SECOND AMENDED AND RESTATED
                                CREDIT AGREEMENT
                                 (MULTICURRENCY)


             Dated as of June 25, 1997, effective as of June 1, 1997


                                     between


                               FILENET CORPORATION


                                       and


                         BANK OF AMERICA NATIONAL TRUST
                             AND SAVINGS ASSOCIATION










<PAGE>

                                TABLE OF CONTENTS


Section                                                                    Page

  ARTICLE I
        Definitions and Financial Requirements.............................  1

  1.01  Definitions........................................................  1
  1.02  Financial Requirements.............................................  8

                                                     ARTICLE II
        The Credit Facilities..............................................  8

  2.01  The Revolving Facility.............................................  8
  2.02  Advances Under the Revolving Facility..............................  9
  2.03  Commercial Letters of Credit under the Revolving Facility.......... 11
  2.04  Standby Letters of Credit Under the Revolving Facility............. 12
  2.05  Local Currency Advances............................................ 14
  2.06  Bank Guaranties.................................................... 14
  2.07  Optional Prepayment................................................ 15
  2.08  Mandatory Payment.................................................. 15
  2.09 Commitment Fee. .................................................... 16
  2.10  Default Rate....................................................... 16
  2.11  Early Termination of Commitment.................................... 16

                                                     ARTICLE III
        Extensions of Credit, Payments and Interest Calculations........... 16

  3.01  Requests for Credit................................................ 16
  3.02  Disbursements and Payments......................................... 17
  3.03  Branch Accounts.................................................... 17
  3.04  Evidence of Indebtedness........................................... 17
  3.05  Interest Calculation............................................... 17
  3.06  Late Payments; Compounding......................................... 17
  3.07  Business Day....................................................... 17
  3.08  Taxes and Other Charges............................................ 18
  3.09  Illegality......................................................... 19
  3.10  Increased Costs.................................................... 19
  3.11  Funding Losses..................................................... 20
  3.12  Inability to Determine Rates....................................... 20
  3.13  Certificate of the Bank............................................ 20
  3.14  Debits to Borrower's Account....................................... 20
  3.15  Survival........................................................... 21

                                                     ARTICLE IV
        Conditions to Availability of Credit............................... 21

  4.01  Conditions to First Extension of Credit............................ 21
  4.02  Conditions to Each Extension of Credit............................. 21

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Section                                                                    Page
                                                      ARTICLE V
        Representations and Warranties..................................... 22

  5.01  Corporate Existence and Power...................................... 22
  5.02  Authorization...................................................... 22
  5.03  Enforceability..................................................... 23
  5.04  Compliance with Laws............................................... 23
  5.05  Permits, Franchises................................................ 23
  5.06  Litigation......................................................... 23
  5.07  No Event of Default................................................ 23
  5.08  Other Obligations.................................................. 23
  5.09  Tax Returns........................................................ 23
  5.10  Information Submitted.............................................. 24
  5.11  No Material Adverse Effect......................................... 24
  5.12  ERISA Compliance................................................... 24
  5.13  Environmental Matters.............................................. 24

  ARTICLE VI
        Affirmative Covenants.............................................. 25

  6.01  Notices of Certain Events.......................................... 25
  6.02  Financial and Other Information.................................... 25
  6.03  Books, Records, Audits and Inspections............................. 26
  6.04  Use of Facility.................................................... 26
  6.05  Insurance.......................................................... 26
  6.06  Compliance with Laws............................................... 27
  6.07  Change in Name, Structure or Location.............................. 27
  6.08  Existence and Properties........................................... 27
  6.09  Additional Acts.................................................... 27

                                                     ARTICLE VII
        Negative Covenants................................................. 27

  7.01  Other Indebtedness................................................. 27
  7.02  Liens   28
  7.03  Capital Assets..................................................... 29
  7.04  Dividends.......................................................... 29
  7.05  Loans   29
  7.06  Acquisitions, Liquidations and Mergers............................. 29
  7.07  Sale of Assets..................................................... 30
  7.08  Business Activities................................................ 30
  7.09  Regulations G, T, U, and X......................................... 30
  7.10  Use of Proceeds - Ineligible Securities............................ 30
  7.11  Quick Ratio........................................................ 31
  7.12  Total Liabilities to Tangible Net Worth............................ 31
  7.13  Tangible Net Worth................................................. 31
  7.14  Consecutive Quarterly Losses; Losses in One Quarter................ 32

                                       ii
<PAGE>

                                                    ARTICLE VIII
        Events of Default.................................................. 32

  8.01  Events of Default.................................................. 32
               (a)  Failure to Pay......................................... 32
               (b)  Breach of Representation or Warranty................... 32
               (c)  Specific Defaults...................................... 32
               (d)  Other Defaults......................................... 32
               (e)  Trade Suits............................................ 32
               (f)  Judgments.............................................. 32
               (g)  Failure to Pay Debts; Voluntary Bankruptcy............. 33
               (h)  Involuntary Bankruptcy................................. 33
               (i)  Default of Other Financial Obligations................. 33
               (j)  Default under other Credit Documents................... 33
               (k)  Default of Other Bank Obligations...................... 33
               (l)  Material Adverse Effect................................ 33
               (m)  ERISA 33
               (n)  Change of Control...................................... 34
  8.02  Remedies........................................................... 34

                                                     ARTICLE IX
        Miscellaneous...................................................... 35

  9.01  Successors and Assigns............................................. 35
  9.02  Consents and Waivers............................................... 35
  9.03  Governing Law...................................................... 35
  9.04  Costs and Attorneys' Fees.......................................... 35
  9.05  Integration; Amendment............................................. 36
  9.06  Borrower's Documents............................................... 36
  9.07  Participations..................................................... 36
  9.08  General Indemnification............................................ 36
  9.09  Arbitration; Reference Proceeding.................................. 37
  9.10  Notices............................................................ 38
  9.11  Headings; Interpretation........................................... 39
  9.12  Severability....................................................... 39
  9.13  Counterparts....................................................... 39
  9.14  Waiver of Jury Trial............................................... 39

EXHIBITS

Exhibit A      Form of Compliance Certificate

                                       iii

<PAGE>

                           SECOND AMENDED AND RESTATED
                                CREDIT AGREEMENT
                                 (MULTICURRENCY)


               THIS   SECOND    AMENDED   AND    RESTATED    CREDIT    AGREEMENT
(MULTI-CURRENCY)  (this  "Agreement")  is  entered  into  as of June  25,  1997,
effective as of June 1, 1997, between FILENET CORPORATION (the "Borrower"),  and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank").

               A. The  Borrower  and the Bank have  entered  into an Amended and
Restated Credit Agreement dated as of April 30, 1994, as amended and restated by
a Second Amended and Restated Credit Agreement  (Multicurrency),  as amended (as
so amended and restated and amended, the "Original Credit Agreement"),  pursuant
to which the Bank has agreed, on the terms and conditions  contained therein, to
extend credit to the Borrower and certain of its subsidiaries.

               B. The parties hereto desire to amend and restate in its entirety
the  Original  Credit  Agreement upon the terms and conditions set forth in this
Agreement.

               In consideration of the mutual covenants and agreements contained
herein, the Borrower and the Bank agree as follows:

                                    ARTICLE I
                     Definitions and Financial Requirements.

   1.01 Definitions. The following terms (including plural and singular versions
thereof) have the meanings indicated:

         "Acceptable Subsidiary": a Subsidiary of the Borrower acceptable to the
Bank  in  its  sole  discretion  that  (a) is  specified  as a  "Borrower"  on a
continuing guaranty executed by the Borrower in form and substance  satisfactory
to the Bank, (b) has executed such credit and related  documentation with and in
favor of the Bank as the Bank may request,  and (c) (i) for extensions of credit
in the form of Dollar Advances, Offshore Currency Advances, or letters of credit
denominated in Dollars, is located in the United States and (ii) for purposes of
extensions of credit in the form of Local Currency  Advances,  letters of credit
denominated in a Local Currency or Bank  Guaranties,  is located  outside of the
United States.

     "Advance": an advance hereunder, which, subject to the terms and conditions
hereof, may be in Dollars, an Offshore Currency, or a Local Currency.

                                       1
<PAGE>

     "Availability  Period": the period commencing on the date of this Agreement
and ending on the date that is the earlier to occur of (a) May 31, 1999,  or (b)
the date on which the Bank's commitment to extend credit hereunder terminates.

     "Bank Guaranty": a guaranty issued hereunder by an Offshore Credit Provider
for the Borrower's or an Acceptable Subsidiary's account.

         "Bank  Guaranty  Outstanding  Amount":  at  any  time,  the  amount  or
Equivalent  Amount  guaranteed  pursuant to any Bank  Guaranty but not disbursed
thereunder  at such time,  plus all amounts  paid under any Bank  Guaranty by an
Offshore  Credit  Provider  which have not yet been  reimbursed,  plus any other
obligation  or  liability  of the Borrower or an  Acceptable  Subsidiary  to any
Offshore Credit Provider with respect to any Bank Guaranty.

         "Business Day": any day other than a Saturday,  a Sunday,  or other day
on which  commercial  banks in San  Francisco,  California,  are  authorized  or
required  by law to close and,  if the  applicable  Business  Day relates to any
Offshore Rate Advance,  means such a day on which dealings are carried on in the
applicable offshore interbank market.

     "CD Rate": for any CD Rate Interest Period,  the rate of interest  (rounded
upward to the next 1/100th of 1%) determined pursuant to the following formula:

                              CD Rate = Certificate of Deposit Rate + Assessment
                             1.00 - Reserve Percentage         Rate

                  Where:

                           "Assessment  Rate" means, for any day of such CD Rate
                  Interest  Period,  the rate determined by the Bank as equal to
                  the annual  assessment rate in effect on the first day of such
                  CD Rate  Interest  Period  that is  payable  to the  FDIC by a
                  member  of the  Bank  Insurance  Fund  that is  classified  as
                  adequately capitalized and within supervisory subgroup "A" (or
                  a comparable successor  assessment risk classification  within
                  the meaning of 12 C.F.R.  ss.327.3) for insuring time deposits
                  at offices of such  member in the  United  States,  or, in the
                  event  that the FDIC  shall  at any  time  hereafter  cease to
                  assess  time  deposits  based  upon  such  classifications  or
                  successor   classifications,   equal  to  the  maximum  annual
                  assessment  rate in effect on such day that is  payable to the


                                       2
<PAGE>

                  FDIC by  commercial  banks  (whether or not  applicable to the
                  Bank) for insuring  time  deposits at offices of such banks in
                  the United States.

                           "Certificate of Deposit Rate" means,  for any CD Rate
                  Interest Period,  the rate of interest per annum determined by
                  the Bank to be the  arithmetic  mean  (rounded  upward  to the
                  nearest  1/100th of 1%) of the rates  notified  to the Bank as
                  the  rates  of  interest  bid by two or  more  certificate  of
                  deposit  dealers of recognized  standing  selected by the Bank
                  for the  purchase  at face  value of  dollar  certificates  of
                  deposit  issued by major United States  banks,  for a maturity
                  comparable  to  the  CD  Rate  Interest   Period  and  in  the
                  approximate  amount of the CD Rate Advance to be made,  at the
                  time  selected  by the Bank on the  first  day of such CD Rate
                  Interest Period.

                           "Reserve  Percentage" means, for any CD Rate Interest
                  Period the maximum reserve percentage (expressed as a decimal,
                  rounded upward to the nearest 1/100th of 1%), as determined by
                  the Bank, in effect on the first day of such  interest  period
                  (including any ordinary,  marginal,  emergency,  supplemental,
                  special and other reserve  percentages)  prescribed by the FRB
                  for  determining  the  maximum  reserves to be  maintained  by
                  member  banks of the  Federal  Reserve  System  with  deposits
                  exceeding  $1,000,000,000  for new non-personal  time deposits
                  for a period  comparable to the CD Rate Interest Period and in
                  an amount of $100,000 or more.

         "CD Rate Advance": an Advance that bears interest based on the CD Rate.

         "CD  Rate  Interest  Period":  for  each CD Rate  Advance,  the  period
commencing  on the date the CD Rate  Advance  begins to bear  interest at a rate
based on the CD Rate and ending 30, 60, 90, or 180 days thereafter, as requested
by the Borrower;  provided,  however, that no such CD Rate Interest Period shall
extend beyond the Final Maturity Date.

     "Closing Date":  the date on which all conditions to the initial  extension
of credit hereunder are satisfied.

     "Code":  the Internal  Revenue Code of 1986, as amended,  and the rules and
regulations promulgated thereunder as from time to time in effect.

                                       3
<PAGE>

     "Compliance  Certificate":  a  certificate,  substantially  in the  form of
Exhibit A,  executed and  delivered on behalf of the Borrower by an  appropriate
officer of the Borrower.

     "Credit Documents":  collectively, this Agreement and each other agreement,
documents and instrument now or hereafter  delivered to the Bank  (including any
Offshore Credit Provider) in connection with the credits  established herein and
the transactions contemplated hereby.

     "Credit Limit": the amount $20,000,000 or the Equivalent Amount thereof.

     "Default":  any event or circumstance which, with the giving of notice, the
lapse of time, or both,  would (if not cured or otherwise  remedied  during such
time) constitute an Event of Default.

         "Dollars", "dollars" and "$":  each, lawful money of the United States.

         "Dollar Advances":  specified in subsection 2.01(c).

         "Environmental Laws": any foreign,  federal, state, local, or municipal
laws,  rules,  orders,  regulations,   statutes,   ordinances,  codes,  decrees,
requirements of any governmental authority,  any and all requirements of law and
any and all common law requirements,  rules, and bases of liability  regulating,
relating to, or imposing liability or standards of conduct concerning  pollution
or protection of human health or the environment or Hazardous  Substances or any
activity involving Hazardous Substances, as now or may at any time hereafter may
be in effect.

         "Equivalent  Amount":  whenever  this  Agreement  requires or permits a
determination on any date of the equivalent in dollars of an amount expressed in
a currency other than dollars,  the  equivalent  amount in dollars of any amount
expressed  in a currency  other than dollars as  determined  by the Bank on such
date on the basis of the Spot Rate for the  purchase of dollars  with such other
currency on the relevant date.

     "ERISA":  the Employee  Retirement Income Security Act of 1974, as amended,
and the rules and  regulations  promulgated  thereunder  as from time to time in
effect.

         "ERISA Event":  (a) a Reportable  Event with respect to a Pension Plan;
(b) a withdrawal  by the Borrower from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a  substantial  employer (as defined in
Section  4001(a)(2) of ERISA) or a cessation of  operations  which is treated as


                                       4
<PAGE>

such a withdrawal  under Section 4062(e) of ERISA; (c) the filing of a notice of
intent to terminate,  the treatment of a plan  amendment as a termination  under
Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to
terminate  a Pension  Plan  subject  to Title IV of ERISA;  (d) a failure by the
Borrower to make required  contributions to a Pension Plan or other Plan subject
to Section 412 of the Code; (e) an event or condition which might  reasonably be
expected to constitute  grounds under Section 4042 of ERISA for the  termination
of, or the  appointment  of a trustee to  administer,  any Pension Plan; (f) the
imposition  of any liability  under Title IV of ERISA,  other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Borrower; or (g) an
application  for a funding  waiver or an  extension of any  amortization  period
pursuant to Section 412 of the Code with respect to any Pension Plan.

     "Event of Default": any event listed in Article VIII of this Agreement.

     "FDIC": the Federal Deposit Insurance Corporation, or any entity succeeding
to any of its principal functions.

     "Final Maturity Date": (a) in respect of any Advances, May 31, 1999; (b) in
respect of any commercial  letters of credit,  November 30, 1999; (c) in respect
of any standby  letters of credit,  May 31, 2000; and (d) in respect of any Bank
Guaranties, May 31, 2000.

     "FRB": the Board of Governors of the Federal Reserve System,  or any entity
succeeding to any of its principal functions.

         "Hazardous  Substance":  any  hazardous or toxic  substance,  material,
pollutant,  waste  or  similar  designation,  defined,  listed,  classified,  or
regulated  as such in or  under  any  Environmental  Laws,  including  asbestos,
petroleum, or petroleum products (including gasoline, crude oil, or any fraction
thereof), polychlorinated biphenyls, and urea-formaldehyde insulation.

     "Investment Guidelines":  the Borrower's Investment Guidelines submitted to
the Bank and  approved  by the Bank prior to the Closing  Date,  and any changes
thereto after the Closing Date to the extent approved by the Bank in writing.

     "IRS": the Internal Revenue Service or any entity  succeeding to any of its
principal functions under the Code.

         "L/C  Outstanding   Amount":  at  any  time,  the  undrawn  amount  (or
Equivalent  Amount  thereof)  at  such  time  of any  letter  of  credit  issued
hereunder,  plus the  amount (or  Equivalent  Amount  thereof)  of all drafts or


                                       5
<PAGE>

drawings paid or accepted by the Bank or an Offshore  Credit Provider which have
not yet been reimbursed to the Bank or such Offshore Credit  Provider,  plus any
other  obligation or liability of the Borrower or any  Acceptable  Subsidiary to
the Bank or an Offshore  Credit  Provider  with  respect to any letter of credit
issued under this Agreement.

         "Local Currency":  specified in subsection 2.01(c).

         "Local Currency Advance":  specified in subsection 2.01(c).

         "Material  Adverse  Effect":  (a) a  material  adverse  change in, or a
material adverse effect upon, the operations,  business,  properties,  condition
(financial  or  otherwise)  or prospects of the Borrower or the Borrower and its
Subsidiaries  taken as a whole; (b) a material  impairment of the ability of the
Borrower or any Acceptable  Subsidiary to perform under any Credit Document;  or
(c) a material  adverse  effect upon the legality,  validity,  binding effect or
enforceability of any Credit Document.

     "Offshore  Credit  Provider":  a foreign office,  foreign branch or foreign
affiliate of the Bank, acceptable to the Bank. "Offshore Currency": specified in
subsection 2.01(c).

         "Offshore Currency Advance":  specified in subsection 2.01(c).

     "Offshore  Rate":  for each  Offshore  Rate  Interest  Period,  the rate of
interest  (rounded  upward to the next 1/16th of 1%) determined  pursuant to the
following formula:

                  Offshore Rate =              Offered Rate               
                                        ----------------------------------------
                                             1.00 - Eurodollar Reserve
                  Percentage

                  Where:

                                    "Offered Rate" means the rate of interest at
                  which deposits in the applicable  currency in the  approximate
                  amount of the  Offshore  Rate  Advance to be made and having a
                  maturity  comparable to such  Offshore  Rate  Interest  Period
                  would be offered  by the Bank's  Grand  Cayman  Branch,  Grand
                  Cayman,  British  West Indies (or such other  office as may be
                  designated  for such  purpose by the Bank),  to major banks in
                  the  offshore  interbank  market upon request of such banks at
                  approximately  8:00 a.m. San Francisco  time two Business Days
                  prior to the first day of such Offshore Rate Interest Period.

                                       6
<PAGE>

     "Eurodollar  Reserve  Percentage"  means,  for any Offshore  Rate  Interest
Period, the maximum reserve percentage  (expressed as a decimal,  rounded upward
to the next  1/100th  of 1%) in effect on the  first day of such  Offshore  Rate
Interest Period (whether or not applicable to the Bank) under regulations issued
from time to time by the FRB for  determining  the maximum  reserve  requirement
(including any emergency,  supplemental or other marginal  reserve  requirement)
with respect to Eurocurrency  funding  (currently  referred to as  "Eurocurrency
liabilities")  having a term  comparable to such Offshore Rate Interest  Period.
"Offshore Rate Advance":  an Advance for which interest is based on the Offshore
Rate.

         "Offshore  Rate  Interest  Period":  for each Offshore Rate Advance the
period  commencing on the date the Offshore Rate Advance begins to bear interest
at a rate based on the Offshore Rate and ending one, two,  three,  or six months
thereafter, as requested by the Borrower;  provided,  however, that the last day
of each Offshore Rate Interest Period shall be determined in accordance with the
practices of the applicable  offshore  interbank markets as from time to time in
effect,  and provided  further that no such interest  period shall extend beyond
the Final Maturity Date.

     "PBGC":  the Pension Benefit Guaranty  Corporation or any entity succeeding
to any of its principal functions under ERISA.

         "Pension  Plan":  a pension  plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions,  or in the case of a
multiple  employer  plan (as  described  in  Section  4064(a) of ERISA) has made
contributions at any time during the immediately preceding five plan years.

     "Plan":  an employee  benefit  plan (as  defined in Section  3(3) of ERISA)
which the Borrower  sponsors or maintains  or to which the  Borrower  makes,  is
making, or is obligated to make contributions and includes any Pension Plan.

         "Reference  Rate": for any day, the rate of interest in effect for such
day as  publicly  announced  from  time to time  by the  Bank in San  Francisco,
California,  as its  "reference  rate." It is a rate set by the Bank  based upon
various factors including the Bank's costs and desired return,  general economic
conditions and other factors,  and is used as a reference point for pricing some
loans,  which may be priced at, above,  or below such announced rate. Any change


                                       7
<PAGE>

in the reference  rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.

     "Reference  Rate  Advance":  an Advance  that bears  interest  based on the
Reference Rate.

     "Reportable Event": any of the events set forth in Section 4043(c) of ERISA
or the  regulations  thereunder,  other than any such event for which the 30-day
notice  requirement  under  ERISA has been waived in  regulations  issued by the
PBGC.

     "Revolving Facility": the line of credit described in Section 2.01.

         "Spot  Rate":  for a currency,  the rate quoted by the Bank as the spot
rate for the purchase by the Bank of such currency with another currency through
its Foreign Exchange Trading Center #5193,  San Francisco,  California,  or such
other  of  the  Bank's  offices  as it may  designate  from  time  to  time,  at
approximately 8:00 a.m. (San Francisco time) on the date two Business Days prior
to the date as of which the foreign exchange computation is made.

         "Subsidiary":   of  the   Borrower,   any   corporation,   association,
partnership,  joint venture,  or other business entity of which more than 50% of
the voting stock or other equity  interests (in the case of entities  other than
corporations),  is owned or controlled directly or indirectly by the Borrower or
one or more Subsidiaries of the Borrower or a combination thereof.

         "Unfunded   Pension   Liability":   the  excess  of  a  Plan's  benefit
liabilities  under Section  4001(a)(16) of ERISA, over the current value of that
Plan's assets,  determined in accordance with the  assumptions  used for funding
the Pension  Plan  pursuant to Section 412 of the Code for the  applicable  plan
year.

     1.02 Financial Requirements.  Unless otherwise specified in this Agreement,
all accounting terms used in this Agreement shall be interpreted,  all financial
computations  required  under this  Agreement  shall be made,  and all financial
information required under this Agreement shall be prepared,  in accordance with
generally  accepted  accounting  principles  in effect  from time to time in the
United States, consistently applied.


                                       8
<PAGE>

                                  ARTICLE IIII

                              The Credit Facilities

     2.01 The Revolving Facility.  (a) From time to time during the Availability
Period,  subject to the terms and  provisions  hereof,  the Bank, on a revolving
basis, will (i) make Advances to the Borrower or an Acceptable Subsidiary,  (ii)
create and issue  commercial and standby letters of credit for the Borrower's or
an Acceptable Subsidiary's account, and (iii) cause to be issued Bank Guaranties
for the Borrower's or an Acceptable Subsidiary's account.

                  (b) This  amendment  and  restatement  of the Original  Credit
Agreement  shall  not be  deemed  a  repayment,  satisfaction,  cancellation  or
novation of any credit  outstanding  thereunder or any other  obligations of the
Borrower or its  Subsidiaries  under the  Original  Credit  Agreement  or any of
documents or  instruments  given in  connection  therewith,  which shall instead
continue  and  constitute  obligations  hereunder  and under  the  other  Credit
Documents. All such documents or instruments given in connection therewith shall
be deemed to be Credit  Documents  hereunder,  and all guaranties  issued by the
Borrower with respect to credit extended or which may be extended by the Bank to
its Subsidiaries shall remain in full force and effect and shall be deemed to be
issued hereunder.

                   (c) Advances  hereunder  may be made in (i) dollars  ("Dollar
Advances")  to the  Borrower  or an  Acceptable  Subsidiary,  (ii)  in a  lawful
currency other than dollars which is freely  transferable  and convertible  into
dollars and is traded in the offshore  interbank currency markets at the time of
the Advance (an  "Offshore  Currency")  ("Offshore  Currency  Advances")  to the
Borrower or an Acceptable  Subsidiary,  or (iii) in a lawful currency other than
dollars  which is  available  at a branch or  affiliate of the Bank located in a
country  other than the United  States and is the legal  tender of that  country
where the branch or affiliate is located (a "Local  Currency")  ("Local Currency
Advances") to an Acceptable Subsidiary.

                  (d)  The  aggregate  of (i)  all  Dollar  Advances,  (ii)  the
Equivalent Amount of all Offshore Currency Advances and Local Currency Advances,
(iii) the L/C  Outstanding  Amount of all  letters of credit,  and (iv) the Bank
Guaranty  Outstanding  Amount of all Bank  Guaranties may not exceed at one time
the Credit Limit.

     2.02  Advances  Under the  Revolving  Facility.  (a)  Subject  to the other
provisions of this Section,  Dollar Advances under the Revolving  Facility shall
bear  interest at a rate per annum equal to the  Reference  Rate.  The  Borrower


                                       9
<PAGE>

shall pay or cause the applicable Acceptable Subsidiary to pay interest monthly,
on the last day of each month until the Final  Maturity  Date, on which date all
accrued and unpaid  interest shall be due and payable.  The Borrower shall repay
or cause the applicable  Acceptable  Subsidiary to repay the principal amount of
each  Reference  Rate  Advance  on the date such  advance is  converted  into an
Offshore Rate Advance or a CD Rate Advance under  subsections  (b) or (c) below,
and on the Final Maturity Date.

                  (b) In lieu of the interest rate described above, the Borrower
or the applicable Acceptable Subsidiary may elect during the Availability Period
to have all or portions of Advances  under the Revolving  Facility be in dollars
or an Offshore  Currency and bear  interest at the Offshore  Rate plus 0.75% per
annum  during  an  Offshore  Rate  Interest  Period,  subject  to the  following
requirements:

                           (i)  Each  Offshore  Rate  Advance  shall  be,  if in
         Dollars,  for an amount not less than  $500,000,  or, if in an Offshore
         Currency, in a minimum amount acceptable to the Bank.

                           (ii) The Borrower  shall pay or cause the  applicable
         Acceptable  Subsidiary to pay interest on each Offshore Rate Advance on
         the last day of the Offshore  Rate  Interest  Period for such  Advance;
         provided,  however,  that if any  Interest  Period for a Offshore  Rate
         Advance  exceeds one month,  interest shall also be payable on the date
         which falls one month after the beginning of such  Interest  Period and
         on each date  which  falls one month  after any such  interest  payment
         date.  The  Borrower  shall  repay or cause the  applicable  Acceptable
         Subsidiary to repay the principal balance of each Offshore Rate Advance
         on the last day of the Offshore Rate Interest  Period for such Advance,
         and (if sooner occurring) on the Final Maturity Date.

                           (iii) Any payment of an Offshore  Rate Advance  prior
         to the last day of the Offshore Rate Interest  Period for such Advance,
         whether  voluntary,  by reason of acceleration or otherwise,  including
         any mandatory payments required under this Agreement and applied by the
         Bank to an Offshore Rate Advance, shall be accompanied by the amount of
         accrued  interest  on the  amount  repaid  and by the  amount  (if any)
         required by Section 3.11.

                  (c) In lieu of the  interest  rates  described  above  in this
Section, the Borrower or the applicable  Acceptable  Subsidiary may elect during
the Availability  Period to have all or portions of Advances under the Revolving


                                       10
<PAGE>

Facility  be in dollars  and bear  interest  at the CD Rate plus 0.75% per annum
during a CD Rate Interest Period, subject to the following requirements:

                         (i) Each CD Rate  Advance  shall be for an  amount  not
                    less than $500,000.

                           (ii) The Borrower  shall pay or cause the  applicable
         Acceptable  Subsidiary  to pay  interest on each CD Rate Advance on the
         last day of the CD Rate  Interest  Period for such  Advance;  provided,
         however,  that if any Interest  Period for a CD Rate Advance exceeds 30
         days,  interest  shall also be payable on the date which  falls 30 days
         after the  beginning  of such  Interest  Period  and on each date which
         falls 30 days after any such interest  payment date. The Borrower shall
         repay  or cause  the  applicable  Acceptable  Subsidiary  to repay  the
         principal  balance  of each CD Rate  Advance  on the last day of the CD
         Rate Interest Period for such Advance, and (if sooner occurring) on the
         Final Maturity Date.

                           (iii) Any payment of a CD Rate  Advance  prior to the
         last  day of the CD Rate  Interest  Period  for such  Advance,  whether
         voluntary, by reason of acceleration or otherwise,  including mandatory
         payments  required under this Agreement and applied by the Bank to a CD
         Rate Advance, shall be accompanied by the amount of accrued interest on
         the amount repaid and by the amount (if any) required by Section 3.11.

         (d) For  purposes of  determining  the  Borrower's  and any  applicable
Acceptable  Subsidiary's  compliance  with  subsection  2.01(d),  the Equivalent
Amount of Offshore  Currency  Advances shall be determined,  and redetermined by
the  Bank as of the  applicable  borrowing  date  in  respect  of  such  Advance
(including the date such Advance was converted into an Offshore Currency Advance
under subsection 2.02(b)), and on the last Business Day of each month.

         2.03  Commercial  Letters  of Credit  under the  Revolving  Facility.03
Commercial  Letters  of Credit  under  Commercial  Letters  of Credit  under the
Revolving  Facility.  (a) Each  commercial  letter  of credit  shall,  except as
provided in subsection 2.03(b), be denominated in dollars and issued pursuant to
the terms and  conditions  hereof and of a Bank  standard form  Application  and
Security  Agreement for  Commercial  Letter of Credit (or such other form as the
Bank may require) executed by the Borrower or an Acceptable Subsidiary.



                                       11
<PAGE>

                  (b) The Bank or any Offshore Credit Provider may, from time to
time during the Availability  Period,  in its sole discretion,  issue commercial
letters of credit  denominated in Local  Currencies to Acceptable  Subsidiaries.
Neither the Bank nor any Offshore  Credit  Provider shall have any obligation to
issue any such  commercial  letters of credit  denominated  in Local  Currencies
unless the Bank and the relevant  Acceptable  Subsidiary  agree,  at the time of
such  Acceptable  Subsidiary's  request  for such a  letter  of  credit,  on the
repayment terms and other material  provisions for such letter of credit and the
Borrower  or  such  Acceptable   Subsidiary  shall  execute  such  applications,
agreements  and  additional  documentation  as the Bank or the  Offshore  Credit
Provider may require relating to such letter of credit.

                  (c)  Each commercial letter of credit shall:

                           (i)  expire on or before 180 days after the date such
         letter  of  credit  is  issued,  but in no event  later  than the Final
         Maturity Date;

                           (ii)  require  drafts  payable in dollars (or, in the
         case of letters  of credit  issued  under  subsection  2.03(b),  in the
         applicable currency) at sight or up to 180 days after sight; and

                         (iii) be otherwise in form and  substance  and in favor
                    of beneficiaries and for purposes satisfactory to the Bank.

                  (d) The Borrower shall pay or cause the applicable  Acceptable
Subsidiary  to pay to  the  Bank  or the  applicable  Offshore  Credit  Provider
issuance fees,  negotiation fees, and other fees at the times and in the amounts
the Bank or the Offshore Credit Provider  advises the Borrower from time to time
as being applicable to the Borrower's or the Acceptable  Subsidiary's commercial
letters of credit.

                  (e) Each draft paid by the Bank or an Offshore Credit Provider
under a commercial  letter of credit issued hereunder shall be reimbursed by the
Borrower or the  applicable  Acceptable  Subsidiary to the Bank or such Offshore
Credit  Provider  on the date  such  draft  is paid by the Bank or the  Offshore
Credit  Provider.  Any sum owed to the Bank or an Offshore  Credit Provider with
respect  to a  commercial  letter of credit  issued  for the  Borrower's  or any
Acceptable  Subsidiary's account which is not paid when due shall, at the option
of the  Bank in each  instance,  be  deemed  to be an  Advance  to the  Borrower
outstanding  under the Revolving  Facility and shall thereafter bear interest at
the Reference Rate.

                                       12
<PAGE>

                  (f) At the expiration of the Availability Period, the Bank may
require the Borrower to provide or cause the applicable Acceptable Subsidiary to
provide  cash  collateral  in the  amount of the L/C  Outstanding  Amount of any
commercial letters of credit outstanding under this Agreement,  and, in addition
to any other rights or remedies  which the Bank may have under this Agreement or
otherwise,  upon the occurrence of an Event of Default, the Bank may require the
Borrower to provide or cause the  applicable  Acceptable  Subsidiary  to provide
cash  collateral in the amount of the L/C  Outstanding  Amount of any commercial
letters of credit outstanding under this Agreement.

         2.04 Standby Letters of Credit Under the Revolving  Facility.04 Standby
Letters  of Credit  Under the  Standby  Letters  of Credit  Under the  Revolving
Facility.  (a) Each  standby  letter of credit  shall,  except  as  provided  in
subsection  2.04(b),  be denominated in dollars and issued pursuant to the terms
and conditions  hereof and of a Bank standard form Application and Agreement for
Standby  Letter of Credit (or such other form as the Bank may require)  executed
by the Borrower or an Acceptable Subsidiary.

                  (b) The Bank or any Offshore Credit Provider may, from time to
time during the  Availability  Period,  in its sole  discretion,  issue  standby
letters of credit  denominated in Local  Currencies to Acceptable  Subsidiaries.
Neither the Bank nor any Offshore  Credit  Provider shall have any obligation to
issue any such standby letters of credit  denominated in Local Currencies unless
the Bank  and the  relevant  Acceptable  Subsidiary  agree,  at the time of such
Acceptable  Subsidiary's  request for such a letter of credit,  on the repayment
terms and other  material  provisions for such letter of credit and the Borrower
or such Acceptable  Subsidiary shall execute such  applications,  agreements and
additional documentation as the Bank or the Offshore Credit Provider may require
relating to such letter of credit.

                  (c) Each  standby  letter of credit  shall:  (i)  expire on or
before one year after the date such letter of credit is issued,  but in no event
later than the Final  Maturity Date; and (ii) be otherwise in form and substance
and in favor of beneficiaries and for purposes satisfactory to the Bank.

                  (d) The Borrower shall pay or cause the applicable  Acceptable
Subsidiary to pay to the Bank a  non-refundable  fee equal to 1.00% per annum of
the outstanding undrawn amount of each standby letter of credit issued hereunder
for its account or for the account of an Acceptable  Subsidiary  (with a minimum
fee of $250),  payable  annually in advance,  and calculated on the basis of the


                                       13
<PAGE>

face amount  outstanding  on the day the fee is  calculated,  or, in the case of
standby letters of credit issued to an Acceptable  Subsidiary and denominated in
a Local Currency,  such fees as are applicable to such letter of credit pursuant
to subsection 2.04(b).  However, if an Event of Default exists, at the option of
the Bank,  the amount of the fee shall be increased to 3% per annum,  commencing
on the day the Bank  provides  notice of the increase to the  Borrower,  or such
fees as are  applicable  to a standby  letter of credit  denominated  in a Local
Currency  pursuant to subsection  2.04(b).  The Borrower shall also pay or cause
the applicable  Acceptable  Subsidiary to pay such other fees and commissions at
the times and in the amounts the Bank advises the Borrower  from time to time as
being applicable to the Borrower's or Acceptable  Subsidiaries'  standby letters
of credit.

                  (e) Each draft paid by the Bank or an Offshore Credit Provider
under a standby  letter of credit  issued  hereunder  shall be reimbursed by the
Borrower  or the  Acceptable  Subsidiary  to the  Bank or such  Offshore  Credit
Provider  on the date  such  draft is paid by the  Bank or the  Offshore  Credit
Provider.  Any sum owed to the Bank or an Offshore  Credit Provider with respect
to a  standby  letter of  credit  issued  for the  Borrower's  or an  Acceptable
Subsidiary's account which is not paid when due shall, at the option of the Bank
in each instance,  be deemed to be an Advance to the Borrower  outstanding under
the Revolving Facility and shall thereafter bear interest at the Reference Rate.

                  (f) At the expiration of the Availability Period, the Bank may
require the Borrower to provide or cause the applicable Acceptable Subsidiary to
provide  cash  collateral  in the  amount of the L/C  Outstanding  Amount of any
standby letters of credit outstanding under this Agreement,  and, in addition to
any other  rights or remedies  which the Bank may have under this  Agreement  or
otherwise,  upon the occurrence of an Event of Default, the Bank may require the
Borrower to provide or cause the  applicable  Acceptable  Subsidiary  to provide
cash  collateral  in the  amount of the L/C  Outstanding  Amount of any  standby
letters of credit outstanding under this Agreement.

                  (g) The aggregate of the L/C Outstanding  Amount in respect of
standby  letters  of credit  and the Bank  Guaranty  Outstanding  Amount may not
exceed at any time $10,000,000.

     2.05 Local Currency Advances. (a) From time to time during the Availability
Period,  the Bank or any Offshore Credit  Provider may, in its sole  discretion,
make Local Currency Advances to Acceptable Subsidiaries.

                  (b) Neither the Bank nor any Offshore  Credit  Provider  shall
have any  obligation  to make any Local  Currency  Advance  unless the following
conditions are satisfied:

                                       14
<PAGE>

                           (i) the Bank and the relevant  Acceptable  Subsidiary
         agree, at the time of such Acceptable  Subsidiary's request for a Local
         Currency Advance,  on the currency,  the amount,  the principal payment
         date(s),  the interest rate and payment  date(s),  the  prepayment  and
         overdue  payment  terms,  and  the  reserve,  tax  and  other  material
         provisions for such Advance; and

                           (ii)  The  Borrower  and such  Acceptable  Subsidiary
         shall  execute  such  additional  documentation  as the  Bank  or  such
         Offshore  Credit  Provider may require  relating to each Local Currency
         Advance.

     2.06 Bank Guaranties. (a) From time to time during the Availability Period,
the Bank may, in its sole discretion,  issue Bank Guaranties to the Borrower and
to Acceptable  Subsidiaries.  Each Bank Guaranty  shall be issued by an Offshore
Credit  Provider  and  pursuant  to the laws of the  jurisdiction  in which such
Offshore  Credit  Provider is located and subject to any other  applicable  law.
Each Bank Guaranty shall be issued  pursuant to the terms and conditions  hereof
and of a Bank  standard  form  indemnity  agreement  and any other Bank standard
forms  for  guaranties  executed  by the  Borrower  or the  relevant  Acceptable
Subsidiary.

                  (b)  Each Bank Guaranty shall:

                           (i)  expire on or before  the date  which is one year
         after the date it is  issued,  but in any event no later than the Final
         Maturity Date; and

                         (ii) be otherwise in form and substance and in favor of
                    beneficiaries and for purposes satisfactory to the Bank.

                  (c) The Borrower or the relevant  Acceptable  Subsidiary shall
pay the Offshore Credit  Provider  issuance fees and other fees at the times and
in the amounts the Bank advises the Borrower or the Acceptable  Subsidiary  from
time to time as being applicable to Bank Guaranties issued for the Borrower's or
the Acceptable Subsidiary's account.

                  (d) Each payment by the Offshore  Credit Provider under a Bank
Guaranty shall be reimbursed by the Borrower or the Acceptable Subsidiary to the
Offshore  Credit  Provider  on the  date of such  payment.  Any sum  owed to the
Offshore  Credit  Provider  with  respect to a Bank  Guaranty  issued under this
Section which is not paid when due shall,  at the option of the Offshore  Credit


                                       15
<PAGE>

Provider  in each  instance,  be deemed to be an Advance to the  Borrower by the
Bank outstanding under the Revolving Facility and shall thereafter bear interest
at the Reference Rate.

                  (e) At the expiration of the Availability Period, the Bank may
require the Borrower to provide or cause the applicable Acceptable Subsidiary to
provide cash collateral in the amount of the Bank Guaranty  Outstanding  Amount,
and, in addition to any other  rights or remedies  which the Bank may have under
this  Agreement or otherwise,  upon the  occurrence of an Event of Default,  the
Bank may require  the  Borrower  to provide or cause the  applicable  Acceptable
Subsidiary  to  provide  cash  collateral  in the  amount  of the Bank  Guaranty
Outstanding Amount.

                  (f) The aggregate of the Bank Guaranty  Outstanding Amount and
the L/C  Outstanding  Amount in  respect  of  standby  letters of credit may not
exceed at any time $10,000,000.

     2.07  Optional  Prepayment  Subject to Section  3.11,  the  Borrower or the
applicable Acceptable Subsidiary may, at any time or from time to time, upon not
less than three Business Days'  irrevocable  notice to the Bank, prepay Advances
in whole or in part.  If such notice is given by the Borrower or the  applicable
Acceptable Subsidiary,  the prepayment amount specified therein shall be due and
payable on the date  specified  therein,  together with accrued  interest to the
date of repayment on the amount so prepaid.

     2.08 Mandatory Payment.  If at any time and for any reason the total amount
of credit  outstanding  under this Agreement  exceeds the  limitations set forth
herein, the Borrower shall or shall cause the applicable  Acceptable  Subsidiary
to,  subject to Section 3.11,  pay to the Bank,  upon demand,  the amount of the
excess;  provided,  that if the foregoing  applies due to a change in applicable
rates of exchange between Dollars and Offshore  Currencies or Local  Currencies,
the Borrower shall be obligated to pay such amount only if the excess is greater
than $500,000 or the Equivalent Amount thereof.  Payments under this Section may
be applied to the obligations of the Borrower or the Acceptable  Subsidiaries to
the Bank in the order and manner as the Bank in its  discretion  may  determine.
Payments  to be applied  to  outstanding  letters of credit and drafts  accepted
under letters of credit and Bank Guaranties  may, at the Bank's option,  be used
to  prepay,  or  held  as cash  collateral  to  secure,  the  Borrower's  or any
Acceptable Subsidiary's  obligations to the Bank or any Offshore Credit Provider
with respect thereto.

                                       16
<PAGE>

     2.09 Commitment Fee. The Borrower shall pay to the Bank a commitment fee at
the rate of 0.20% per annum on the average  daily  unused  portion of the credit
provided under this Agreement. For purposes of computing the unused portion, the
L/C Outstanding Amount and the Bank Guaranty  Outstanding Amount shall be deemed
to be usage.  The commitment fee shall be computed on a calendar  quarter basis,
except for the first period which shall  commence on May 1, 1997 and end on June
30,  1997,  and  the  last  period  which  shall  end  on  the  last  day of the
Availability  Period. The commitment fee shall be payable in arrears on June 30,
1997, on the last day of each successive quarter thereafter, and on the last day
of the Availability Period.

     2.10 Default Rate.  Upon the occurrence and during the  continuation of any
Event  of  Default,  and  without  constituting  a waiver  of any such  Event of
Default,  (a) Advances  under the Revolving  Facility shall at the option of the
Bank bear  interest at a rate per annum which is 2.00% per annum higher than the
rate of interest  otherwise  provided  under this  Agreement,  and (b)  Offshore
Currency Advances shall at the option of the Bank be redenominated and converted
into the Equivalent Amount of Reference Rate Advances in Dollars.

     2.11  Early  Termination  of  Commitment.  The  Borrower  may at  any  time
terminate the Bank's  (including any Offshore Credit  Provider's)  commitment to
extend credit  hereunder by giving no less than five Business Days' prior notice
to the Bank and paying in full the entire amount of credit outstanding hereunder
(including the L/C  Outstanding  Amount and Bank Guaranty  Outstanding  Amount),
together  with any sums due  under  Section  3.11.  Payments  to be  applied  to
outstanding  letters of credit and drafts  accepted  under letters of credit and
Bank  Guaranties may, at the Bank's option,  be used to prepay,  or held as cash
collateral to secure, the Borrower's and Acceptable Subsidiaries' obligations to
the Bank with respect thereto. All accrued commitment fees to, but not including
the effective date of any  termination of the  commitment,  shall be paid on the
effective date of such termination.

                                 ARTICLE IIIIII

            Extensions of Credit, Payments and Interest Calculations

     3.01 Requests for Credit.  Each request for an extension of credit shall be
made  in  writing  on a form  acceptable  to the  Bank  or in any  other  manner
acceptable to the Bank.

                                       17
<PAGE>

     3.02  Disbursements  and Payments.  Each  disbursement by the Bank and each
payment by the Borrower or an Acceptable  Subsidiary  under this Agreement shall
be made in the funds and at such branch of the Bank as the Bank may from time to
time select.

     3.03 Branch  Accounts.  Each extension of credit under this Agreement shall
be made for the account of such branch,  office, or affiliate of the Bank as the
Bank may from time to time select.

     3.04 Evidence of Indebtedness.  Principal, interest, and all other sums due
to the Bank (or any Offshore  Credit  Provider)  under this  Agreement  shall be
evidenced by entries in records  maintained by the Bank (or such Offshore Credit
Provider),  and, if required by the Bank,  by a promissory  note or notes.  Each
payment on and any other  credits with respect to principal,  interest,  and all
other sums due under this  Agreement  shall be  evidenced  by entries to records
maintained by the Bank or such Offshore  Credit  Provider.  The loan accounts or
records  maintained  by the  Bank  or any  Offshore  Credit  Provider  shall  be
conclusive absent manifest error of the amount of the credit extended  hereunder
and the interest and payments thereon.  Any failure to so record or any error in
doing so shall not,  however,  limit or otherwise  affect the  obligation of the
Borrower or any Acceptable Subsidiary hereunder to pay any amount owing.

     3.05 Interest  Calculation.  Interest  based on the Reference Rate shall be
computed on the basis of a  365/366-day  year,  actual days  elapsed.  All other
interest and fees payable under this Agreement shall be computed on the basis of
a 360 day year and actual  days  elapsed,  which  results in more  interest or a
larger fee than if a 365-366 day year were used.

     3.06 Late Payments;  Compounding. Any sum payable by the Borrower hereunder
(including unpaid interest) if not paid when due shall bear interest (payable on
demand) from its due date until payment in full at a rate per annum equal to the
Reference  Rate  plus  2.00% per  annum.  At the  option  of the  Bank,  in each
instance, any sum payable hereunder which is not paid when due (including unpaid
interest)  may be  added  to  principal  of the  Revolving  Facility  and  shall
thereafter bear interest at the rate applicable to principal.

     3.07  Business  Day.  Any sum  payable  by the  Borrower  or an  Acceptable
Subsidiary  hereunder  which  becomes  due on a day which is not a Business  Day
shall be due on the next Business Day after such due date,  unless,  in the case
of an Offshore Rate Loan,  the result of such  extension  would be to carry such


                                       18
<PAGE>

Offshore Rate Interest  Period into another  calendar month, in which event such
Offshore Rate Interest  Period shall end on the immediately  preceding  Business
Day. Any payments  received by the Bank or an Offshore  Credit Provider on a day
which is not a Business Day shall be deemed to be received on the next  Business
Day after such date of receipt.

     3.08 Taxes and Other Charges. (a) (i) If any taxes (other than taxes on net
income (A) imposed by the country or any subdivision of the country in which the
Bank's  principal office or actual lending office is located and (B) measured by
the United  States  taxable  income the Bank would have received if all payments
under or in respect of this Agreement and any  instrument or agreement  required
hereunder  were exempt from taxes levied by the  Borrower's  country) are at any
time  imposed  on any  payments  under or in respect  of this  Agreement  or any
instrument  or  agreement  required  hereunder  including,  but not  limited to,
payments made pursuant to this  Section,  the Borrower  shall pay all such taxes
and shall also pay to the Bank,  at the time  interest is paid,  all  additional
amounts which the Bank  specifies as necessary to preserve the  after-tax  yield
the Bank would have received if such taxes had not been imposed.

                           (ii) The additional amounts necessary to preserve the
         after-tax yield the Bank would have received if such taxes had not been
         imposed shall be calculated pursuant to the formula:

                                                  (w)(t)(i)
                                            y = -----------
                                                    1-w-t

where the terms are defined as follows:

                           y = additional payment to be made to the Bank

                           w = withholding tax rate levied by foreign
                                  government

                           t  = the Bank's combined Federal and state tax
                       rate

                           i  = amount of interest to be paid on Credit
                                  (computed by using the base rate plus
                                  quoted spread)

                           1  = one

                                       19
<PAGE>


                  (b) The  Borrower  will  provide  the Bank with  original  tax
receipts,  notarized copies of tax receipts, or such other documentation as will
prove payment of tax in a court of law applying the United States  Federal Rules
of  Evidence,  for all taxes paid by the  Borrower  pursuant to  subsection  (a)
above.  The Borrower will deliver  receipts to the Bank within 30 days after the
due date for the related tax.

     3.09  Illegality.  (a) If the Bank determines that (i) the  introduction of
any law, rule, regulation, treaty, or determination of an arbitrator or court or
other  governmental  authority  or any  change  in or in the  interpretation  or
administration  thereof has made it unlawful,  or that any central bank or other
governmental  authority has asserted that it is unlawful, for the Bank (directly
or through any Offshore Credit  Provider) to make or extend any Advance or other
credit  under  this  Agreement,  or (ii) any order,  judgment,  or decree of any
governmental authority or arbitrator purports by its terms to enjoin or restrain
the Bank (or any Offshore Credit  Provider) from making or extending any Advance
or other credit hereunder,  then, on notice thereof by the Bank to the Borrower,
the  obligation  of the Bank to make or  extend  such  Advance  or other  credit
(directly or through any Offshore Credit  Provider) shall be suspended until the
Bank shall have notified the Borrower that the circumstances giving rise to such
determination no longer exist.

                  (b) If the Bank  determines  that it is unlawful for it or any
applicable  Offshore  Credit  Provider to maintain any Offshore  Rate Advance or
Local Currency Advance  hereunder,  the Borrower shall prepay or shall cause the
applicable Acceptable Subsidiary to prepay in full all Offshore Rate Advances or
Local  Currency  Advances,  as the case may be then  outstanding,  together with
interest accrued thereon, either on the last day of the applicable Offshore Rate
Interest Period or the interest period  applicable to the Local Currency Advance
if the Bank or such Offshore Credit  Provider may lawfully  continue to maintain
such  Advances  to  such  day  and  such  loans  have  an  interest  period,  or
immediately,  if the Bank may not lawfully continue to maintain such Advances or
such loans have no interest  period,  together  with any amounts  required to be
paid in connection therewith pursuant to Section 3.11.

     3.10 Increased  Costs.  The Borrower shall pay to the Bank, on demand,  the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory  agency which is applicable to all national banks or
a class of all national  banks (but not including any such statute,  regulation,
request or requirement which has the effect of changing the reserve requirements


                                       20
<PAGE>

or Assessment  Rate to the extent already  included in the calculation of the CD
Rate or the  Offshore  Rate).  The costs and losses  will be  allocated  to this
facility in a manner  determined by the Bank, using any reasonable  method.  The
costs include the following:

                  (a)  any reserve or deposit requirements; and

                  (b)  any capital requirements relating to the Bank's assets
 and commitments for credit.

     3.11 Funding  Losses.  The Borrower  shall  reimburse the Bank and hold the
Bank  harmless from any loss or expense which the Bank may sustain or incur as a
consequence  of the failure of the Borrower (or any  Acceptable  Subsidiary)  to
make any payment or prepayment of principal of any Advance  hereunder  made at a
rate of interest related to the Offshore Rate or the CD Rate (including payments
made  after any  acceleration  thereof),  or to  borrow  at such a rate,  or the
prepayment of an Advance  which bears  interest at such a rate on a day which is
not the last day of the interest period with respect thereto (including payments
made  after any  acceleration  thereof  or  because  the total  amount of credit
exceeds the limitations set forth herein), or the redenomination and conversion,
upon the occurrence of any Event of Default,  of an Advance which bears interest
at such a rate;  including any such loss or expense arising from the liquidation
or  reemployment of funds obtained by it to maintain its Advances made at a rate
related to the  Offshore  Rate or the CD Rate  hereunder or from fees payable to
terminate any deposits from which such funds were obtained or deemed obtained.

     3.12 Inability to Determine  Rates. The Bank has no obligation to accept an
election  for an Offshore  Rate  Advance or a CD Rate Advance if (a) deposits in
the applicable currency in the principal amount, and for the period equal to the
interest  period,  for such Advance are not available in the applicable  funding
market; or (b) the Offshore Rate or CD Rate does not accurately reflect the cost
of such Advance.  Nothing contained herein shall, however,  obligate the Bank to
obtain the funds for any Advance in any particular manner.

     3.13  Certificate  of the Bank.  If the Bank  claims any  reimbursement  or
compensation  pursuant  to  Section  3.10 or Section  3.11,  then the Bank shall
deliver to the Borrower a certificate  setting  forth in  reasonable  detail the
amount payable to the Bank thereunder and such  certificate  shall be conclusive
and binding on the Borrower in the absence of manifest error.

                                       21
<PAGE>

     3.14 Debits to Borrower's Account.  The Borrower hereby authorizes the Bank
to debit the Borrower's deposit account number 1233012785 at the Global Payments
Operations, Concord, CA office of the Bank in the amount of principal, interest,
fees,  or any other amount due under this  Agreement or under any  instrument or
agreement required under this Agreement.  The Bank may, at its option, debit the
account  on the date  such  amounts  become  due,  or, if such due date is not a
Business  Day,  on the next  Business  Day  after  such due  date.  If there are
insufficient funds in the account to cover the amount debited to the accounts in
accordance with this Section, such debit may be reversed in whole or in part, at
the option of the Bank in its sole discretion,  and the amount not debited shall
be deemed to remain unpaid.

     3.15  Survival.  The  agreements  and  obligations  of the  Borrower  under
Sections 3.08 through 3.11 shall survive the  expiration or  termination  of the
commitment to extend credit  hereunder and the payment of all other  obligations
of the Borrower or any Acceptable Subsidiary hereunder or under the other Credit
Documents.


                                  ARTICLE IVIV

                      Conditions to Availability of Credit.

         The Bank's  obligation to extend credit under this Agreement is subject
to the Bank's receipt of the following,  each in form and substance satisfactory
to the Bank:

     4.01 Conditions to First Extension of Credit. Before the first extension of
credit:Extension of Credit

                  (a)  This Agreement, executed by the Borrower;

                  (b)  Satisfactory   evidence  of  due   authorization  of  the
execution,  delivery,  and  performance  by  the  Borrower  and  any  Acceptable
Subsidiary of this Agreement and any other Credit Documents, including certified
resolutions,  incumbency certificate, articles of incorporation and bylaws, or a
certificate  stating that such items previously  delivered to the Bank are still
in effect and have not been amended or modified;

                  (c) Certificates of state officials  showing that the Borrower
is in good standing or qualified to conduct business under the laws of the state
of its  organization  and, if requested by the Bank, in any other state in which
the Borrower is required to be so qualified;

                                       22
<PAGE>

                    (d) A certificate of an appropriate  officer of the Borrower
               as to the  matters set forth in Section  4.02(a)  and (b);  (e) A
               copy of the Borrower's current Investment Guidelines,  which must
               be satisfactory to the Bank;

                    (f) Payment of any fee or expense  required  hereunder prior
               to the first extension of credit;

                    (g) Such other approvals, opinions, documents or instruments
               as the Bank may request.

     4.02  Conditions  to Each  Extension  of Credit.  Before each  extension or
renewal of credit  (including  pursuant to any election under Section  2.02(b)),
including the first:

     (a) The  representations  and warranties of the Borrower  contained in this
Agreement shall be true on and as of the date of each extension of credit;

                  (b) Immediately  prior to and immediately  after giving effect
to such extension of credit, no Default or Event of Default shall exist;

                  (c) Executed  originals of all Credit Documents required under
Article II shall have been delivered to the Bank.

         Each request for an extension of credit  hereunder  shall  constitute a
representation and warranty by the Borrower, as of the date of each such request
and as of the date of each  extension  of credit,  that the  conditions  in this
Section are satisfied.

                                       23
<PAGE>

                                   ARTICLE V

                         Representations and Warranties

                   The Borrower represents and warrants that:

     5.01 Corporate  Existence and Power. The Borrower and each Subsidiary:  (a)
is a corporation  duly organized and existing under the laws of the jurisdiction
of its  organization;  (b) has the  power  and  authority  and all  governmental
licenses,  authorizations,  consents,  and approvals to own its assets, carry on
its business,  and to execute,  deliver,  and perform its obligations under, the
Credit Documents to which it is a party ; and (c) is duly qualified and properly
licensed  and in good  standing  under the laws of each  jurisdiction  where its
ownership,  lease,  or  operation  of property  or the  conduct of its  business
requires such license or qualification.

     5.02  Authorization.  The  execution,  delivery,  and  performance  by  the
Borrower and each  Acceptable  Subsidiary of this Agreement and any other Credit
Document  to which  any of them is a party,  have been  duly  authorized  by all
necessary corporate action, and do not and will not:

               (a)  contravene  the  terms  of  any  organizational  or  charter
          documents;

                  (b) conflict with or result in any breach or contravention of,
or the creation of any lien, security interest,  or charge under, any agreement,
contract,  indenture,  document,  or  instrument  to which the  Borrower  or any
Subsidiary  is a  party  or by  which  any  property  is  bound,  or any  order,
injunction,  writ, or decree of any governmental authority to which the Borrower
or any Subsidiary or any of their respective property is subject; or

                  (c) violate any law, rule, regulation,  or determination of an
arbitrator  or  of a  court  or  other  governmental  authority,  in  each  case
applicable  to or binding  upon the Borrower or any  Subsidiary  or any of their
respective property.

     5.03  Enforceability.  This  Agreement  is  a  legal,  valid,  and  binding
agreement of the Borrower,  enforceable  against the Borrower in accordance with
its terms,  and the other Credit Documents and any other instrument or agreement
required  under this  Agreement,  when  executed and  delivered,  will be legal,
valid,  binding,  and  enforceable  in  accordance  with its terms  against  the
Borrower or the Acceptable Subsidiary, as applicable.

                                       24
<PAGE>

     5.04 Compliance with Laws. Each of the Borrower and its  Subsidiaries is in
compliance with all foreign,  federal, state and local laws, rules,  regulations
and  determinations of arbitrators,  courts and other  governmental  authorities
materially  affecting the  business,  operations or property of the Borrower and
such Subsidiaries (including Environmental Laws).

     5.05  Permits,  Franchises.  The Borrower or its  Subsidiaries  possess all
permits,  memberships,  franchises,  contracts,  and  licenses  required and all
trademark rights,  trade name rights,  patent rights, and fictitious name rights
necessary to enable the Borrower and its  Subsidiaries to conduct the businesses
in which they are now engaged.

     5.06   Litigation.   There  is  no  litigation,   tax  claim,   proceeding,
governmental or administrative action, investigation,  arbitration proceeding or
dispute pending,  or, to the knowledge of the Borrower,  threatened,  against or
affecting the Borrower or any of its  Subsidiaries  or any of their  properties,
the adverse determination of which would result in a Material Adverse Effect.

     5.07 No Event of Default. There exists no Default or Event of Default.

     5.08  Other  Obligations.  As of the  Closing  Date,  the  Borrower  or its
Subsidiaries is not in default under any other agreement involving the borrowing
of money, the extension of credit, or the lease of real or personal property, to
which  the  Borrower  or such  Subsidiary  is a party  as  borrower,  guarantor,
installment  purchaser,  or lessee,  except as  disclosed in writing to the Bank
prior to the Closing Date.

     5.09 Tax Returns.  The  Borrower  has no knowledge of any material  pending
assessments or adjustments with respect to its or its  Subsidiaries'  income tax
liabilities  for any year,  except as  disclosed in writing to the Bank prior to
the Closing Date.

     5.10 Information  Submitted. All financial and other  information  that has
been  submitted  by the  Borrower or a  Subsidiary  to the Bank,  including  the
Borrower's  financial statement delivered to the Bank most recently prior to the
Closing Date: (a) in the case of financial statements, is prepared in accordance


                                       25
<PAGE>

with generally accepted accounting  principles  consistently applied; and (b) is
true and correct in all  material  respects  and is  complete  insofar as may be
necessary  to give the Bank true and accurate  knowledge  of the subject  matter
thereof.

     5.11 No Material Adverse Effect. Since December 31, 1996, there has been no
Material Adverse Effect.

     5.12 ERISA  Compliance.  Except as  specifically  disclosed  to the Bank in
writing  prior to the  Closing  Date:  (a)  each  Plan is in  compliance  in all
material  respects with the applicable  provisions of ERISA,  the Code and other
federal or state law;  (b) there are no  pending,  or to the best  knowledge  of
Borrower,  threatened claims, actions or lawsuits, or action by any governmental
authority,  with respect to any Plan which has resulted or could  reasonably  be
expected  to  result  in a  Material  Adverse  Effect;  (c)  there  has  been no
prohibited  transaction or other violation of the fiduciary  responsibility rule
with  respect to any Plan which could  reasonably  result in a Material  Adverse
Effect; (d) no ERISA Event has occurred or is reasonably  expected to occur with
respect to any  Pension  Plan;  (e) no  Pension  Plan has any  Unfunded  Pension
Liability;  (f) the Borrower has not incurred,  nor does it reasonably expect to
incur,  any  liability  under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (g) no
trade or business  (whether or not  incorporated  under common  control with the
Borrower  within the  meaning of Section  414(b),  (c),  (m) or (o) of the Code)
maintains  or  contributes  to any Pension Plan or other Plan subject to Section
412 of the Code;  and (h) neither the Borrower or entity  under  common  control
with  the  Borrower  in the  preceding  sentence  has  ever  contributed  to any
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

     5.13 Environmental  Matters. (a) (i) The properties of the Borrower and its
Subsidiaries  do not contain and have not previously  contained (at,  under,  or
about any such property) any Hazardous  Substances or other contamination (A) in
amounts or  concentrations  that  constitute  or  constituted a violation of, or
could give rise to liability  under,  any  Environmental  Laws,  (B) which could
interfere with the continued use, occupation or operation of such property,  (C)
which  could  impair  the  fair  market  value  thereof  or  (D)  in  levels  or
concentrations  requiring cleanup or other management under applicable standards
or guidelines of foreign,  federal,  state or local environmental  agencies; and
(ii) there has been no transportation or disposal of Hazardous  Substances from,
nor any release or threatened  release of Hazardous  Substances at or from,  any


                                       26
<PAGE>

property of the  Borrower or any of its  Subsidiaries  in violation of or in any
manner which could give rise to liability under any Environmental Laws.

                  (b)  Neither  the  Borrower  nor any of its  Subsidiaries  has
received  or is aware of any  material  claim or notice of  material  violation,
alleged material  violation,  non-compliance,  liability or potential  liability
regarding  environmental  matters,   Hazardous  Substances  or  compliance  with
Environmental  Laws with regard to the  properties or operations of the Borrower
or any of its  Subsidiaries,  nor does the Borrower have  knowledge or reason to
believe that any such action is being contemplated, considered, or threatened.


                                   ARTICLE VI

                              Affirmative Covenants

         So long as credit is available  under this Agreement and until full and
final  payment  of  all of  the  Borrower's  and  any  Acceptable  Subsidiaries'
obligations under this Agreement and any other Credit Document:

     6.01 Notices of Certain  Events.  The Borrower  shall promptly give written
notice to the Bank of:

          (a) all litigation,  proceedings or actions  affecting the Borrower or
     its Subsidiaries where the amount claimed is $1,000,000 or more;

          (b) any  substantial  dispute  which may exist between the Borrower or
     its Subsidiaries  and any  governmental  regulatory body or law enforcement
     authority;

          (c) any Default or Event of Default;

          (d) any of the  representations  and warranties in Article V ceases to
     be true and correct; and

          (e) any  other  matter  which  has  resulted  or could  reasonably  be
     expected to result in a Material Adverse Effect.

          6.02  Financial and Other  Information.  The Borrower shall deliver to
     the Bank in form and detail satisfactory to the Bank, and in such number of
     copies as the Bank may request:

                                       27
<PAGE>

                  (a) Within 95 days after the end of each fiscal year,  (i) the
Borrower's  consolidated  financial  statements  for  such  year  audited  by  a
certified  public  accountant  together  with  an  unqualified  opinion  of such
certified public accountant and including,  at a minimum, the Borrower's balance
sheet and  statements of income,  retained  earnings,  and cashflow;  and (ii) a
complete copy of Borrower's Form 10-K Annual Report  submitted to the Securities
and Exchange Commission for such year;

                  (b) Within 50 days after the end of each fiscal  quarter,  (i)
the Borrower's consolidated financial statements for such period prepared by the
Borrower  and  including,  at  a  minimum,  the  Borrower's  balance  sheet  and
statements of income, retained earnings, and cash flow, and (ii) a complete copy
of  Borrower's  Form 10-Q  Quarterly  Report  submitted  to the  Securities  and
Exchange Commission for such quarter;

     (c) Concurrently with the delivery of the financial  statements referred to
in subsections 6.02(a) and (b) above, a Compliance Certificate;

     (d)  Within  10 days  after  the date of  filing  with the  Securities  and
Exchange Commission, copies of the Borrower's Form 8-K Current Reports;

     (e)  Promptly  after any changes  thereto,  any  changes to the  Investment
Guidelines; and

                  (f)  Promptly   upon   request,   such  other   materials  and
information  relating  to the  Borrower  or its  Subsidiaries  as the  Bank  may
request.

     6.03 Books, Records, Audits and Inspections.  The Borrower shall, and shall
cause its Subsidiaries to, maintain  adequate books,  accounts and records,  and
prepare all financial statements required hereunder in accordance with generally
accepted accounting principles  consistently applied, and in compliance with the
regulations of any  governmental  regulatory body having  jurisdiction  over the
Borrower or its Subsidiaries, or the Borrower's or its Subsidiaries' businesses,
and permit employees or agents of the Bank at any reasonable time to inspect the
Borrower's  and its  Subsidiaries'  properties,  and to  examine  or  audit  the
Borrower's and its Subsidiaries'  books,  accounts,  and records and make copies
and memoranda thereof.

     6.04 Use of Facility. The Borrower shall use and shall cause the Acceptable
Subsidiaries  to use the credit  facility  provided  herein  solely for  working
capital  and  other  general  corporate  purposes  not in  contravention  of any
requirement of law.

                                       28
<PAGE>

     6.05 Insurance.  The Borrower shall,  and shall cause its  Subsidiaries to,
maintain  and keep in force  insurance  of the types and in amounts  customarily
carried  in lines  of  businesses  similar  to  those  of the  Borrower  and its
Subsidiaries, as applicable, including fire, extended coverage, public liability
(including coverage for contractual  liability),  property damage (including use
and occupance), business interruption, and workers' compensation, all carried by
insurers and in amounts satisfactory to the Bank, with loss payable endorsements
on such types of insurance as the Bank may request, and deliver to the Bank from
time to time, at the Bank's  request,  a copy of each  insurance  policy,  or if
permitted by the Bank, a  certificate  of insurance  setting forth all insurance
then in effect.

     6.06 Compliance with Laws. The Borrower shall at all times comply with, and
cause  its  Subsidiaries  to comply  with,  all laws,  statutes  (including  any
fictitious  name statute),  rules,  regulations,  orders,  and directions of any
governmental  authority  having  jurisdiction  over the  Borrower  or any of its
Subsidiaries  or the  business  of  the  Borrower  or  any  of its  Subsidiaries
(including all Environmental Laws).

     6.07 Change in Name,  Structure or Location.  The Borrower shall notify the
Bank in writing  prior to any change in (a) the  Borrower's  name or the name of
any Acceptable  Subsidiary,  (b) the  Borrower's or any Acceptable  Subsidiary's
business  or  legal   structure,   or  (c)  the  Borrower's  or  any  Acceptable
Subsidiary's  place of business or chief  executive  office if the  Borrower has
more than one place of business.

     6.08 Existence and  Properties.  The Borrower and each of its  Subsidiaries
shall  maintain and  preserve  its  existence  and all rights,  privileges,  and
franchises  now  enjoyed,  conduct its  business in an orderly,  efficient,  and
customary  manner,  keep  all  the its  properties  in good  working  order  and
condition,  and  from  time  to time  make  all  needed  repairs,  renewals,  or
replacements  thereto and thereof so that the  efficiency of such property shall
be fully maintained and preserved.

     6.09 Additional  Acts. The Borrower shall perform,  on request of the Bank,
such acts as may be  necessary  or  advisable  to perfect  any lien or  security
interest  contemplated  hereby  or  otherwise  to carry  out the  intent of this
Agreement.


                                       29
<PAGE>

                                 ARTICLE VII

                               Negative Covenants

         So long as credit is available  under this Agreement and until full and
final  payment  of  all  of  the  Borrower's  and  any  Acceptable  Subsidiary's
obligations under this Agreement and any other Credit Document:

     7.01  Other  Indebtedness.  The  Borrower  and its  Subsidiaries  shall not
create, incur, assume, or permit to exist any indebtedness or liabilities for or
resulting from borrowed money, loans, or advances,  or for the deferred purchase
price of property under capital leases, whether secured or unsecured, matured or
unmatured,  liquidated or unliquidated,  joint or several, or become liable as a
surety,  guarantor,  accommodation  endorser,  or  otherwise  for  or  upon  the
obligation of any other person,  firm,  corporation  or other entity;  provided,
however, that this Section shall not prohibit:

     (a) the  acquisition  of goods,  supplies,  or  merchandise on normal trade
credit;

     (b) the execution of bonds or  undertakings  in the ordinary  course of its
business as presently conducted;

     (c) the  endorsement  of  negotiable  instruments  received in the ordinary
course of its business as presently conducted;

     (d)  indebtedness  for borrowed money to banks other than the Bank incurred
by  Subsidiaries  which does not exceed  $5,000,000 in the aggregate  (including
commitments and outstandings) outstanding at any time;

     (e)  indebtedness  secured by purchase money liens  permitted under Section
7.02(f), provided that the aggregate of such indebtedness incurred in any fiscal
year does not exceed $10,000,000;

     (f) guarantees by the Borrower or its Subsidiaries in favor of the Bank; or

     (g)  guarantees by the Borrower of  indebtedness  incurred by  Subsidiaries
which is permitted under subsection (d) of this Section 7.01.

                                       30
<PAGE>

     7.02 Liens.  The Borrower  shall not, and shall not suffer or permit any of
its Subsidiaries to, create,  assume, or suffer to exist any security  interest,
deed of trust, mortgage, lien (including the lien of an attachment, judgment, or
execution), or encumbrance, securing a charge or obligation, on or of any of its
or their property,  real or personal,  whether now owned or hereafter  acquired,
except:  (a)  security  interests  and deeds of trust in favor of the Bank;  (b)
liens, security interests,  and encumbrances in existence as of the date of this
Agreement and  disclosed to the Bank in writing  prior to the Closing Date;  (c)
liens for current taxes,  assessments,  or other governmental  charges which are
not  delinquent or remain payable  without any penalty;  (d) liens in connection
with workers'  compensation,  unemployment  insurance,  or other social security
obligations; (e) mechanics', worker's, materialmen's,  landlords', carriers', or
other like liens  arising in the  ordinary  and normal  course of business  with
respect  to  obligations  which are not due;  and (f)  purchase  money  security
interests in personal  property  hereafter  acquired when the security  interest
does not extend beyond the property  purchased,  the liability  secured does not
exceed 100% of the cost thereof, and the aggregate amount of liabilities secured
by such property do not exceed, at any one time, $10,000,000.

     7.03 Capital Assets.  The Borrower on a consolidated basis shall not expend
or  incur  obligations  for the  acquisition  of fixed or  capital  assets  on a
cumulative  basis of more  than  (i)  $25,000,000  for the  fiscal  year  ending
December  31, 1997,  (ii)  $30,000,000  for the fiscal year ending  December 31,
1998, and (iii) $30,000,000 for the fiscal year ending December 31, 1999.

     7.04 Dividends.  Neither the Borrower nor any of its  Subsidiaries  that is
not  wholly-owned  by the  Borrower  shall  declare  or  pay  any  dividends  or
distributions  on any of its  shares now or  hereafter  existing,  or  purchase,
redeem or otherwise  acquire for value any of its shares,  or create any sinking
fund in relation thereto, except for (i) dividends payable solely in its capital
stock and (ii) repurchases of its shares in an aggregate  cumulative  amount not
to exceed $10,000,000 after March 31, 1997.

     7.05 Loans. Neither the Borrower nor any of its Subsidiaries shall make any
loans,  advances, or other extensions of credit to any of the Borrower's or such
Subsidiary's  executives,   officers,  or  directors  or  shareholders  (or  any
relatives of any of the foregoing),  or make loans, advances or other extensions
of credit to or invest in any other person, firm, corporation,  or other entity,
other than (a) investments in cash equivalents;  (b) extensions of credit in the
nature of accounts receivable or notes receivable arising from the sale or lease
of goods or services in the  ordinary  course of  business;  (c)  extensions  of


                                       31
<PAGE>

credit by the Borrower to any of its wholly-owned  Subsidiaries or by any of its
wholly-owned Subsidiaries to another of its wholly-owned  Subsidiaries;  and (d)
investments  incurred in order to consummate  acquisitions or other transactions
otherwise permitted under Section 7.06, provided that such acquisitions or other
transactions  are undertaken in accordance  with all applicable  requirements of
law.

     7.06  Acquisitions,  Liquidations and Mergers.  The Borrower shall not, and
shall not suffer or permit any  Subsidiary  to,  liquidate  or dissolve or enter
into  any  consolidation,   merger,   partnership,   joint  venture,   or  other
combination,  or to purchase control of, or the assets or business of, any other
person, firm, corporation or other entity;  provided that this Section shall not
prohibit any such  transaction  where (i) the  consolidated  or merged entity or
partnership or joint venture or acquired  assets or business  involves  business
activities  and operations  substantially  the same as or related to the present
business  activities and  operations of the Borrower,  and (ii) in the case of a
consolidation,  merger or combination,  the Borrower or such Subsidiary shall be
the surviving  entity,  and provided  further that any Subsidiary may merge with
the Borrower,  provided that the Borrower  shall be the  continuing or surviving
corporation,  or  with  any  one or  more  Subsidiaries,  provided  that  if any
transaction  shall be between a Subsidiary  and a wholly-owned  Subsidiary,  the
wholly-owned Subsidiary shall be the continuing or surviving corporation.

     7.07 Sale of Assets. Neither the Borrower nor any of its Subsidiaries shall
(a) sell,  lease,  or otherwise  dispose of its business or assets as a whole or
such as in the  opinion of the Bank  constitutes  a  substantial  portion of its
business  or  assets;  (b)  sell or  otherwise  dispose  of any of its  accounts
receivable  except in  connection  with the  collection  of same in the ordinary
course of business;  (c) sell or otherwise  dispose of any of its assets  except
for full,  fair and  reasonable  consideration;  or (d) enter  into any sale and
leaseback agreement covering any of its fixed or capital assets if the amount of
financing being extended pursuant to such agreement exceeds $5,000,000.

     7.08  Business  Activities.  The  Borrower and its  Subsidiaries  shall not
engage in any business activities or operations  substantially different from or
unrelated to present business activities and operations.

                                       32
<PAGE>

     7.09  Regulations  G, T, U, and X. The  Borrower  shall not,  and shall not
permit any of its  Subsidiaries  to,  use any  portion  of the  proceeds  of any
Advances or  extensions  of credit  hereunder,  directly or  indirectly,  (i) to
purchase or carry margin stock (within the meanings of  Regulations G, T, U, and
X of the FRB), (ii) to repay or otherwise refinance indebtedness of the Borrower
or others  incurred to purchase or carry any such margin stock,  (iii) to extend
credit for the purpose of purchasing or carrying any such margin stock,  or (iv)
to acquire any security in any  transaction  that is subject to Section 13 or 14
of the Securities Exchange Act of 1934, as amended.

     7.10 Use of Proceeds - Ineligible  Securities.  The Borrower shall not, and
shall not permit any Acceptable  Subsidiary to, directly or indirectly,  use any
portion of the proceeds of any Advances or  extensions  of credit  hereunder (i)
knowingly to purchase Ineligible Securities from BASI during any period in which
BASI makes a market in such  Ineligible  Securities,  (ii) knowingly to purchase
during  the  underwriting  or  placement  period  Ineligible   Securities  being
underwritten or privately placed by BASI, or (iii) to make payments of principal
or interest on Ineligible  Securities  underwritten or privately  placed by BASI
and issued by or for the benefit of the Borrower or any  Subsidiary or affiliate
of the Borrower. As used in this Section,  "BASI" means BancAmerica  Securities,
Inc., a wholly-owned subsidiary of BankAmerica Corporation. BASI is a registered
broker-dealer  and  permitted  to  underwrite  and  deal in  certain  Ineligible
Securities;  and  "Ineligible  Securities"  means  securities  which  may not be
underwritten  or dealt in by member  banks of the Federal  Reserve  System under
Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh), as amended.

     7.11  Quick  Ratio.  The  Borrower  shall  not  permit  at  any  time  on a
consolidated  basis its Quick Ratio to be less than 1.50:  1.00. For purposes of
this Agreement,

                  (a) "Quick  Ratio"  shall mean the ratio of (i) the sum of (A)
consolidated cash, (B) accounts  receivable net of any reserves or offsets,  (C)
short-term cash  investments,  (D) investment  grade  marketable  securities not
classified as long-term investments, and (E) long-term investments not to exceed
$15,000,000  and in compliance with the Investment  Guidelines,  to (ii) Current
Liabilities; and

                  (b)  "Current   Liabilities"  shall  include  all  funded  and
unfunded  indebtedness  under  this  Agreement  and the other  Credit  Documents
(including  undrawn amounts (or the Equivalent Amount thereof) of all letters of
credit and Bank Guaranties and drawn and  unreimbursed  obligations with respect
thereto).

                                       33
<PAGE>

     7.12 Total Liabilities to Tangible Net Worth. The Borrower shall not permit
at  any  time  on a  consolidated  basis  the  ratio  of  the  Borrower's  Total
Liabilities  to Tangible  Net Worth to exceed 0.75:  1.00.  For purposes of this
Agreement,

                  (a) "Total  Liabilities" shall include all funded and unfunded
indebtedness  under this  Agreement  and the other Credit  Documents  (including
undrawn amounts (or the Equivalent  Amount thereof) of all letters of credit and
Bank Guaranties and drawn and unreimbursed  obligations  with respect  thereto);
and

                  (b)  "Tangible  Net  Worth"  means the gross book value of the
assets of the Borrower and its  Subsidiaries  (exclusive  of goodwill,  patents,
trademarks,  trade names,  organization  expense,  treasury stock (to the extent
included in gross  assets),  unamortized  debt  discount and  expense,  deferred
charges, capitalized software and other like intangibles and excluding (i) loans
from the Borrower or its  Subsidiaries  to any of its  employees,  officers,  or
owners,  and (ii) any value placed on any  leasehold,  provided,  however,  that
leasehold   improvements  may  be  included  in  the  value  of  the  Borrower's
consolidated   assets)  less  (A)  reserves   applicable  thereto  and  (B)  all
liabilities including accrued and deferred income taxes.

     7.13  Tangible Net Worth.  The  Borrower  shall not permit at any time on a
consolidated  basis its Tangible Net Worth to be less than $105,000,000 plus the
sum of (i) 75% of net income  after income taxes  (without  subtracting  losses)
earned in each quarterly accounting period commencing after March 31, 1997, plus
(ii) the net proceeds  from any equity  securities  issued after March 31, 1997,
plus (iii) any increase in stockholders' equity resulting from the conversion of
debt securities to equity  securities after March 31, 1997, less (iv) the lesser
of (a)  $10,000,000  or (b) the amount of  repurchases  by the  Borrower  of its
equity securities after March 31, 1997.

         7.14 Consecutive Quarterly Losses; Losses in One Quarter.14 Consecutive
Quarterly Losses; Losses in Consecutive Quarterly Losses; Losses in One Quarter.
The Borrower on a  consolidated  basis shall not incur,  (a) any  quarterly  net
(after tax) or operating  loss in excess of  $7,500,000  for the quarter  ending
June 30, 1997,  (b) any quarterly net (after tax) or operating loss in excess of
$2,000,000  for the quarter  ending  September 30, 1997, and (c) for the quarter
ending  December  31, 1997 and each quarter  thereafter  (i) any  quarterly  net


                                       34
<PAGE>

(after tax) or operating loss in any two  consecutive  fiscal  quarters and (ii)
any  quarterly  net  (after  tax)  or  operating  loss  in  excess  of 5% of its
consolidated Tangible Net Worth. For purposes of clarification of clause (c), if
there is a net (after tax) or operating loss in the quarter ending September 30,
1997, the quarter ending December 31, 1997 must be profitable.


                                  ARTICLE VIII

                                Events of Default

     8.01 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement:

     (a) Failure to Pay. The Borrower or any Acceptable Subsidiary fails to pay,
when due, any  installment of principal,  or any interest,  fee or any other sum
due under this  Agreement or any other Credit  Document in  accordance  with the
terms hereof or thereof.

     (b) Breach of  Representation or Warranty.  Any  representation or warranty
herein or in any other Credit  Document  proves to have been false or misleading
in any material respect when made or deemed made.

     (c) Specific  Defaults.  The Borrower fails to perform or observe any term,
covenant or agreement contained in Section 6.01, 6.02, or 6.03 or Article VII.

     (d) Other  Defaults.  The Borrower or any  Acceptable  Subsidiary  fails to
perform or observe any other term or covenant contained in this Agreement or any
Credit Document.

     (e) Trade  Suits.  One or more suits are filed  against  the  Borrower by a
trade  creditor or trade  creditors of the Borrower in the  aggregate  amount of
$5,000,000 or more.

     (f)  Judgments.  One or more  judgments or  arbitration  awards are entered
against the  Borrower or any of its  Subsidiaries  or the Borrower or any of its
Subsidiaries enters into any settlement agreement with respect to any litigation
or  arbitration,  in the  aggregate  amount of  $3,000,000 or more on a claim or
claims not fully covered by insurance.

                                       35
<PAGE>

     (g)  Failure  to Pay  Debts;  Voluntary  Bankruptcy.  The  Borrower  or any
Subsidiary  (i)  fails  to  pay  the  Borrower's  or y such  Subsidiary's  debts
generally as they come due, or (ii) files any  petition,  proceeding,  case,  or
action  for  relief  under  any  bankruptcy,   reorganization,   insolvency,  or
moratorium  law,  or any other law or laws for the  relief of, or  relating  to,
debtors.

     (h)  Involuntary  Bankruptcy.  An  involuntary  petition is filed under any
bankruptcy  or similar  statute  against the  Borrower or any  Subsidiary,  or a
receiver,  trustee,  liquidator,  assignee,  custodian,  sequestrator,  or other
similar  official is  appointed  to take  possession  of the  properties  of the
Borrower or any Subsidiary;  provided, however, that such Event of Default shall
be deemed  cured if such  petition or  appointment  is set aside or withdrawn or
ceases  to be in  effect  within  60  days  from  the  date of  said  filing  or
appointment.

     (i) Default of Other  Financial  Obligations.  Any default occurs under any
other  agreement  involving the borrowing of money or the extension of credit to
which the Borrower or any Subsidiary may be a party as borrower,  guarantor,  or
installment  purchaser,  if such  default  consists  of the  failure  to pay any
obligation  when due or if such  default  gives to the holder of the  obligation
concerned the right to accelerate the obligation.

     (j) Default under other Credit  Documents.  Any Credit Document (other than
this  Agreement),  guaranty,  subordination  agreement,  or other  agreement  or
instrument  required hereunder or executed in connection herewith is breached or
becomes ineffective or any default occurs under any such agreement or instrument
or Borrower disavows its obligations under any such guaranty.

     (k) Default of Other Bank  Obligations.  Any default occurs under any other
obligation of the Borrower or any Subsidiary to the Bank or to any subsidiary or
affiliate of the Bank.

     (l) Material  Adverse  Effect.  There occurs a Material  Adverse  Effect.se
Effect

                                       36
<PAGE>

     (m) ERISA.  (i) An ERISA Event shall occur with  respect to a Pension  Plan
which has resulted or could reasonably be expected to result in liability of the
Borrower  under  Title IV of ERISA to the Pension  Plan or PBGC in an  aggregate
amount in excess of $500,000; (ii) the commencement or increase of contributions
to, or the adoption of or the amendment of a Pension Plan by the Borrower  which
has  resulted  or could  reasonably  be  expected  to result in an  increase  in
Unfunded  Pension  Liability  among all Pension Plans in an aggregate  amount in
excess of $500,000; or (iii) any of the representations and warranties contained
in Section  5.12 shall cease to be true and correct  which,  individually  or in
combination,  has  resulted  or could  reasonably  be  expected  to  result in a
Material Adverse Effect.

     (n) Change of Control. (i) any person, firm, corporation or other entity (a
"person")  or two or more persons  acting in concert  shall  acquire  beneficial
ownership,  directly or  indirectly,  of  securities  of the  Borrower (or other
securities  convertible  into such  securities)  representing 30% or more of the
combined voting power of all securities of the Borrower  entitled to vote in the
election of directors; or (ii) during any period of up to 12 consecutive months,
commencing  after the Closing  Date,  individuals  who at the  beginning of such
12-month  period were  directors of the  Borrower  shall cease for any reason to
constitute  a majority  of the Board of  Directors  of the  Borrower  unless the
persons  replacing such  individuals were nominated by the Board of Directors of
the  Borrower;  or (iii) any  person or two or more  persons  acting in  concert
acquiring by contract or otherwise,  or entering into a contract or  arrangement
which upon  consummation  will result in its or their acquisition of, or control
over,  securities  of the Borrower (or other  securities  convertible  into such
securities)  representing  30% or  more  of the  combined  voting  power  of all
securities of the Borrower entitled to vote in the election of directors.

     8.02 Remedies. If any Event of Default occurs,

                  (a) any  indebtedness  of the  Borrower  or of any  Acceptable
Subsidiary under any of the Credit  Documents,  any term thereof to the contrary
notwithstanding,  shall  at  the  Bank's  option  (but  automatically  upon  the
occurrence  of an  Event of  Default  described  in  subsection  8.01(g)(ii)  or
subsection  8.01(h))  and  without  notice  become  immediately  due and payable
without  presentment,  demand,  protest,  or  notice of  dishonor,  or any other
notice,  all of which are hereby  expressly  waived by the  Borrower to the full
extent permitted by law, and the Bank may declare an amount equal to the maximum
aggregate  amount that is or at any time  thereafter  may become  available  for
drawing  under  any  then-outstanding  letters  of  credit  (whether  or not any


                                       37
<PAGE>

beneficiary  shall have presented,  or be entitled at such time to present,  the
drafts or other documents required to draw under such letters of credit) and the
Bank Guaranty Outstanding Amount, to be immediately due and payable;

                  (b) the obligation, if any, of the Bank (including through any
Offshore  Credit  Provider)  to make  further  loans  or  extensions  of  credit
hereunder shall immediately cease and terminate, and

                  (c) the Bank and each Offshore  Credit Provider shall have all
rights,  powers, and remedies  available under each of the Credit Documents,  or
accorded by law,  including  the right to resort to any or all  security for any
credit accommodation  described herein, and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law.

All rights,  powers,  and remedies of the Bank and each Offshore Credit Provider
may be exercised at any time by the Bank or such  Offshore  Credit  Provider and
from time to time  after the  occurrence  of an Event of  Default.  All  rights,
powers,  and remedies of the Bank and any Offshore Credit Provider in connection
with each of the Credit  Documents are cumulative and not exclusive and shall be
in addition to any other rights, powers, or remedies provided by law or equity.


                                  ARTICLE IX

                                  Miscellaneous

     9.01  Successors and Assigns.  This  Agreement  shall bind and inure to the
benefit of the  parties  hereto and their  respective  successors  and  assigns;
provided,  however,  that the  Borrower  shall not assign this  Agreement or any
other  Credit  Document  or any of the  rights,  duties  or  obligations  of the
Borrower hereunder without the prior written consent of the Bank.

     9.02  Consents  and  Waivers.  No  failure  to  exercise  and no  delay  in
exercising,  on the part of the Bank or any Offshore Credit Provider, any right,
remedy,  power, or privilege  hereunder,  shall operate as a waiver thereof; nor
shall any single or partial exercise of any right,  remedy,  power, or privilege
hereunder  preclude any other or further exercise thereof or the exercise of any
other  right,  remedy,  power,  or  privilege.  No consent or waiver  under this
Agreement  shall be  effective  unless in  writing.  No waiver of any  breach or
default shall be deemed a waiver of any breach or default thereafter occurring.

                                       38
<PAGE>

     9.03 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California.

     9.04 Costs and  Attorneys'  Fees.  The Borrower  shall,  whether or not the
transactions contemplated hereby shall be consummated, pay or reimburse the Bank
on demand for all reasonable  out-of-pocket  costs and expenses  incurred by the
Bank in connection with the development,  preparation, delivery, administration,
and execution of, and any amendment, supplement, waiver or modification to, this
Agreement and any other Credit Document and the consummation of the transactions
contemplated  hereby  and  thereby,   including  reasonable  attorney  fees  and
disbursements  and the  allocated  cost of internal  counsel and  disbursements,
incurred  by  the  Bank  with  respect  thereto;  and  in  connection  with  the
enforcement,  attempted  enforcement or  preservation  of any rights or remedies
hereunder or under any Credit Document, including any "workout" or restructuring
under  this  Agreement,  including  attorney  fees  and  disbursements  and  the
allocated  cost  of  internal  counsel  and   disbursements.   As  used  herein,
"out-of-pocket  costs" shall include the allocated  cost of internal  counsel to
the Bank, and other  non-routine Bank resources (such as internal  environmental
consultants or asset  auditors).  The agreements and obligations of the Borrower
under this Section shall survive the expiration or termination of the commitment
to extend  credit  hereunder  and the  payment of all other  obligations  of the
Borrower  or any  Acceptable  Subsidiary  hereunder  or under the  other  Credit
Documents.

     9.05 Integration; Amendment. This Agreement, together with the other Credit
Documents,  embodies the entire agreement and understanding between the Borrower
and the Bank. This Agreement may be amended or modified only in writing,  signed
by the Borrower and the Bank.

     9.06 Borrower's Documents.  The Bank shall be under no obligation to return
any schedules, invoices, statements, budgets, forecasts, reports or other papers
delivered by the Borrower and shall destroy or otherwise dispose of same at such
time as the Bank, in its discretion, deems appropriate.

     9.07  Participations.  The  Bank  may  at  any  time  sell,  assign,  grant
participations in, or otherwise transfer to any other person, firm,  corporation
or other entity (a "Participant") all or part of the obligations of the Borrower
and  any  Acceptable  Subsidiary  under  this  Agreement  and any  other  Credit
Document.  The  Borrower  authorizes  the Bank and  each  Participant,  upon the
occurrence  of an Event of  Default,  to  proceed  directly  by right of setoff,
banker's  lien,  or  otherwise,  against  any  assets  of the  Borrower  and any


                                       39
<PAGE>

Acceptable Subsidiary which may be in the hands of the Bank or such Participant,
respectively.  The Borrower  authorizes the Bank to disclose to any  prospective
Participant and any Participant any and all information in the Bank's possession
concerning the Borrower and its Subsidiaries, this Agreement or any other Credit
Document.

     9.08 General  Indemnification.  The Borrower  shall pay and  indemnify  the
Bank, the Offshore  Credit  Providers,  the Bank's parent  company,  and each of
their  respective   officers,   directors,   employees,   counsel,   agents  and
attorneys-in-fact  (each,  an  "Indemnified  Person") and hold harmless from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions, judgments, suits, costs, charges, expenses, or disbursements (including
reasonable attorneys' fees and disbursements and the allocated costs of internal
counsel)  of any  kind or  nature  whatsoever  with  respect  to the  execution,
delivery, enforcement, performance, and administration of this Agreement and any
other Credit Documents, or the transactions contemplated hereby and thereby, and
with respect to any  investigation,  litigation,  or proceeding  related to this
Agreement,  any  violation  of any  Environmental  Law by  the  Borrower  or its
Subsidiaries, any use, generation,  manufacture,  production,  storage, release,
threatened release, discharge,  disposal or presence (whether actual or alleged)
of a Hazardous  Substance  on, under or about the property or  operations  of or
property leased to the Borrower or any of its Subsidiaries,  any  transportation
from or other off-site  management of any Hazardous  Substance generated or used
by the Borrower or any of its Subsidiaries, or the loans and other extensions of
credit  hereunder  or the  use of  the  proceeds  thereof,  whether  or not  any
Indemnified  Person is a party  thereto (all the  foregoing,  collectively,  the
"Indemnified Liabilities"); provided, that the Borrower shall have no obligation
hereunder  to any  Indemnified  Person with respect to  Indemnified  Liabilities
arising from the gross  negligence  or willful  misconduct  of such  Indemnified
Person.  The  agreements  and  obligations of the Borrower in this Section shall
survive the  expiration  and  termination  of the  commitment  to extend  credit
hereunder  and the  payment  of all other  obligations  of the  Borrower  or any
Acceptable Subsidiary hereunder or under the other Credit Documents.

     9.09  Arbitration;  Reference  Proceeding.  (a) Any  controversy  or  claim
between or among the parties,  including but not limited to those arising out of
or relating to this Agreement or any other Credit  Document or other  agreements
or instruments relating hereto or delivered in connection herewith and any claim
based on or arising from an alleged  tort,  shall at the request of any party be


                                       40
<PAGE>

determined by arbitration. The arbitration shall be conducted in accordance with
the United States  Arbitration  Act (Title 9, U.S.  Code),  notwithstanding  any
choice of law provision in this Agreement, and under the Commercial Rules of the
American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in  determining  any claim.  Any  controversy  concerning
whether  an  issue  is  arbitrable  shall be  determined  by the  arbitrator(s).
Judgment  upon  the  arbitration  award  may  be  entered  in any  court  having
jurisdiction.  The  institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party,  including the plaintiff,  to submit the  controversy or
claim to  arbitration  if any other  party  contests  such  action for  judicial
relief.

                  (b)  Notwithstanding  the provisions of subsection (a) of this
Section,  no controversy or claim shall be submitted to arbitration  without the
consent  of all  parties  if,  at the  time  of the  proposed  submission,  such
controversy  or claim arises from or relates to an  obligation to the Bank which
is secured by real property collateral located in California.  If all parties do
not consent to  submission of such a controversy  or claim to  arbitration,  the
controversy  or claim shall be determined as provided in subsection  (c) of this
Section.

                  (c)  A  controversy   or  claim  which  is  not  submitted  to
arbitration as provided and limited in  subsections  (a) and (b) of this Section
shall,  at the request of any party,  be determined by a reference in accordance
with California Code of Civil Procedure Sections 638 et seq. If such an election
is made, the parties shall designate to the court a referee or referees selected
under the auspices of the AAA in the same manner as arbitrators  are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single  referee,  shall  be an  active  attorney  or  retired  judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such  proceeding was commenced in accordance  with California
Code of Civil Procedure Sections 644 and 645.

                  (d) No  provision of this  paragraph  shall limit the right of
any party to this Agreement to exercise  self-help  remedies such as setoff,  to
foreclose against or sell any real or personal property  collateral or security,
or to  obtain  provisional  or  ancillary  remedies  from a court  of  competent
jurisdiction  before,  after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference.  At the Bank's option,  foreclosure  under a
deed of trust or  mortgage  may be  accomplished  either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.

                                       41
<PAGE>

     9.10 Notices. (a) All notices,  requests and other communications  provided
for  hereunder  shall be in writing  and mailed or  delivered  to a party at its
address  specified on the signature  pages  hereof,  or to such other address as
shall be designated by such party in a written notice to the other parties.

                  (b)  All  such   notices  and   communications   shall,   when
transmitted  by overnight  delivery,  be effective  when delivered for overnight
delivery, or if personally delivered,  upon such personal delivery,  except that
notices pursuant to Article II shall not be effective until actually received by
the Bank.

                  (c) The Borrower acknowledges and agrees that any agreement of
the Bank pursuant to Article II to receive  notices by telephone or facsimile is
solely  for  the  convenience  and at the  request  of the  Borrower.  Telephone
requests may be made by any  individual  identified  in writing to the Bank on a
form acceptable to the Bank as being authorized to make such requests.  The Bank
shall be entitled to rely upon any written or telephone  request from persons it
reasonably  believes to be  authorized  by the  Borrower  to make such  requests
without making independent  inquiry.  The Borrower assumes the full risk of, and
the Bank shall not be responsible for, any delays or errors in transmission, and
the obligation of the Borrower to repay the loans and other extensions of credit
hereunder  shall not be  affected  in any way or to any extent by any failure by
the Bank to receive written  confirmation of any telephonic or facsimile  notice
or the receipt by the Bank of a confirmation which is at variance with the terms
understood by the Bank to be contained in the telephonic or facsimile notice.

     9.11 Headings; Interpretation. Article, section, and paragraph headings are
for  reference  only and shall not affect the  interpretation  or meaning of any
provisions  of this  Agreement.  The  meaning of defined  terms shall be equally
applicable  to the  singular and plural  forms of the defined  terms.  The words
"hereof",  "herein",  "hereunder"  and words of similar import when used in this
Agreement  shall refer to this  Agreement  as a whole and not to any  particular
provision of this  Agreement;  and article,  subsection,  section,  schedule and
exhibit  references are to this Agreement unless otherwise  specified.  The term
"including" is not limiting and means  "including  without  limitation."  In the
computation of periods of time from a specified date to a later  specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including."

                                       42
<PAGE>

     9.12 Severability.  The illegality or  unenforceability of any provision of
this Agreement or any instrument or agreement  required  hereunder  shall not in
any way  affect  or impair  the  legality  or  enforceability  of the  remaining
provisions of this Agreement or any instrument or agreement required hereunder.

     9.13  Counterparts.  This Agreement may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto on
separate  counterparts  each of  which,  when so  executed,  shall be  deemed an
original  but all  such  counterparts  shall  constitute  but  one and the  same
agreement.

     9.14 Waiver of Jury Trial.  IF A  CONTROVERSY  OR CLAIM IS NOT SUBMITTED TO
ARBITRATION AS PROVIDED AND LIMITED IN  SUBSECTIONS  (a) AND (b) OF SECTION 9.09
OR IS NOT  DETERMINED BY A REFERENCE AS PROVIDED IN SUBSECTION (c) OF SUBSECTION
9.09, THEN THE BORROWER AND THE BANK WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT,  THE OTHER CREDIT  DOCUMENTS,  OR THE TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY,  IN ANY ACTION,  PROCEEDING  OR OTHER  LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE  PARTIES  AGAINST ANY OTHER  PARTY OR ANY  PARTICIPANT  OR
ASSIGNEE,  WHETHER WITH RESPECT TO CONTRACT CLAIMS,  TORT CLAIMS,  OR OTHERWISE.
THE  BORROWER  AND THE BANK EACH  AGREE  THAT ANY SUCH  CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING,
THE  PARTIES  FURTHER  AGREE THAT THEIR  RESPECTIVE  RIGHT TO A TRIAL BY JURY IS
WAIVED BY  OPERATION  OF THIS  SECTION AS TO ANY ACTION,  COUNTERCLAIM  OR OTHER
PROCEEDING  WHICH  SEEKS,  IN WHOLE OR IN PART,  TO  CHALLENGE  THE  VALIDITY OR
ENFORCEABILITY  OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION
HEREOF  OR  THEREOF.  THIS  WAIVER  SHALL  APPLY TO ANY  SUBSEQUENT  AMENDMENTS,
RENEWALS,  SUPPLEMENTS OR  MODIFICATIONS  TO THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS.




                                       43
<PAGE>

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


                                     FILENET CORPORATION



                                     By:
                                     Typed Name:
                                     Title:


                                     By:
                                     Typed Name:
                                     Title:


                                     Address  where  notices  to
                                     Borrower are to be sent:

                                     3565 Harbor Blvd.
                                     Costa Mesa, CA  92626
                                     Attn:
                                     Telecopier No.:


                                     BANK OF AMERICA NATIONAL TRUST
                                     AND SAVINGS ASSOCIATION


                                     By:
                                     Typed Name: Debra Staiger
                                     Title: Vice President


                                     Address  where  notices  to
                                     Bank are to be sent:

                                     530 Lytton Avenue
                                     Palo Alto, CA  94301
                                     Attn:  Debra Staiger
                                            Vice President
                                     Telecopier No.: 415-853-4476


                                       44
<PAGE>

                                    EXHIBIT A


                               FILENET CORPORATION
                             COMPLIANCE CERTIFICATE



                                                   Date:                 , 199


         Reference is made to that certain  Second  Amended and Restated  Credit
Agreement  (Multicurrency)  (the "Credit  Agreement") dated as of June 25, 1997,
effective as of June 1, 1997,  between FileNet  Corporation (the "Borrower") and
Bank of America  National  Trust and  Savings  Association,  a national  banking
association (the "Bank").  Unless otherwise  defined herein,  capitalized  terms
used  herein  have  the  respective  meanings  assigned  to them  in the  Credit
Agreement.

         The undersigned responsible officer of the Borrower hereby certifies as
of the date hereof that he/she is the of the Borrower, and that, as such, he/she
is  authorized  to  execute  and  deliver  this  Compliance   Certificate   (the
"Certificate")  to the Bank on the behalf of the Borrower  and its  consolidated
Subsidiaries, and that:

[Use the following paragraph if this Certificate is delivered in connection with
the  financial   statements   required  by  subsection  6.02(a)  of  the  Credit
Agreement.]

         1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
audited  consolidated  balance sheet of the Borrower as of the end of the fiscal
year ended  _______________,  199__, (b) the related consolidated  statements of
income,  retained earnings and cash flows for such fiscal year, setting forth in
each case in  comparative  form the figures for the previous  fiscal  year,  and
accompanied in each case by the unqualified  opinion of  ______________  [insert
name of independent  certified public  accounting firm], and (c) a complete copy
of the  Borrower's  Form 10K  annual  report  submitted  to the  Securities  and
Exchange Commission for such year.

                                                         or

[Use the following paragraph if this Certificate is delivered in connection with
the  financial   statements   required  by  subsection  6.02(b)  of  the  Credit
Agreement.]

         1.  Attached as Schedule 1 hereto is (a) a true and correct copy of the
unaudited  consolidated  balance  sheet  of the  Borrower  as of the end of such


                                       A-1
<PAGE>

quarter ended ____________,  199__, (b) the related  consolidated  statements of
income,  retained  earnings  and  cash  flows  of the  Borrower  for the  period
commencing on the first day and ending on the last day of such quarter,  and (c)
a complete copy of the Borrower's  Form 10-Q Quarterly  Report  submitted to the
Securities and Exchange Commission for such quarter.

         2. The  undersigned  has reviewed and is familiar with the terms of the
Credit  Agreement  and  has  made,  or  has  caused  to be  made  under  his/her
supervision,  a detailed review of the transactions and conditions (financial or
otherwise) of the Borrower during the accounting  period covered by the attached
financial statements.

         3. The attached  financial  statements  are complete and correct in all
material respects,  and have been prepared in accordance with generally accepted
accounting principles on a basis consistent with prior periods.

         4. To the best of the  undersigned's  knowledge,  the  Borrower and any
Acceptable  Subsidiaries,  during such period, have each observed,  performed or
satisfied all of their respective covenants and other agreements,  and satisfied
every  condition  in the  Credit  Agreement  and other  Credit  Documents  to be
observed,   performed  or   satisfied   by  the  Borrower  or  such   Acceptable
Subsidiaries,  and the  undersigned  has no knowledge of any Default or Event of
Default.

         5. The following  financial covenant analyses and information set forth
on  Schedule 2 attached  hereto are true and  accurate  on and as of the date of
this Certificate.

     IN WITNESS  WHEREOF,  the undersigned has executed this Certificate as of ,
199 . ------------------- -- 

                                                     FILENET CORPORATION


                                                     By:

                                                     Title:

                                      A-2

<PAGE>


                                                   Date: ______________, 199__
                                                   For the fiscal quarter/year
                                                   ended ______________, 199__


                                   SCHEDULE 2
                           to Compliance Certificate1/
<TABLE>
<CAPTION>
<S>    <C>                                                    <C>                      <C>

------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                 Actual                     Required/Permitted
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
1.     Section 7.01(d) Other Bank Borrowings by Subsidiaries
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       Indebtedness of Subsidiaries for borrowed money from                            Not to exceed $5,000,000
       other banks                                               ----------
------ ------------------------------------------------------ ------------------------ ---------------------------------------------

------ ------------------------------------------------------ ------------------------ ---------------------------------------------
2.     Section 7.01(e) Purchase Money Obligations and
       Section 7.02 Purchase Money Liens
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       Purchase money obligations and related liens              ----------            Not to exceed $10,000,000
------ ------------------------------------------------------ ------------------------ ---------------------------------------------

------ ------------------------------------------------------ ------------------------ ---------------------------------------------
3.     Section 7.03 Capital Assets
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       Obligations for the acquisition of fixed or capital                             Not to exceed (i) $25,000,000 from 1/1/97
       assets                                                                          through 12/31/97, (ii) $30,000,000 from
                                                                                       1/1/98 through 12/31/98, and (iii)
                                                                                       $30,000,000 from 1/1/99 through 12/31/99.
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
4.     Section 7.04(ii) Stock Repurchases
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       Stock repurchases                                        ----------             Not to exceed $10,000,000 after 
                                                                                       March 31, 1997                              
------ ------------------------------------------------------ ------------------------ ---------------------------------------------

------ ------------------------------------------------------ ------------------------ ---------------------------------------------
5.     Section 7.07(d) Sale and Leaseback
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       Financing under sale and leaseback agreements of                                Not to exceed $5,000,000
       fixed or capital assets                                   ----------
------ ------------------------------------------------------ ------------------------ ---------------------------------------------


                                      S-1
<PAGE>


------ ------------------------------------------------------ ------------------------ ---------------------------------------------
6.     Section 7.11 Quick Ratio
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       A.    (i)      cash
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
             (ii      net accounts receivable
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
             (iii) short-term cash
                      investments
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
             (iv)     investment grade marketable
                      securities not classified as
                      long-term investments
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
             (v)      long-term investments in compliance
                      with the Investment Guidelines (not
                      to exceed $15,000,000)
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
             (i) + (ii) + (iii) + (iv) + (v)               =
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       B.    Current liabilities  (including all funded and 
             unfunded obligations under the Credit  Agreement
             and other Credit  Documents, including undrawn 
             amounts (or the Equivalent  Amount thereof) of
             all letters of credit and Bank Guaranties and
             drawn and unreimbursed obligations with respect
             thereto
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                  A                        =                           Not less than 1.50 to 1.00
                                 ---                          ==========
                                  B
                                      S-2

<PAGE>


------ ------------------------------------------------------ ------------------------ ---------------------------------------------
7.     Section 7.12 Total Liabilities to Total Net Worth

       the ratio of
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       A.    total  liabilities  (including all funded and
             unfunded  obligations under the Credit Agreement
             and other Credit  Documents,  including undrawn
             amounts (or the Equivalent  Amount thereof) of 
             all letters of credit and Bank Guaranties and
             drawn and unreimbursed obligations with respect
             thereto
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       B.  Tangible Net Worth
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                  the difference of:
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                    (i)   gross book value of assets
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                  less
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                   (ii)   goodwill, patents, trademarks,
                                  trade names, organization
                                  expense, capitalized
                                  software, treasury stock
                                  (to the extent included
                                  in assets), unamortized
                                  debt discount and
                                  expense, deferred
                                  charges, and other like
                                  intangibles,  monies due
                                  from affiliates,
                                  officers, directors, or
                                  shareholders of the
                                  Borrower or any of its
                                  Subsidiaries, and value
                                  placed on any leasehold
                                  (other than leasehold
                                  improvements)
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                  less
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                  (iii)   applicable reserves                 __________
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                  less
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                   (iv)   all liabilities (including          ___________
                                  accrued and deferred
                                  income taxes)


                                       S-3
<PAGE>

------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                              -----------
                     (i) - (ii) - (iii) - (iv)             =
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                            A                              =                           Not greater than 0.75 to 1.00
                           ---                                ===========
                            B
------ ------------------------------------------------------ ------------------------ ---------------------------------------------

------ ------------------------------------------------------ ------------------------ ---------------------------------------------
8.     Section 7.13 Tangible Net Worth                        ___________              Not less than the sum of:
       -------------------------------

       Tangible Net Worth (from 7 above)
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                       A.    $105,000,000
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                                    plus
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                       B.    75% of net income
                                                                                             after taxes (with-
                                                                                             out subtracting
                                                                                             losses) for each
                                                                                             fiscal quarter
                                                                                             commencing after
                                                                                             3/31/97                       ________
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                                    plus
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                       C.    100% of net pro-
                                                                                             ceeds from
                                                                                             the issuance of any
                                                                                             equity securities
                                                                                             issued after 3/31/97          --------
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                                    plus
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                       D.    100% of any increase
                                                                                             in shareholders'
                                                                                             equity from
                                                                                             conversion of debt
                                                                                             to equity after
                                                                                             3/31/97                       ________
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                                    less
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                       E.    Stock repurchases
                                                                                             from and after
                                                                                             3/31/97 (not to
                                                                                             exceed $10,000,000)            ________
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
                                                                                             A + B + C + D - E  =
------ ------------------------------------------------------ ------------------------ ---------------------------------------------


                                      S-4
<PAGE>


------ ------------------------------------------------------ ------------------------ ---------------------------------------------
9.     Section 7.14 Consecutive Quarterly Losses; Losses in
       One Quarter
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       A.    (i)      Net (after tax) income (loss) for
                      fiscal quarter reported on
                                                                                      
                                                                                       Not in excess of $7,500,000 for quarter
                                                                                       ending 6/30/97, $2,000,000 for quarter ending
                                                                                       9/30/97, and 5% of Tangible Net Worth (from
                                                                                       7 above)for quarters commencing on and after
                                                                                       10/1/97.
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
             (ii)     Operating income (loss) for fiscal
                      quarter reported on
                                                                                       Not in excess of $7,500,000 for quarter
                                                                                       ending 6/30/97, $2,000,000 for quarter ending
                                                                                       9/30/97, and 5% of Tangible Net Worth (from
                                                                                       7 above)for quarters commencing on and after
                                                                                       10/1/97.
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       B.2/    (i)    Net (after tax) income (loss)
                      immediately preceding fiscal quarter
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
               (ii)   Net (after tax) income (loss) for                                If (i) is a loss, (ii) shall                 
                      fiscal quarter reported on                                       not be a loss.
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
       C.2/    (i)    Operating income (loss) for the
                      immediately preceding fiscal quarter
------ ------------------------------------------------------ ------------------------ ---------------------------------------------
               (ii)   Operating income (loss) for fiscal                               If (i) is a loss, (ii) shall
                                  quarter reported on                                  not be a loss.
====== ====================================================== ======================== =============================================

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

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

1/   All amounts determined on a consolidated basis.

2/   B and C apply for  quarters  commencing  on and  after  10/1/97  (i.e.,  if
     quarter  ending  9/30/97  is  a  loss,  quarter  ending  12/31/97  must  be
     profitable).

                                      S-5
</TABLE>