurrence of an Event of Default or on
          account  of a failure to deliver  financial  statements  on a timely
          basis) thereon or fees hereunder,

               (iii)  reduce or waive the  principal  amount of any Loan or of
          any reimbursement  obligation,  or any portion thereof, arising from
          drawings under Letters of Credit,

               (iv) increase the Revolving Credit  Commitment or Employee Loan
          Participation of a Bank over the amount thereof in effect, except as
          provided in Section  2.8(d) (it being  understood  and agreed that a
          waiver of any  Default or Event of Default  shall not  constitute  a
          change  in  the  Revolving   Credit   Commitment  or  Employee  Loan
          Participation of any Bank),

<PAGE>

               (v) except as permitted  under Section  7.3(a) or (b),  release
          the Borrower or all or substantially  all of the Guarantors from its
          or their respective obligations under the Credit Documents,

               (vi)  except  as  the  result  of  or  in  connection   with  a
          disposition   permitted  under  Section   7.3(b),   release  all  or
          substantially all of the Collateral,

               (vii)  amend,  modify or waive any  provision  of this  Section
          10.10 or Section 2.8(d), 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 8.1(a),
          10.6 or 10.7,

               (viii) reduce any percentage specified in, or otherwise modify,
          the definition of Majority Banks, or

               (ix) consent to the  assignment  or transfer by the Borrower of
          any of its  rights  and  obligations  under (or in  respect  of) the
          Credit Documents except as permitted thereby;

          (b) without the consent of the Agent,  no provision of Section 9 may
     be amended;

          (c) without the consent of the Issuing Bank, no provision of Section
     2.5 may be amended.

     Notwithstanding the fact that the consent of all the Banks is required in
certain circumstances as set forth above, (x) each Bank is entitled to vote as
such Bank sees fit on any  bankruptcy  reorganization  plan that  affects  the
Loans,  and each Bank  acknowledges  that the provisions of Section 1126(c) of
the Federal  Bankruptcy Code supersedes the unanimous  consent  provisions set
forth herein and (y) the  Majority  Banks may consent to allow the Borrower to
use cash collateral in the context of a bankruptcy or insolvency proceeding.

     Section 10.11. RELATIONSHIP OF THE PARTIES.

     This  Agreement  provides for the making of loans by the Banks,  in their
capacity  as Banks,  to the  Borrower,  and for the  payment of  interest  and
repayment of principal by the Borrower to the Banks. The relationship  between
the Banks (including,  throughout this Section, the Agent) and the Borrower is
limited to that of creditors/secured  parties, on the one hand, and debtor, on
the other hand. The provisions herein for compliance with financial covenants,
delivery of financial statements,  and financial inspections,  investigations,
audits,  or  examinations  are intended solely for the benefit of the Banks to
protect  their  interests  as lenders in assuring  payments  of  interest  and
repayment  of  principal,  and nothing  contained in this  Agreement  shall be
construed  as  permitting  or  obligating  the  Banks to act as  financial  or
business advisors or consultants to the Borrower,  as permitting or obligating
any Bank to control the Borrower or to conduct the Borrower's  operations,  as
creating any fiduciary obligation on the part of the Banks to the Borrower, or
as creating  any joint  venture,  agency,  or other  relationship  between the
parties other than as explicitly and  specifically  stated in this  Agreement.
The Borrower acknowledges that it has had the opportunity to obtain the advice
of experienced  counsel of its own choosing in connection with the negotiation

<PAGE>

and execution of this  Agreement and to obtain the advice of such counsel with
respect to all matters contained herein,  including,  without limitation,  the
provision  in Section 10.5 for waiver of trial by jury.  The Borrower  further
acknowledges  that it is  experienced  with  respect to  financial  and credit
matters  and has made its own  independent  decision to apply to the Banks for
credit and to execute and deliver this Agreement.

<PAGE>

                                   EXHIBIT B
                          TO AMENDED CREDIT AGREEMENT
             FORM OF AMENDED AND RESTATED EMPLOYEE PROMISSORY NOTE

Name:_______________                                          _________, 2000
Office:_____________
$__________

     FOR VALUE RECEIVED,  the undersigned promises to pay to the order of BANK
OF  AMERICA,   N.A.,  a  national  banking   association   formerly  known  as
NationsBank,  N.A.  (the  "Agent"),  at 101 North  Tryon  Street,  15th Floor,
NC1-001-15-04,  Charlotte,  North Carolina  28255, or at such other address as
the  Agent  shall  subsequently  state  to the  undersigned  in  writing,  the
principal sum of __________ and _____/100  U.S.  DOLLARS (U.S.  $_____),  plus
interest on the unpaid balance  thereof at a fluctuating  rate per annum equal
to the Applicable Rate (as defined herein).  Interest shall be computed on the
basis of the actual  number of days elapsed over a year of 365 or 366 days, as
the case may be, or, if the Federal Funds Rate (as defined  herein) shall then
apply, 360 days, for the period  commencing with the date hereof and ending on
the date on which this Note has been paid in full.  Interest  shall be payable
quarterly in arrears,  commencing on __________ for the first calendar quarter
ending  after the date hereof and  continuing  on the 3rd  business day of the
month immediately following each calendar quarter occurring thereafter, and on
the Maturity Date (as defined herein).

     For  purposes  hereof,  the  "Applicable  Rate" means (i) for all periods
prior to and  including  January 5, 2001,  the Adjusted Base Rate and (ii) for
all  periods  thereafter  (a) if no  Cash  Flow  Deficiency  exists  as of the
immediately  preceding  Calculation  Date, the Adjusted Base Rate and (b) if a
Cash Flow Deficiency exists as of the immediately  preceding Calculation Date,
the Prime Rate.  "Adjusted  Base Rate" means,  for any day, the rate per annum
(rounded upwards, if necessary,  to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal  Funds Rate in effect on such day PLUS
1/2 of 1.0% or(b) the Prime Rate in effect on such day, MINUS 1.0%. If for any
reason  the  Agent  shall  have  determined  (which   determination  shall  be
conclusive  absent  manifest  error)  that it is unable  after due  inquiry to
ascertain  the Federal  Funds Rate for any reason,  including the inability or
failure of the Agent to obtain  sufficient  quotations in accordance  with the
terms hereof,  the Adjusted Base Rate shall be  determined  without  regard to
clause (a) of the first sentence of this  definition  until the  circumstances
giving rise to such inability no longer exist. Any change in the Adjusted Base
Rate due to a change in the Prime  Rate or the  Federal  Funds  Rate  shall be
effective  on the  effective  date of such  change  in the  Prime  Rate or the
Federal Funds Rate, respectively. "Federal Funds Rate" means, for any day, the
rate of interest per annum  (rounded  upwards,  if  necessary,  to the nearest
whole  multiple of 1/100 of 1%) equal to the weighted  average of the rates on
overnight  Federal  funds  transactions  with  members of the Federal  Reserve
System  arranged by Federal  funds  brokers on such day, as  published  by the
Federal Reserve Bank of New York on the business day next succeeding such day,
PROVIDED  that (A) if such day is not a business  day, the Federal  Funds Rate
for such day shall be such  rate on such  transactions  on the next  preceding
business day and (B) if no such rate is so  published on such next  succeeding
business  day,  the Federal  Funds Rate for such day shall be the average rate
quoted  to the Agent on such day on such  transactions  as  determined  by the

<PAGE>

Agent. "Prime Rate" means the per annum rate of interest established from time
to time by the Agent at its principal  office in Charlotte,  North Carolina as
its Prime Rate. Any change in the interest rate resulting from a change in the
Prime Rate shall  become  effective  as of 12:01 a.m. of the  business  day on
which each change in the Prime Rate is announced by the Agent.  The Prime Rate
is a reference rate used by the Agent in determining interest rates on certain
loans and is not  intended to be the lowest  rate of  interest  charged on any
extension  of credit to any debtor.  "Calculation  Date" means the last day of
each fiscal quarter of Watson Wyatt & Company.  A "Cash Flow Deficiency" shall
exist at any time when the Leverage Ratio of the Watson Wyatt & Company,  on a
consolidated  basis,  is 2.5 or greater,  as more fully  described in the Loan
Documents referenced below.

     Principal   hereunder  shall  be  payable  in  seven  consecutive  annual
installments  of [U.S.  $__________]  each on the  30th day of each  September
beginning _________.  [the amount of the annual installments and the beginning
date of  payment of the  annual  installments  should be the same as under the
employee's existing Note]

     This Note shall mature on September 30, 200[__] [the maturity date should
be the same as under the  employee's  existing  Note] (the  "Maturity  Date");
PROVIDED  however,  that in the event the  undersigned is terminated  (whether
voluntary or involuntary)  from Watson Wyatt & Company  Holdings or any of its
subsidiaries   or   affiliates   (such   termination   is,   hereinafter,    a
"Termination"),  the undersigned  shall prepay this Note in the amounts and on
the dates set forth below:

          (A) if on the date of  Termination  the  undersigned is permitted to
     sell  all of  the  common  stock  securing  this  Note  under  applicable
     securities  laws and  under the  Management  Stock  Agreements,  then the
     undersigned  shall  repay this Note in full on the date  thirty (30) days
     after the Termination;

          (B) if on the date of  Termination  the  undersigned is permitted to
     sell a portion, but not all, of the common stock securing this Note under
     applicable  securities  laws and under the Management  Stock  Agreements,
     then the undersigned shall repay this Note:

                   (x) on the date thirty (30) days after the  Termination  by
              an amount equal to the lesser of (1) the unpaid principal amount
              of this Note and (2) the proceeds (net of broker commissions, if
              any) from the sale of all of the common stock securing this Note
              permitted to be sold under applicable  securities laws and under
              the Management Stock Agreements;

                   (y)  subject to clause (z) below,  on the date  thirty (30)
              days after the  undersigned  is permitted to sell any additional
              common stock securing this Note under applicable securities laws
              and under the Management  Stock Agreements by an amount equal to
              the lesser of (1) the unpaid  principal  amount of this Note and
              (2) the proceeds  (net of broker  commissions,  if any) from the
              sale of all of the additional  common stock permitted to be sold
              under applicable  securities laws and under the Management Stock
              Agreements; and

<PAGE>

                   (z) on the date thirty (30) days after the  undersigned  is
              permitted  to sell all of the common  stock  securing  this Note
              under applicable  securities laws and under the Management Stock
              Agreements by an amount equal to the unpaid  principal amount of
              this Note.

          (C) if on the date of Termination  the  undersigned is not permitted
     to sell all or any portion of the common stock  securing  this Note under
     applicable  securities  laws and under the Management  Stock  Agreements,
     then the undersigned shall repay this Note:

                   (x)  subject to clause (y) below,  on the date  thirty (30)
              days after the undersigned is permitted to sell any common stock
              securing this Note under  applicable  securities  laws and under
              the Management Stock Agreements by an amount equal to the lesser
              of (1) the  unpaid  principal  amount  of this  Note and (2) the
              proceeds  (net of broker  commissions,  if any) from the sale of
              all of the common stock  permitted  to be sold under  applicable
              securities laws and under the Management Stock Agreements; and

                   (y) on the date thirty (30) days after the  undersigned  is
              permitted  to sell all of the common  stock  securing  this Note
              under applicable  securities laws and under the Management Stock
              Agreements by an amount equal to the unpaid  principal amount of
              this Note.

     Whenever any principal of or interest on this Note shall not be paid when
due, whether at the stated maturity or by acceleration or otherwise,  interest
on such unpaid  amounts shall  thereafter  (and in the case of late  principal
payments,  50 days  thereafter if no other default shall then exist under this
Note or under any other Loan  Document (as such term is defined  hereinafter))
be payable at a rate per annum equal to two (2)  percentage  points  above the
stated rate of interest  under this Note until such amounts shall be paid, but
in no event shall the rate of interest  payable hereon exceed the highest rate
allowed by law.

     Payments  shall be made in  lawful  money  of the  United  States  and in
immediately  available  funds and shall be applied first to interest,  then to
principal.

     The undersigned may prepay the principal  hereof, in whole or in part, at
any time without penalty, provided, however, that any prepayments of principal
shall be applied  against the  installments  of  principal  hereunder in their
inverse order of maturity.

     Upon the sale of any common  stock  securing  payment  of this Note,  the
undersigned shall  immediately  prepay the principal hereof in an amount equal
to the product of (a) the sum of (i) the number of shares of common stock sold
DIVIDED by (ii) the total number of shares of common stock securing payment of
this Note  (including  the shares  sold),  MULTIPLIED  by (b) the  outstanding
principal of this Note (for example,  if this Note is secured by 10,000 shares
of  common  stock  and the  undersigned  sells  2,500 of those  shares  (which
represents  25% of the common stock securing  payment of this Note),  then the

<PAGE>

undersigned  must prepay the principal hereof by an amount equal to 25% of the
outstanding principal).

     Whenever this Note, or any other  liability of any of the  undersigned to
the Agent  matures,  whether  at the stated  maturity  or by  acceleration  or
otherwise,  the Agent may  set-off  against  the  balance  hereof  any and all
credits,  money,  stocks,  bonds or other  security  or property of any nature
whatsoever on deposit with or held by, or in the possession of, the Agent,  to
the credit of or for the  account  of the  undersigned,  without  notice to or
consent by the  undersigned.  The  undersigned  promptly  shall  provide  such
financial,  operational  or business  information in each instance and in such
form as the Agent in its sole discretion shall require.

     This Note is secured by, among other things, common stock of Watson Wyatt
& Company  Holdings  purchased  or  refinanced  with the  proceeds of the loan
evidenced  by this Note and as provided by a certain  stock  pledge  agreement
from the  undersigned  to the Agent dated this date, and this Note is entitled
to the benefits of said stock pledge agreement, including, without limitation,
waiver by the undersigned of demand, presentment,  protest, and other notices,
all as provided in the stock pledge agreement.

     Upon failure of the  undersigned  to pay any payment  hereon in full when
due,  or the failure of the  undersigned  to perform or comply with any of the
provisions  hereof  and/or  any of the  provisions  of any  pledge  agreement,
guaranty,  or any  other  document  previously,  simultaneously  or  hereafter
executed and delivered by the undersigned to the Agent in connection with this
Note  (collectively,  and including  without  limitation  that certain  Credit
Agreement dated June 30, 1998, as amended,  among Watson Wyatt & Company,  the
Subsidiary   Guarantors  identified  therein,  the  banks  party  thereto  and
NationsBank,  N.A. (now known as Bank of America,  N.A.), as Agent,  the "Loan
Documents"),  or the occurrence of a default on the part of the undersigned or
Watson Wyatt & Company under any of the Loan Documents;  or if any information
contained in any financial  statement,  application,  schedule,  report or any
other document  delivered by the  undersigned or any other party in connection
with the  obligations of the  undersigned or such other party omitted to state
any  material  fact  or any  fact  necessary  to  make  such  information  not
misleading; or if any judgment shall be entered against the undersigned; or if
an attachment  shall be levied  against any assets of the  undersigned  in the
possession of the Agent; or if the undersigned shall become the subject of any
bankruptcy or insolvency proceeding;  or if the Agent shall in good faith deem
itself  insecure  or unsafe as a result of acts or events  which bear upon the
financial condition of the undersigned or the repayment of this Note, then the
entire  unpaid  principal  balance  hereof plus  accrued  and unpaid  interest
thereon shall, at the option of the Agent,  mature and become  immediately due
and payable without  presentment,  demand,  protest,  notice of protest or any
other notice of any kind, all of which are hereby expressly waived.

     The  undersigned  hereby  agrees to pay, in addition to all other sums or
money due, all costs of collection and  reasonable  attorneys'  fees,  whether
suit be brought or not, if this Note is not paid in full when due,  whether at
the stated maturity or by acceleration.

<PAGE>

     The  undersigned  hereby  certifies to Agent that the proceeds hereof are
not to be used in whole or in part for personal, family or household purposes,
but only for the  purpose of  financing  and/or  refinancing  the  purchase of
common stock of Watson Wyatt & Company.

     This Note is given in  replacement  of that certain  Employee  Promissory
Note dated  __________ in the principal  amount of  $__________  issued by the
undersigned to the Agent.

<PAGE>

     This instrument is an instrument  under seal and shall be governed in all
respects by the laws of the State of North  Carolina,  excluding its choice of
law rules.  The undersigned  hereby consents to the jurisdiction of the courts
of North  Carolina,  including  the federal  district  court,  and consents to
service  of  process  by  registered  mail,  return  receipt  requested.   The
undersigned  further  specifically  consents to venue in  Mecklenburg  County,
North Carolina.

Witness:__________________ Signed:__________________ (Seal)
           (Signature)

Name:____________________  Name:___________________
     (Print or Type)            (Print or Type)

<PAGE>

                                   EXHIBIT C

                          FORM OF GUARANTY AGREEMENT

     THIS GUARANTY AGREEMENT,  dated as of June 30, 1998 (the "GUARANTY"),  is
given by

     WATSON WYATT & COMPANY, a Delaware corporation (the "GUARANTOR"), to

     BANK OF AMERICA,  N.A., a national banking association  formerly known as
NationsBank,  N.A.,  as Agent  for the  Banks  party to the  Credit  Agreement
referred to below (the "AGENT").  All  capitalized  terms used and not defined
herein have the meanings stated in the Credit Agreement.

                             W I T N E S S E T H :

     WHEREAS,  the Guarantor,  as borrower and  otherwise,  is a party to that
Credit Agreement,  dated as of the date hereof, among the Guarantor, the Agent
and the Banks named therein (as the same may be amended, modified or extended,
the "CREDIT AGREEMENT"); and

     WHEREAS,  in  consideration of and to induce advances made or to be made,
or  other  financial  accommodations  from  time  to  time  afforded  or to be
afforded, to or at the request of the individuals listed on EXHIBIT A attached
hereto,  as such  Exhibit may be amended  from time to time upon the making of
additional advances to or for the benefit of persons employed by the Guarantor
or its affiliates or subsidiaries (each such person  individually an "EMPLOYEE
BORROWER" and all collectively  the "EMPLOYEE  BORROWERS";  in addition,  such
term shall mean and include all entities eligible to purchase shares of common
stock of the Guarantor  and to or for the benefit of whom  Employee  Loans are
made  under  the  Credit   Agreement),   such  advances  or  other   financial
accommodations  being for the  purpose  of  financing  the  purchase  from the
Guarantor of stock of the Guarantor, the Guarantor has agreed to guarantee the
performance of the  obligations of the Employee  Borrowers  under the Employee
Notes issued pursuant to the Credit Agreement;

     NOW,  THEREFORE,  in  consideration  of the  premises  and other good and
valuable  consideration,  the  receipt  and  sufficiency  of which  is  hereby
acknowledged, the Guarantor hereby agrees as follows:

     I.  GUARANTY  OF  LIABILITIES.   The  Guarantor  hereby   unconditionally
guarantees and becomes surety for the full and prompt payment to the Agent and
the Banks at maturity,  whether by acceleration or otherwise, and at all times
thereafter,  and upon a  Default  hereunder,  of the  Employee  Loans  and all
indebtedness,  obligations  and  liabilities of the Employee  Borrowers to the
Agent and the Banks,  whether now  existing or  hereafter  created or arising,
matured or unmatured,  and whether absolute or contingent,  joint, several, or
joint and several,  arising out of the financing by the Agent and the Banks of
the acquisition by the Employee  Borrowers of any shares of stock issued or to
be  issued  by  the  Guarantor  (all  of  which  are  hereinafter  called  the
"GUARANTEED DEBT").

<PAGE>

     In the  event  any  Employee  Borrower  shall at any time fail to pay the
Agent or any Bank any  principal of or interest on or other sums  constituting
any Guaranteed Debt at its maturity,  whether by acceleration or otherwise, or
in the  event of any  Default  hereunder  as  defined  herein,  the  Guarantor
promises to pay such amount to the Agent and such Bank forthwith on demand, in
the same manner as if the Guaranteed  Debt  constituted the direct and primary
liability of the  Guarantor,  this being a guaranty of payment  rather than of
collection.

     2. IN THE  EVENT OF A  DEFAULT.  In case of the  occurrence  of a default
under the terms of any Employee  Borrower's note evidencing  Guaranteed  Debt,
any Employee  Borrower's  pledge agreement  providing  security for Guaranteed
Debt, or any other document or instrument  pertaining  thereto,  or in case of
the  death  or  incompetence  of  any  Employee  Borrower,   or  in  case  any
dissolution,    liquidation,   bankruptcy,    reorganization,    receivership,
assignment,  debt  arrangement  or other  proceeding  under any  bankruptcy or
insolvency law or procedure is instituted by or against an Employee  Borrower,
each of such events or  occurrences  constituting a "DEFAULT"  hereunder,  all
Guaranteed Debt of such Employee Borrower shall at the option of the Agent and
the Banks  immediately  become due and payable from the Guarantor;  and in any
such event the Guarantor  hereby  authorizes the Agent and the Banks,  without
notice or demand, to advance a Revolving Credit Loan, as defined in the Credit
Agreement,  for the account of the Guarantor or to  appropriate  and apply any
property,  balances,  credits,  deposits,  accounts or moneys of the Guarantor
then  in the  possession  of the  Agent,  or  standing  to the  credit  of the
Guarantor,  to the  payment  of such  Guaranteed  Debt.  In the  event  of the
occurrence and continuance of any Event of Default under and as defined in the
Credit Agreement,  all Guaranteed Debt of all Employee  Borrowers shall at the
option  of the  Agent  and the  Banks  become  immediately  due  and  payable,
irrespective  of whether  there  exists a default  under any note  issued by a
Employee Borrower.

     3.  AGREEMENTS  AND WAIVERS.  The Guarantor  hereby (a) agrees (i) to any
modifications  of any terms or conditions of any Guaranteed Debt and/or to any
extensions  or  renewals  of time of payment or  performance  by any  Employee
Borrower or the  Guarantor;  and (ii) that it shall not be  necessary  for the
Agent to resort to legal remedies  against any Employee  Borrower,  or against
any collateral,  before proceeding against the Guarantor; (b) waives notice of
any election,  acceptance,  demand,  protest,  notice of protest and notice of
default,  presentment for payment, diligence in collection, and waives, to the
extent  permitted  by law,  all benefit of  valuation,  appraisement,  and all
exemptions  under the laws of the North  Carolina,  and/or any other  state or
territory of the United States; (c) agrees, if any Guaranteed Debt is not paid
in accordance with the terms hereof,  to pay, in addition to all other sums of
money due, all costs of collection including costs of suit and (whether or not
suit is brought)  the Agent's and the Banks'  reasonable  attorneys'  fees and
disbursements;  (d)  agrees  that  the  Agent  and  the  Banks  shall  have no
obligation  to verify the  signature  of the  Employee  Borrower  on any note,
pledge agreement or other document delivered in connection with any Guaranteed
Debt; and (e) agrees that the Guarantor's  liability hereunder shall in no way
be affected or impaired by the failure of such note, pledge agreement or other
document  to be  valid,  binding  or  enforceable  as  against  such  Employee
Borrower.

     4. CERTAIN RIGHTS OF THE AGENT AND THE BANKS.  The Guarantor's  liability
hereunder shall in no way be affected or impaired by any of the following (any
or all of which  may be done or  omitted  by the  Agent or the  Banks  without

<PAGE>

notice to anyone and  irrespective  of whether  the  Guaranteed  Debt shall be
increased or decreased  thereby),  namely:  (a) any acceptance by the Agent or
the Banks of any security or collateral  for, or other  guarantors or obligors
upon, any Guaranteed Debt; (b) any compromise, settlement, surrender, release,
discharge,  renewal,  extension,  alteration,  exchange, sale, pledge or other
disposition  of, or  substitution  for,  or  indulgence  with  respect  to, or
failure,  neglect or omission  to realize  upon,  or to  enforce,  exercise or
perfect any liens or right of  appropriation  or other  rights with respect to
any  Guaranteed  Debt or any security or  collateral  therefor,  or any claims
against any person or persons primarily or secondarily liable thereon; (c) the
granting of credit from time to time by the Agent or any Bank to any  Employee
Borrower in excess of the amount, if any, to which the right of recovery under
this Guaranty may be limited;  or (d) any act of commission or omission of any
kind or at any time upon the part of the Agent or any Bank with respect to any
matter  whatsoever  other than the  execution and delivery by the Agent or any
Bank to the Guarantor of an express  written  release or  cancellation of this
Guaranty.  The Agent  shall  have the right to  determine  how,  when and what
application of payments and credits,  if any,  whether derived from a Employee
Borrower or any other source,  shall be made on the Guaranteed  Debt, and this
Guaranty  shall apply to and secure any  ultimate  balance  that shall  remain
owing to the Agent or any Bank.  This Guaranty is secured by the Collateral as
defined in the Credit Agreement.

     5. NO WAIVER,  ETC. No  postponement or delay on the part of the Agent or
any Bank in the enforcement of any right  hereunder shall  constitute a waiver
of such right,  and all rights of the Agent and the Banks  hereunder  shall be
cumulative  and not  alternative  and shall be in addition to any other rights
granted  to the Agent or any Bank in any other  agreement,  or by Law.  If any
provision  hereof shall be or shall be declared to be illegal or unenforceable
in any respect,  such illegal or  unenforceable  provision shall be and become
absolutely  null and void and of no force and effect as though such  provision
were not in fact set forth herein, but all other covenants,  terms, conditions
and provisions hereof shall nevertheless  continue to be valid and enforceable
and this Guaranty shall be so construed.

     6.  CONTINUING  GUARANTY.  This Guaranty  shall  continue in force in any
event for so long as any Employee  Borrower shall be indebted to the Agent and
the Banks,  and  thereafter  until the Agent and the Banks shall have actually
received written notice of the termination hereof from the Guarantor and until
all Guaranteed Debt incurred or contracted before receipt of such notice shall
have been fully and finally paid plus interest,  costs, and attorneys' fees as
above described, it being contemplated that the Employee Borrowers may borrow,
repay and subsequently borrow money from, or become indebted to, the Agent and
the Banks from time to time, and the Guarantor, not having given notice of the
termination  hereof as herein  provided for, shall be deemed to have permitted
this  Guaranty  to  remain in full  force  and  effect  with  respect  to such
additional or subsequent Guaranteed Debt.

     7. AGENT HAS NO DUTY TO ADVISE;  WAIVER.  The Guarantor  assumes the risk
for its failure to be and keep  informed  of the  financial  condition  of the
Employee  Borrowers  and of all other  circumstances  bearing upon the risk of
non-payment and  non-performance of the Guaranteed Debt; and the Agent and the
Banks shall have no duty to advise the Guarantor of  information  known to the
Agent  or  any  Bank  regarding  such  condition  or any  such  circumstances.
Furthermore,  the Guarantor  hereby waives any defense based on the failure of

<PAGE>

the Agent to conduct a credit review of an Employee  Borrower  prior to making
or during the existence of any Employee Loan.

     8. SUBORDINATION; RESCISSION. The Guarantor agrees that all claims of the
Guarantor against any and all of the Employee Borrowers,  whether now existing
or hereafter arising, are and shall be at all times subject and subordinate to
the  Guaranteed  Debt,  for so long as any  Guaranteed  Debt or such  claim or
claims shall exist.  The Guarantor  waives all rights of  subrogation  that it
might have arising out of this  Guaranty.  The Guarantor  agrees that it shall
not,  without the prior written consent of the Agent:  (a) receive any payment
of or collect,  in whole or in part,  or sue upon,  any claim or claims now or
hereafter existing which the Guarantor may hold against the Employee Borrower;
or (b) enforce any lien which the  Guarantor  may now or in the future have on
any of the Employee Borrowers'  properties,  real or personal, as security for
the  payment  of any  debt or  claim  owing by any  Employee  Borrower  to the
Guarantor.  The liability of the Guarantor  hereunder  shall be reinstated and
revived and the rights of the Agent and the Banks shall continue if and to the
extent  that for any  reason  any  payment  by or on  behalf  of any  Employee
Borrower or the  Guarantor is  rescinded or must be otherwise  restored by the
Agent or any Bank,  whether as a result of any  proceedings  in  bankruptcy or
reorganization or otherwise,  PROVIDED, HOWEVER, that if the Agent or any Bank
chooses to  contest  any such  matter at the  request  of the  Guarantor,  the
Guarantor  agrees to indemnify  and hold the Agent and any such Bank  harmless
with respect to all costs (including, without limitation,  attorneys' fees) of
such litigation. If any Employee Borrower becomes a debtor in a case under the
Federal  Bankruptcy  Code and the Guarantor is an "insider" as defined in such
Code, the Guarantor agrees, upon request by a debtor-in-possession  or trustee
(collectively  "OFFICIAL") for such Employee Borrower, to pay to the estate of
such  Employee  Borrower  an amount  equal to any  amount of  Guaranteed  Debt
previously  paid  to the  Agent  or any  Bank by such  Employee  Borrower  and
reasonably  contended by such  official to be avoidable  under  Section 547 of
such Code.

     9. MISCELLANEOUS.  This Guaranty shall be governed in all respects by the
internal  laws of the State of North  Carolina but excluding its choice of law
rules and shall be binding  upon and shall inure to the benefit of the parties
hereto  and  their  respective  heirs,  executors,  administrators,   personal
representatives,  successors  and assigns.  This  Guaranty,  together with the
Credit Agreement and the other documents executed thereunder (collectively, as
the same may be modified or amended, the "CREDIT  DOCUMENTS"),  constitute the
entire  agreement  of the  Agent on  behalf  of  itself  and the Banks and the
Guarantor with respect to its subject  matter,  superseding  and replacing any
previous  guaranty  and  applicable  to  all  obligations  guaranteed  by  the
Guarantor under any previous guaranty as well as to all subsequently  incurred
Guaranteed Debt, and no provision hereof may be modified,  altered, amended or
waived except by a writing executed by the person against whom it is sought to
be applied or enforced.  All parties have participated in the drafting of this
Guaranty, and this Guaranty shall be interpreted without reference to any rule
of construction  providing for interpretation of documents against the Persons
drafting   them.   This  Guaranty  may  be  executed  by  the  parties  hereto
individually or in any  combination of the parties hereto in several  separate
counterparts,  each of which  shall  be an  original  and all of  which  taken
together shall constitute one and the same Guaranty.

<PAGE>

     10. VENUE,  ETC. The Guarantor and the Agent agree that, at the option of
the Agent,  all litigation  arising out of this Guaranty shall be in the local
or federal  courts located in the State of North  Carolina,  and the Guarantor
hereby waives any defense of inconvenient  forum.  The Guarantor and the Agent
further agree that process may be served upon any party hereto by certified or
registered  mail,  return  receipt  requested,  directed  to such party at its
address stated in the Credit  Agreement,  and each party waives any defense of
insufficiency of service with respect to process so served.  The Guarantor and
the Agent  further  agree  that,  because of the  complexities  of  commercial
transactions  and  the  need  for  expeditious  resolution  of  disputes,  any
litigation  arising  out of this  Guaranty  shall be  before  a court  sitting
without  a jury,  and  both  parties  hereby  waive  trial by jury in all such
litigation,  after having received the advice of their respective  independent
counsel.

     11.  LIMITATION  ON  OBLIGATIONS.  Notwithstanding  any  provision to the
contrary  contained  herein or in any other of the  Credit  Documents,  to the
extent the  obligations of the Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including,  without  limitation,  because of any
applicable  state  or  federal  law  relating  to  fraudulent  conveyances  or
transfers) then the obligations of the Guarantor hereunder shall be limited to
the maximum amount that is permissible  under  applicable law (whether federal
or state and including, without limitation, the Bankruptcy Code).

<PAGE>

     WITNESS the due  execution  hereof with the intent of being legally bound
as of the date stated on the first page hereof.


                                                 WATSON WYATT & COMPANY,
                                                 a Delaware corporation,


ATTEST:__________________________                By:_________________________
Name:                                            Name:
Title:                                           Title:

<PAGE>

                                   EXHIBIT A
                                      TO
                              GUARANTY AGREEMENT

                         [To be supplied by Guarantor]


<PAGE>

                                  EXHIBIT D-1
                                      TO
                           AMENDED CREDIT AGREEMENT


              FORM OF EMPLOYEE PLEDGE AGREEMENT (FOR INDIVIDUALS)


                                                  Name: ______________________

                                          Home Address: ______________________

                                                        ______________________

                                                        ______________________

                                                  Date: ______________________


Watson Wyatt & Company Holdings
1717 H Street, NW, 8th Floor
Washington, DC 20006

Attn:  Mr. Walter W. Bardenwerper, General Counsel & Secretary

Gentlemen:

     I have issued a promissory  note (the "NOTE") in the principal  amount of
$_____ to Bank of America, N.A., a national banking association formerly known
as  NationsBank,  N.A.  (the  "AGENT"),  as agent for itself and certain other
banks.  The Note  evidences  a loan  made to me by the  Agent to  enable me to
purchase,  or to refinance  the purchase of, ___ shares of the common stock of
Watson Wyatt & Company (the "COMPANY").  In connection with the initial public
offering of the common stock of Watson Wyatt & Company Holdings  ("HOLDINGS"),
my shares of common stock of the Company  converted  into ___ shares of common
stock of Holdings.

     As security for the timely satisfaction of my obligations under the Note,
I hereby  pledge to the Agent all  shares  purchased  or  refinanced  with the
proceeds of the loan,  including the shares of common stock of Holdings issued
in  conversion  of or exchange  for the shares of common  stock of the Company
(the "EMPLOYEE PLEDGED SHARES"), and grant to the Agent a lien on and security
interest in the Employee Pledged Shares and all proceeds thereof.

     Holdings  and/or its transfer agent is hereby  authorized and directed to
register on its books my pledge to the Agent of the Employee  Pledged  Shares,
to identify  said  pledge of the  Employee  Pledged  Shares on all initial and
periodic  statements  and all  other  statements  or  notices  respecting  the
Employee  Pledged  Shares,  and to have all  pledgee  notices  and  statements
respecting the Employee  Pledged Shares as well as any and all certificates or

<PAGE>

any other  instruments  or documents  evidencing  my ownership of the Employee
Pledged Shares sent directly to the Agent at the following address:

                    Bank of America, N.A.
                    101 North Tryon Street, 15th Floor
                    NC1-001-15-04
                    Charlotte, North Carolina 28255
                    Attn:  Tammie Cotton, Agency Services

     I agree that the Agent  shall take and  maintain  possession  of all such
statements,  notices, certificates,  instruments and documents in its capacity
as pledgee.

     Upon the sale of any  Employee  Pledged  Shares,  I agree to  immediately
prepay the  principal of the Note in an amount equal to the product of (a) the
sum of (i) the number of  Employee  Pledged  Shares  sold  DIVIDED by (ii) the
total  number  of  Employee  Pledged  Shares   (including  the  shares  sold),
MULTIPLIED by (b) the outstanding  principal of the Note (for example,  if the
Note is secured by 10,000  Employee  Pledged  Shares and I sell 2,500 Employee
Pledged Shares (which  represents 25% of the Employee Pledged Shares),  then I
must prepay 25% of the outstanding principal of the Note).

     In the event that I sell any or all of the Employee  Pledged Shares prior
to  repayment  of my  loan  from  the  Agent,  I agree  and  direct  that  the
purchaser(s) thereof shall be directed to remit the purchase price to Holdings
and that Holdings shall apply the proceeds of such sale in the manner provided
above.  To facilitate the foregoing,  I agree and direct that Holdings  and/or
its transfer agent register on its books and identify on all  transaction  and
periodic  statements  respecting the Employee  Pledged Shares the  restriction
that any purchaser of the Employee Pledged Shares may be required to remit the
purchase   price  directly  to  Holdings  to  be  applied  in  payment  of  my
indebtedness  to the Agent,  and I further agree and direct that the following
legend shall be placed on all  certificates,  if any, for the Employee Pledged
Shares:

            "In the event the shares represented by this certificate are sold,
            the purchaser may be required to remit the purchase price directly
            to Watson  Wyatt & Company  Holdings  to be  applied in payment of
            certain  indebtedness of the registered holder to Bank of America,
            N.A., as agent for itself and certain other banks."

You agree to have such legend removed from any certificate if and when you are
advised in writing by the Agent that my  indebtedness to it has been repaid in
full.

     Upon the  payment in full of all  amounts due under my note issued to the
Agent,  I understand  that with respect to all of the Employee  Pledged Shares
that  have not been  sold or  otherwise  disposed  of under  the terms of this
letter,  the Agent will direct  Holdings and/or its transfer agent to register
on its books the release of the Agent's lien on and the foregoing restrictions
respecting  such Employee  Pledged  Shares,  and will have delivered to me, at
Holdings'  expense,  free of liens and  encumbrances,  and without recourse or
representation,  all certificates, if any, for such Employee Pledged Shares. I
agree that beyond the  exercise of  reasonable  care,  the Agent shall have no
duty or  liability  to preserve  rights  pertaining  to the  Employee  Pledged

<PAGE>

Shares,  and shall be relieved of all  responsibility for the Employee Pledged
Shares upon  issuing a  direction  to Holdings  and/or its  transfer  agent to
register the release of its lien on and the foregoing  restriction  respecting
the Employee Pledged Shares and upon surrendering or tendering surrender to me
of all certificates, if any, respecting the Employee Pledged Shares.

     I agree that all rights, remedies and powers granted to the Agent in this
letter,  in my note,  in your  guaranty of my note,  or in any other  document
previously, simultaneously or hereafter executed and delivered by me or by any
other  party  to  the  Agent  in  connection  with  this  letter  or  my  note
(collectively,  the "LOAN  DOCUMENTS"),  whether express or implied,  shall be
cumulative and may be exercised singly or concurrently  with such other rights
as the Agent may have.  I also  agree  that no failure or delay on the part of
the Agent in exercising any right, power or privilege hereunder,  under any of
the Loan  Documents,  or  under  applicable  law,  shall  operate  as a waiver
thereof;  nor shall any single or  partial  exercise  of any  right,  power or
privilege  hereunder  or  thereunder  preclude  any other or further  exercise
thereof or the exercise of any other right,  power,  or  privilege.  I further
agree that no waiver or modification  of any right,  power or privilege of the
Agent or of any  obligation  of mine shall be effective  unless such waiver or
modification is in writing,  signed by the Agent,  and then only to the extent
set forth therein,  and I agree that a waiver by the Agent of any right, power
or privilege hereunder on any one occasion shall not be construed as a bar to,
or a waiver of, any such right,  power or privilege  which the Agent otherwise
would have on any subsequent occasion.

     This agreement is given in amendment, restatement and replacement of that
letter agreement dated as of __________ given by me to the Company pursuant to
which I pledged my Employee  Pledged  Shares to the Agent as security  for the
Note.

<PAGE>

     This letter constitutes a security agreement in favor of the Agent, and I
understand  that the Agent is  entitled  to rights and  remedies  as a secured
party under this agreement and  applicable  law. I authorize and direct you to
provide a copy of this letter to the Agent, and I understand that the Agent is
relying on this letter, in addition to your guaranty of my note, in making its
loan to me.



Witness:_____________________             Signed:_____________________
           (Signature)

Name:    ________________________                 Name:_______________________
           (Print or Type)                              (Print or Type)

                                          Tax ID No.:_________________


<PAGE>

                                  EXHIBIT D-2
                                      TO
                           AMENDED CREDIT AGREEMENT

           FORM OF EMPLOYEE PLEDGE AGREEMENT (FOR HOLDING COMPANIES)

                                        Name:    _____________________________

                                        Address: _____________________________

                                                 _____________________________

                                                 _____________________________

                                           Date: _____________________________


Watson Wyatt & Company Holdings
1717 H Street, NW, 8th Floor
Washington, DC 20006

Attn:  Mr. Walter W. Bardenwerper, General Counsel & Secretary

Gentlemen:

     The undersigned  employee  [Employee Name] (the  "EMPLOYEE") has issued a
promissory  note (the "NOTE") in the principal  amount of $________ to Bank of
America,  N.A., a national banking association  formerly known as NationsBank,
N.A.  (the  "AGENT"),  as agent for itself and certain  other banks.  The Note
evidences  a loan made to the  Employee  by the  Agent  (the  "LOAN")  for the
purpose of financing or refinancing the purchase by the  undersigned  personal
holding company [PERSONAL HOLDING COMPANY NAME] (the "HOLDING COMPANY") of ___
shares of the  common  stock of Watson  Wyatt & Company  (the  "COMPANY").  In
connection  with the initial  public  offering  of the common  stock of Watson
Wyatt & Company  Holdings  ("HOLDINGS"),  my  shares  of  common  stock of the
Company converted into ___ shares of common stock of Holdings.

     As security  for the timely  satisfaction  of all  obligations  under the
Note,  the  undersigned  hereby  pledges to the Agent all shares  purchased or
refinanced with the proceeds of the Loan, including the shares of common stock
of Holdings  issued in  conversion  of or exchange for the common stock of the
Company (the "EMPLOYEE PLEDGED SHARES"), and grants to the Agent a lien on and
security interest in the Employee Pledged Shares and all proceeds thereof.

     Holdings  and/or its transfer agent is hereby  authorized and directed to
register on its books the  undersigned's  pledge to the Agent of the  Employee
Pledged Shares,  to identify said pledge of the Employee Pledged Shares on all
initial and periodic statements and all other statements or notices respecting
the Employee  Pledged  Shares,  and to have all pledgee notices and statements

<PAGE>

respecting the Employee  Pledged Shares as well as any and all certificates or
any other  instruments  or  documents  evidencing  ownership  of the  Employee
Pledged Shares sent directly to the Agent at the following address:

                    Bank of America, N.A.
                    101 North Tryon Street, 15th Floor
                    NC1-001-15-04
                    Charlotte, North Carolina 28255
                    Attn: Tammie Cotton, Agency Services

The undersigned agree that the Agent shall take and maintain possession of any
and all such statements,  notices, certificates,  instruments and documents in
its capacity as pledgee.

     In the  event  that  the  undersigned  sells  any or all of the  Employee
Pledged Shares prior to repayment of the Loan from the Agent,  the undersigned
agrees and directs that the  purchaser(s)  thereof  shall be directed to remit
the purchase  price to Holdings and that Holdings  shall apply the proceeds of
such sale in the manner  provided  above.  To facilitate  the  foregoing,  the
undersigned  agrees  and  directs  that  Holdings  and/or its  transfer  agent
register on its books and identify on all transaction and periodic  statements
respecting the Employee  Pledged Shares the restriction  that any purchaser of
the  Employee  Pledged  Shares may be  required  to remit the  purchase  price
directly to Holdings to be applied in payment of my indebtedness to the Agent,
and the undersigned further agrees and directs that the following legend shall
be placed on all certificates, if any, for the Employee Pledged Shares:

            "In the event the shares represented by this certificate are sold,
            the purchaser may be required to remit the purchase price directly
            to  Holdings to be applied in payment of certain  indebtedness  of
            the  registered  holder  to Bank of  America,  N.A.,  as agent for
            itself and certain other banks."

Such legend  shall be removed  from any  certificate  if and when  Holdings is
advised in writing by the Agent that all  indebtedness  to the Agent under the
Note has been repaid in full.

     Upon the sale of any Employee Pledged Shares,  the undersigned  agrees to
immediately prepay the principal of the Note in an amount equal to the product
of (a) the sum of (i) the number of Employee  Pledged  Shares sold  DIVIDED by
(ii) the total number of Employee Pledged Shares  (including the shares sold),
MULTIPLIED by (b) the outstanding  principal of the Note (for example,  if the
Note is secured by 10,000 Employee  Pledged Shares and the  undersigned  sells
2,500 Employee  Pledged Shares (which  represents 25% of the Employee  Pledged
Shares),  then the undersigned must prepay 25% of the outstanding principal of
the Note).

     Upon the  payment in full of all amounts due under the Note issued to the
Agent and with  respect to all of the  Employee  Pledged  Shares that have not
been sold or otherwise  disposed of under the terms of this letter,  the Agent
will direct  Holdings  and/or its transfer  agent to register on its books the
release  of the  Agent's  lien on and  restriction  respecting  such  Employee
Pledged Shares, and will have delivered to Holding, at Holdings' expense, free
of liens  and  encumbrances,  and  without  recourse  or  representation,  all
certificates,  if any, for such Employee Pledged Shares. The undersigned agree

<PAGE>

that beyond the exercise of reasonable  care,  the Agent shall have no duty or
liability to preserve rights  pertaining to the Employee  Pledged Shares,  and
shall be relieved of all  responsibility  for the Employee Pledged Shares upon
issuing a direction  to Holdings  and/or its  transfer  agent to register  the
release of its lien on and the foregoing  restriction  respecting the Employee
Pledged  Shares and upon  surrendering  or tendering  surrender to the Holding
Company of all certificates, if any, respecting the Employee Pledged Shares.

     All rights,  remedies and powers granted to the Agent in this letter,  in
the Note, in your guaranty of the Note, or in any other  document  previously,
simultaneously  or hereafter  executed and  delivered by either or both of the
undersigned or by any other party to the Agent in connection  with this letter
or the Note (collectively,  the "LOAN DOCUMENTS"), whether express or implied,
shall be  cumulative  and may be exercised  singly or  concurrently  with such
other  rights as the Agent may have.  No  failure  or delay on the part of the
Agent in exercising any right, power or privilege hereunder,  under any of the
Loan  Documents,  or under  applicable law, shall operate as a waiver thereof;
nor shall any single or partial  exercise  of any  right,  power or  privilege
hereunder or thereunder  preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. No waiver or modification of
any right,  power or privilege of the Agent or of any  obligation of either or
both of the undersigned  shall be effective unless such waiver or modification
is in  writing,  signed by the  Agent,  and then only to the  extent set forth
therein,  and a waiver by the Agent of any right, power or privilege hereunder
on any one  occasion  shall not be  construed as a bar to, or a waiver of, any
such right,  power or privilege  which the Agent  otherwise  would have on any
subsequent occasion.

     This agreement is given in amendment, restatement and replacement of that
letter agreement dated as of __________ given by me to the Company pursuant to
which I pledged my Employee  Pledged  Shares to the Agent as security  for the
Note.

<PAGE>

     This letter  constitutes a security  agreement in favor of the Agent, and
the  undersigned  understand that the Agent is entitled to rights and remedies
as a secured party under this  agreement and applicable  law. The  undersigned
authorize  and direct  Holdings  to provide a copy of this letter to the Agent
and  understand  that the Agent is relying on this letter,  in addition to the
Company's guaranty of the Note, in making the Loan.


                                         Employee:

Witness:_______________________          Signed:_____________________
         (Signature)                            (Employee Signature)


Name:__________________________          Name:________________________________
       (Print or Type)                       (Print or Type)


                                         Personal Holding Company:

Witness:_______________________          Signed:______________________________
       (Signature)                           (Name of Personal Holding Co.)

Name:__________________________          Tax ID No.:__________________________
     (Type or Print Name)                           (Print or Type)

                                         By:__________________________________
                                              (Employee Signature)

                                         Name:________________________________
                                              (Type or Print Employee Name)


<PAGE>

                                   EXHIBIT E
                                      TO
                           AMENDED CREDIT AGREEMENT

                         FORM OF EMPLOYEE STOCK POWER


  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to



the following shares of the common stock of WATSON WYATT & COMPANY HOLDINGS, a
Delaware corporation:

              NO. OF SHARES                 CERTIFICATE NO.



and  irrevocably  appoints  __________________________________  its  agent and
attorney-in-fact  to transfer all or any part of such common stock and to take
all necessary and  appropriate  action to effect any such transfer.  The agent
and attorney-in-fact may substitute and appoint one or more persons to act for
him.  The  effectiveness  of a transfer  pursuant to this stock power shall be
subject to any and all  transfer  restrictions  referenced  on the face of the
certificates  evidencing such interest or in the certificate of  incorporation
or bylaws of the subject corporation, to the extent they may from time to time
exist.


                                              By:_____________________________
                                              Name:
                                              Title:

<PAGE>

                                   EXHIBIT F
                          TO AMENDED CREDIT AGREEMENT

                          FORM OF NOTICE OF BORROWING

TO:      Bank of America, N.A., as Agent
         101 North Tryon Street, 15th Floor
         NC1-001-15-04
         Charlotte, North Carolina  28255
         Attn: Tammie Cotton, Agency Services

           RE: Credit Agreement dated as of June 30, 1998 among Watson Wyatt &
               Company (the "Borrower"),  the Guarantors  identified  therein,
               the banks  party  thereto  (the  "Banks")  and Bank of America,
               N.A.,  a  national  banking   association   formerly  known  as
               NationsBank,  N.A., as Agent (as amended, modified, extended or
               restated from time to time, the "Credit Agreement")

DATE:    _____________, 2000__
______________________________________________________________________________

1.       This Notice of Borrowing is made  pursuant to the terms of the Credit
         Agreement.  All  capitalized   terms  used  herein  unless  otherwise
         defined shall have the meanings set forth in the Credit Agreement.

2.       Please be advised that:

         ______   (a)   the Borrower is requesting  Revolving  Credit Loans in
                        the   amount   of   $__________   to  be   funded   on
                        ____________,  200__ at the  interest  rate option set
                        forth in paragraph 3 below.  Subsequent to the funding
                        of the requested Revolving Credit Loans, the aggregate
                        amount of outstanding Revolving Credit Loans, together
                        with outstanding LOC  Obligations,  will be $_________
                        which is less than or equal to the Aggregate Revolving
                        Credit Commitment.

         ______   (b)   the  Borrower  is  requesting that  a  portion  of the
                        current  outstanding  Revolving  Credit  Loans  in the
                        amount of  $__________ be extended or converted at the
                        interest rate option set forth in paragraph 3 below.

3.       The  interest  rate option  applicable  to the  requested   Revolving
         Credit  Loans (or the  extension  or conversion of all or part of the
         existing Revolving Credit Loans), as set forth above, shall be:

         a.       ________ the Base Rate

<PAGE>

         b.       ________ the Eurodollar Rate plus the Applicable  Percentage
                           for an Interest Period of:

                                    ________ one month
                                    ________ two months
                                    ________ three months
                                    ________ six months

4.       The  representations and warranties set forth in the Credit Documents
         are true and correct in all material  respects as if made on the date
         hereof and shall be true and correct as of the date of the  borrowing
         (or continuation or conversion thereof).

5.       As of the date hereof,  no Incipient  Default or Event of Default has
         occurred  and is  continuing  or would be  caused  by this  Notice of
         Borrowing  or the making of Loans  requested  hereby and no Incipient
         Default  or  Event  of  Default  shall  exist  as of the  date of the
         borrowing (or continuation or conversion thereof).

7.       No material  adverse  effect has occurred in the  financial condition
         of the Borrower since the Closing Date.

8.       No Margin Stock Event has occurred.

                                                  WATSON WYATT & COMPANY

                                                By:___________________________
                                                Name:_________________________
                                                Title:________________________


<PAGE>

                                   EXHIBIT H
                                      TO
                           AMENDED CREDIT AGREEMENT

                           FORM OF JOINDER AGREEMENT

     THIS JOINDER AGREEMENT (the "AGREEMENT"),  dated as of __________, 200__,
is by  and  between  __________,  a  __________  corporation  (the  "APPLICANT
GUARANTOR"),  and Bank of America,  N.A.,  in its capacity as Agent under that
certain  Credit  Agreement  dated as of June 30, 1998 (as  amended,  modified,
supplemented  or extended from time to time,  the "CREDIT  AGREEMENT")  by and
among  Watson  Wyatt  &  Company,  a  Delaware  corporation,   the  Guarantors
identified therein, the Banks identified therein and Bank of America, N.A., as
Agent.  All of the  defined  terms in the Credit  Agreement  are  incorporated
herein by reference.

     The Applicant Guarantor has indicated its desire to become a Guarantor or
is required by the terms of Section  6.11 of the Credit  Agreement to become a
Guarantor under the Credit Agreement.

     Accordingly,  the Applicant  Guarantor  hereby agrees as follows with the
Agent for the benefit of the Banks:

     1. The Applicant Guarantor hereby acknowledges, agrees and confirms that,
by its execution of this Agreement,  the Applicant Guarantor will be deemed to
be a party to the Credit  Agreement and a "Guarantor"  for all purposes of the
Credit  Agreement  and the other Credit  Documents,  and shall have all of the
obligations  of a  Guarantor  thereunder  as if it  had  executed  the  Credit
Agreement and the other Credit Documents. The Applicant Guarantor agrees to be
bound by all of the terms,  provisions and conditions  contained in the Credit
Documents,  including  without  limitation  (i)  all  of the  affirmative  and
negative  covenants  set forth in Articles VI and VII of the Credit  Agreement
and (ii) all of the  undertakings  and  waivers set forth in Article IV of the
Credit  Agreement.  Without  limiting the generality of the foregoing terms of
this  paragraph 1, the  Applicant  Guarantor  hereby (A) jointly and severally
together with the other,  guarantees to the Agent and each Bank (including the
Issuing Bank) as provided in Article III of the Credit  Agreement,  the prompt
payment  and  performance  of the  Guaranteed  Obligations  in full  when  due
(whether at stated maturity, as a mandatory prepayment, by acceleration,  as a
mandatory cash collateralization or otherwise) strictly in accordance with the
terms thereof,  (B) agrees that if any of the Guaranteed  Obligations  are not
paid or performed in full when due (whether at stated maturity, as a mandatory
prepayment,  by  acceleration,   as  a  mandatory  cash  collateralization  or
otherwise),  the Applicant Guarantor will, jointly and severally together with
the other Guarantors, promptly pay and perform the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed  Obligations,  the same will be promptly paid
in full when due (whether at extended maturity, as a mandatory prepayment,  by
acceleration,   as  a  mandatory  cash   collateralization  or  otherwise)  in
accordance  with the terms of such  extension  or  renewal,  (C) grants to the
Agent,  for the ratable benefit of the Banks, a continuing  security  interest
in, and a right to set off against, its Collateral (as defined in the Security
Agreement)  as  collateral  security for the prompt and  complete  payment and
performance  when  due  (whether  at  stated  maturity,   by  acceleration  or
otherwise) of the Secured Obligations (as defined in the Security  Agreement),
and (D) pledges to the Agent, for the ratable benefit of the Banks, and grants
to the Agent, for the ratable benefit of the Banks, a first security  interest
in, the Pledged Stock identified on SCHEDULE A hereto pursuant to the terms of
the Credit Party Pledge  Agreement as  collateral  security for the prompt and
complete payment and performance when due (whether at the stated maturity,  by

<PAGE>

acceleration  or  otherwise)  of the  Pledgor  Obligations  (as defined in the
Credit Party Pledge Agreement).

     2. The Applicant Guarantor acknowledges and confirms that it has received
a copy of the  Credit  Agreement  and the other  Credit  Documents  (including
schedules and exhibits thereto). The information on Schedules 1(b), 4(a), 4(b)
and 4(c) to the  Security  Agreement  and  Schedule  2(a) to the Credit  Party
Pledge  Agreement are amended to include the information set forth on SCHEDULE
A hereto.

     3. The Applicant  Guarantor hereby waives acceptance by the Agent and the
Banks of the  guaranty by the  Applicant  Guarantor  under  Article III of the
Credit Agreement upon the execution of this Joinder Agreement by the Applicant
Guarantor.

     4. This  Agreement may be executed in two or more  counterparts,  each of
which shall  constitute an original but all of which when taken together shall
constitute one contract.

     5. This Agreement  shall be governed by and construed and  interpreted in
accordance with the laws of the State of North Carolina.

<PAGE>

     IN WITNESS  WHEREOF,  the  Applicant  Guarantor  has caused this  Joinder
Agreement to be duly executed by its authorized  officers,  and the Agent, for
the benefit of the Banks, has caused the same to be accepted by its authorized
officer, as of the day and year first above written.

                                           APPLICANT GUARANTOR

                                           By:  ______________________________
                                           Name:
                                           Title:

                                           Address for Notices:

                                           [address]
                                           Attn:
                                           Telephone:
                                           Telecopy:

                                           Acknowledged and accepted:

                                           BANK OF AMERICA, N.A., as Agent

                                           By:  ______________________________
                                           Name:
                                           Title:


<PAGE>

                                  SCHEDULE A
                                      TO
                               JOINDER AGREEMENT

                      SCHEDULE 1(B) TO SECURITY AGREEMENT

                             Intellectual Property



                      SCHEDULE 4(A) TO SECURITY AGREEMENT

                            Chief Executive Office



                      SCHEDULE 4(B) TO SECURITY AGREEMENT

                            Locations of Collateral



                      SCHEDULE 4(C) TO SECURITY AGREEMENT

       Mergers, Consolidations, Change in Structure or Use of Tradenames



                       SCHEDULE 2(A) TO PLEDGE AGREEMENT

                         Description of Pledged Shares


<PAGE>
                                   EXHIBIT I
                                      TO
                           AMENDED CREDIT AGREEMENT

                FORM OF AGREEMENT TO EMPLOYEE PLEDGE AGREEMENTS

     In  consideration  of financial  accommodations  made by Bank of America,
N.A., a national banking association  formerly known as NationsBank,  N.A., as
Agent for the Banks party to the Credit Agreement referred to below ("AGENT"),
to or at the  request  of Watson  Wyatt & Company  (the  "BORROWER"),  and the
mutual covenants contained in that certain Credit Agreement,  dated as of June
30, 1998, among the Borrower,  the Subsidiary  Guarantors  identified therein,
the Agent and the Banks party  thereto (the  "BANKS"),  as said  agreement may
have been or may be amended  from time to time (the "CREDIT  AGREEMENT"),  and
having  reviewed  the Employee  Pledge  Agreements  executed and  delivered in
connection  with Employee Loans as identified on the attached  schedule (which
schedule  identifies  all Employee  Pledge  Agreements  executed and delivered
after   ___________________),   the  Borrower   hereby   reaffirms  its  prior
acknowledgment of and agreement to certain of the Employee Pledge  Agreements,
and hereby further acknowledges and agrees to the terms and conditions of each
and every one of the Employee Pledge Agreements.

     This  Agreement to Employee  Pledge  Agreements is executed and delivered
with the  intent  that  the  Borrower  shall be bound by each of the  Employee
Pledge  Agreements  and that the Agent and the Banks  shall  rely  hereon  and
thereon in making or participating in Employee Loans.

     Capitalized  terms used but not defined  herein  shall have the  meanings
stated in the Credit Agreement.  As used herein,  "EMPLOYEE PLEDGE AGREEMENTS"
shall include any and all amendments to the Employee Pledge Agreements.

                                             WATSON WYATT & COMPANY

                                             By:   ___________________________
                                             Name: ___________________________
                                             Title:___________________________

<PAGE>

           Schedule of Employee Loans and Employee Pledge Agreements

------------ ---------------------  -------------------------- ---------------
    NAME      INITIAL LOAN AMOUNT    NUMBER OF SHARES PLEDGED       DATE
------------ ---------------------  -------------------------- ---------------
------------ ---------------------  -------------------------- ---------------
------------ ---------------------  -------------------------- ---------------