AMENDED AND RESTATED
                                CREDIT AGREEMENT
                                 (MULTICURRENCY)


                            Dated as of June 30, 1999



                                     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................................7

ARTICLE II      The Credit Facilities.....................................7
                ---------------------
         2.01       The Revolving Facility................................7
                    ----------------------
         2.02       Advances Under the Revolving Facility.................8
                    -------------------------------------
         2.03       Commercial Letters of Credit under the
                      Revolving Facility..................................9
                    --------------------
         2.04       Standby Letters of Credit Under the
                      Revolving Facility.................................10
                    --------------------
         2.05       Local Currency Advances..............................11
                    -----------------------
         2.06       Bank Guaranties......................................12
                    ---------------
         2.07       Optional Prepayment..................................12
                    -------------------
         2.08       Mandatory Payment....................................13
                    -----------------
         2.09       Commitment Fee.......................................13
                    --------------
         2.10       Default Rate.........................................13
                    ------------
         2.11       Early Termination of Commitment......................13
                    -------------------------------

ARTICLE III     Extensions of Credit, Payments and
                  Interest Calculations..................................14
                -----------------------
         3.01       Requests for Credit..................................14
                    -------------------
         3.02       Disbursements and Payments...........................14
                    --------------------------
         3.03       Branch Accounts......................................14
                    ---------------
         3.04       Evidence of Indebtedness.............................14
                    -------------------------
         3.05       Interest Calculation.................................14
                    --------------------
         3.06       Late Payments; Compounding...........................15
                    --------------------------
         3.07       Business Day.........................................15
                    -------------
         3.08       Taxes and Other Charges..............................15
                    -----------------------
         3.09       Illegality...........................................16
                    ----------
         3.10       Increased Costs......................................16
                    ---------------
         3.11       Funding Losses.......................................17
                    --------------
         3.12       Inability to Determine Rates.........................17
                    ----------------------------
         3.13       Certificate of the Bank..............................17
                    -----------------------
         3.14       Debits to Borrower's Account.........................17
                    ----------------------------
         3.15       Survival.............................................17
                    --------

ARTICLE IV      Conditions to Availability of Credit.....................18
                ------------------------------------
         4.01       Conditions to First Extension of Credit..............18
                    ---------------------------------------
         4.02       Conditions to Each Extension of Credit...............18
                    --------------------------------------

ARTICLE V       Representations and Warranties...........................19
                ------------------------------
         5.01       Corporate Existence and Power........................19
                    -----------------------------
         5.02       Authorization........................................19
                    -------------
         5.03       Enforceability.......................................19
                    --------------
         5.04       Compliance with Laws.................................19
                    --------------------
         5.05       Permits, Franchises..................................20
                    -------------------
         5.06       Litigation...........................................20
                    ----------
         5.07       No Event of Default..................................20
                    -------------------
         5.08       Other Obligations....................................20
                    -----------------
         5.09       Tax Returns..........................................20
                    -----------
         5.10       Information Submitted................................20
                    ---------------------

                                       i
<PAGE>

         5.11       No Material Adverse Effect...........................20
                    --------------------------
         5.12       ERISA Compliance.....................................20
                    ----------------
         5.13       Environmental Matters................................21
                    ---------------------

ARTICLE VI      Affirmative Covenants....................................21
                ---------------------
         6.01       Notices of Certain Events............................22
                    -------------------------
         6.02       Financial and Other Information......................22
                    -------------------------------
         6.03       Books, Records, Audits and Inspections...............23
                    --------------------------------------
         6.04       Use of Facility......................................23
                    ---------------
         6.05       Insurance............................................23
                    ---------
         6.06       Compliance with Laws.................................23
                    --------------------
         6.07       Change in Name, Structure or Location................23
                    -------------------------------------
         6.08       Existence and Properties.............................23
                    ------------------------
         6.09       Additional Acts......................................23
                    ---------------

ARTICLE VII      Negative Covenants......................................24
-----------      ------------------
         7.01       Other Indebtedness...................................24
                    ------------------
         7.02       Liens................................................24
                    -----
         7.03       Capital Assets.......................................25
                    --------------
         7.04       Dividends............................................25
                    ---------
         7.05       Loans................................................25
                    -----
         7.06       Acquisitions, Liquidations and
                      Mergers............................................25
                    --------------------------------------
         7.07       Sale of Assets.......................................26
                    --------------
         7.08       Business Activities..................................26
                    -------------------
         7.09       Regulations G, T, U, and X...........................26
                    --------------------------
         7.10       Intentionally Omitted................................26
                    ---------------------
         7.11       Quick Ratio..........................................26
                    -----------
         7.12       Total Liabilities to Tangible Net Worth..............26
                    ---------------------------------------
         7.13       Tangible Net Worth...................................27
                    ------------------
         7.14       Consecutive Quarterly Losses; Losses in
                      One Quarter........................................27
                    ---------------------------------------------------

ARTICLE VIII      Events of Default......................................27
                  -----------------
         8.01       Events of Default....................................27
                    (a)    Failure to Pay................................27
                           --------------
                    (b)    Breach of Representation or
                             Warranty....................................27
                           ----------
                    (c)    Specific Defaults.............................28
                           -----------------
                    (d)    Other Defaults................................28
                           --------------
                    (e)    Trade Suits...................................28
                           -----------
                    (f)    Judgments.....................................28
                           ---------
                    (g)    Failure to Pay Debts; Voluntary
                             Bankruptcy..................................28
                           -------------
                    (h)    Involuntary Bankruptcy........................28
                           ----------------------
                    (i)    Default of Other Financial Obligations........28
                           --------------------------------------
                    (j)    Default under other Credit Documents..........28
                           ------------------------------------
                    (k)    Default of Other Bank Obligations.............28
                           ---------------------------------
                    (l)    Material Adverse Effect.......................28
                           -----------------------
                    (m)    ERISA.........................................29
                           -----
                    (n)    Change of Control.............................29
                           -----------------
         8.02       Remedies.............................................29
                    --------

ARTICLE IX      Miscellaneous............................................30
         9.01       Successors and Assigns...............................30
                    ----------------------
         9.02       Consents and Waivers.................................30
                    --------------------
         9.03       Governing Law........................................30
                    -------------
         9.04       Costs and Attorneys' Fees............................30
                    -------------------------

                                       ii
<PAGE>

         9.05       Integration; Amendment...............................31
                    ----------------------
         9.06       Borrower's Documents.................................31
                    --------------------
         9.07       Participations.......................................31
                    --------------
         9.08       General Indemnification..............................31
                    -----------------------
         9.09       Arbitration; Reference Proceeding....................32
                    ---------------------------------
         9.10       Notices..............................................32
                    -------
         9.11       Headings; Interpretation.............................33
                    ------------------------
         9.12       Severability.........................................33
                    ------------
         9.13       Counterparts.........................................33
                    ------------
         9.14       Waiver of Jury Trial.................................33
                    --------------------


EXHIBITS

Exhibit A         Form of Compliance Certificate

                                      iii
<PAGE>

                              AMENDED AND RESTATED
                                CREDIT AGREEMENT
                                 (MULTICURRENCY)


     THIS  AMENDED  AND  RESTATED   CREDIT   AGREEMENT   (MULTICURRENCY)   (this
"Agreement") is entered into as of June 30, 1999,  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 a Second  Amended  and
          Restated  Credit  Agreement(Multicurrency)dated  as of June 25,  1997,
          effective as of June 1, 1997, as amended (as so 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.

     "Availability  Period": the period commencing on the date of this Agreement
and ending on the date that is the earlier to occur of (a) June 29, 2001, or (b)
the date on which the Bank's commitment to extend credit hereunder terminates.

                                       1
<PAGE>

     "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

     (a)  with respect to disbursements and payments  pertaining to any Offshore
          Rate  Advances  denominated  in Dollars,  a day on which  dealings are
          carried on in the applicable offshore Dollar interbank market, and

     (b)  with respect to disbursements and payments  pertaining to any Offshore
          Currency Advance:

          (i)  if the  applicable  Business Day relates to an Offshore  Currency
               Advance  denominated  in the euro or a National  Currency Unit, a
               Target  Business  Day on  which  banks  are  generally  open  for
               business in London,  Frankfurt, San Francisco and/or in any other
               principal  financial  center as the Bank  shall from time to time
               determine for this purpose, and

          (ii) with   respect  to  any   disbursements   and   payments  in  and
               calculations   pertaining  to  any  Offshore   Currency   Advance
               denominated  in any  other  Offshore  Currency,  a day  on  which
               commercial  banks  are  open for  foreign  exchange  business  in
               London,  England,  and on which dealings in the relevant Offshore
               Currency  are  carried  on in  the  applicable  offshore  foreign
               exchange  interbank market in which disbursement of or payment in
               such Offshore Currency will be made or received hereunder.

     For  purposes of this  Agreement,  "TARGET  Business  Day" means a day when
TARGET (the Trans-European Automated Real-time Gross settlement Express Transfer
system) is scheduled to be open for business.

     "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.

     "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.

                                       2
<PAGE>

     "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).

     "EMU": Economic and Monetary Union as contemplated in the Treaty of Rome of
March 25, 1957,  as amended by the Single  European Act 1986 and the  Maastricht
Treaty (which was signed at Maastricht on February 1, 1992,  and came into force
on November 1, 1993), as amended from time to time.

     "EMU legislation":  legislative measures of the European Council (including
European  Council  regulations)  for the  introduction  of,  changeover  to,  or
operation of the euro,  being in part the  implementation  of the third stage of
EMU.

     "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 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.

     "euro": the single currency of Participating  Member States of the European
Union.

     "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,  June 29, 2001; (b)
in  respect of any  commercial  letters of credit,  December  28,  2001;  (c) in
respect of any standby  letters of credit,  June 28, 2002; and (d) in respect of
any Bank Guaranties, June 28, 2002.

     "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 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).

                                       4
<PAGE>

     "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.

     "National  Currency Unit": the former national  currency of a Participating
Member State.

     "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;  provided,  however,  that with
          respect to any Offshore Currency Advance to be denominated in the euro
          or a National Currency Unit of a Participating  Member State, it shall
          mean the rate  displayed on Telerate (also known as Dow Jones Markets)
          page 3740 or 3750 (or any replacement page thereof or other applicable
          display page  designated by Telerate) as  appropriate  for deposits in
          such  currency  in the  approximate  amount of the  Offshore  Currency
          Advance to be made and having a comparable  maturity to such  Offshore
          Rate Interest  Period at  approximately  11:00 a.m.  (London time) two
          TARGET  Business  Days  prior to the first day of such  Offshore  Rate
          Interest Period.

               "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

                                       5
<PAGE>

          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.

     "Participating  Member  State":  each  country  so  described  in  any  EMU
Legislation.

     "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 as its "reference  rate" or
"prime 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 in the reference rate
or prime 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.


                                       7
<PAGE>

     "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.

     "Target Business Day": specified in the definition of "Business Day."

     "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.


                                   ARTICLE II

                              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,  including  the euro,  but not  including any National
     Currency Unit (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
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 under  subsection  (b) 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
     1.00% 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

                                       8
<PAGE>

                    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) Intentionally Omitted.

          (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.  (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.

          (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.

          (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.  (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  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:

               (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  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.

     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.

     2.12  Denomination  and  Payments  in the Euro;  Additional  Changes.  Each
obligation  under  this  Agreement  of a party  hereto  which  would  have  been
denominated in a National  Currency Unit but for the  introduction  of the euro,
shall instead be denominated in, or redenominated into, as applicable, the euro;
provided  that,  if and to the extent that any EMU  Legislation  allows  amounts
denominated  in the euro to be paid by  crediting  an  account  of the  creditor
within a  country  in  either  the euro or the  National  Currency  Unit of that
country,  such amounts may be paid hereunder in either the euro or such National
Currency  Unit.  The  provisions  of this  Agreement  relating  to the  euro and
National Currency Units shall be subject to such further changes as the Bank may
from time to time in its  reasonable  discretion  notify to the  Borrower  to be
necessary or appropriate to reflect the changeover to the euro in  Participating
Member States.


                                   ARTICLE III

            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.

     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. All payments by the Borrower or an Acceptable Subsidiary under this
Agreement of amounts  denominated in the euro or a National  Currency Unit shall
be made in  immediately  available,  freely  transferable,  cleared funds to the
account  of the Bank in the  principal  financial  center in such  Participating
Member State, as from time to time designated by the Bank for such purpose.  The
Bank shall not be liable to the Borrower or any Acceptable Subsidiary in any way
whatsoever for any delay, or the  consequences of any delay, in the crediting to
any account of any amount denominated in the euro or a National Currency Unit.

     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;  provided,  that,  the basis of
accrual of interest or fees with  respect to the euro shall be  consistent  with
the convention and practice for the euro in the London interbank market or other
applicable interbank market, as the case may be.

     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
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


          (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
to the extent already  included in the  calculation of 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; and

          (c) the introduction  of,  changeover to or operation of the euro in a
     Participating Member State.

     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 (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  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 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 does not accurately reflect the cost of such Advance;  or (c) with
respect to Offshore  Currency  Advances  denominated  in the euro,  the euro has
ceased to be utilized as the basic  accounting  unit of the European  Community.
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.

     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 IV

                      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:

          (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;

          (c) A certificate of an appropriate  officer of the Borrower as to the
     matters set forth in Section 4.02(a) and (b);

          (d) A copy of the Borrower's current Investment Guidelines, which must
     be satisfactory to the Bank;

          (e) Payment of a  non-refundable  amendment and restatement fee in the
     amount of $_______,  which amount the Borrower covenants to pay to the Bank
     on demand, and payment of any other fee or expense required hereunder prior
     to the first extension of credit;

          (f) 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.

                                    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.

     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
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
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.

     5.14 Year 2000. On the basis of a  comprehensive  review and  assessment of
the Borrower's and its  Subsidiaries'  systems and equipment and inquiry made of
the  Borrower's  and its  Subsidiaries'  material  suppliers  and  vendors,  the
Borrower  reasonably  believes  that the  "Year  2000  problem"  (that  is,  the
inability of computers, as well as embedded microchips in non-computing devices,
to perform properly date-sensitive functions with respect to certain dates prior
to and after December 31, 1999), including costs of remediation, will not result
in a Material  Adverse  Effect.  The  Borrower  and its  Subsidiaries  will have
developed contingency plans by October 31, 1999 to ensure uninterrupted business
operation of systems and equipment  which are  essential to Borrower's  business
operations  in the event of failure of their own or a third  party's  systems or
equipment  due  to the  Year  2000  problem,  including  those  of  vendors  and
suppliers.



                                   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:

          (a)  Within  100  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.

     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 occupancy), 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.


                                   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.

     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 each of the fiscal years ending December
31, 1998 and  December 31, 1999,  and (iii)  $37,500,000  for each of the fiscal
years ending December 31, 2000 and December 31, 2001.

     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
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;  (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; and (e) other loans,  advances,  extensions of credit and investments in an
aggregate amount outstanding at any one time not to exceed $5,000,000.

     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.

     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 Intentionally Omitted.

     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).

     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. 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 (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.

          (g) Failure to Pay Debts;  Voluntary  Bankruptcy.  The Borrower or any
     Subsidiary  (i)  fails to pay the  Borrower's  or 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.

          (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 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.

     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
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
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.

     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."

     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.




<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: Mark S. St. Clare
                             Title: Senior Vice President, Finance and CFO


                             By: _________________________________________
                             Typed Name: Brian A. Colbeck
                             Title: Controller, CAO, Assistant Secretary



                             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:  Timothy M. O'Connor
                             Title:  Vice President


                             Address where notices to
                             Bank are to be sent:

                             Nations Bank Plaza
                             901 Main Street
                             Dallas, Texas 75202-3714
                             Attn: Timothy M. O'Connor
                                   Vice President
                             Telecopier No.:


<PAGE>
                                    EXHIBIT A


                               FILENET CORPORATION
                             COMPLIANCE CERTIFICATE



                                                      Date: _____________, 199__

         Reference is made to that certain Amended and Restated Credit Agreement
(Multicurrency)  (the "Credit  Agreement")  dated as of June 30,  1999,  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
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: _____________________________________




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<TABLE>

<CAPTION>

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


                                                        SCHEDULE 2
                                               to Compliance Certificate*



<S>                                                   <C>                       <C>
                                                      Actual                    Required/Permitted

1. Section 7.01(d) Other Bank
   Borrowings by Subsidiaries

   Indebtedness of Subsidiaries for borrowed money
   from other banks                                   ___________________       Not to exceed $5,000,000


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        ___________________       Not to exceed (i) $25,000,000 from 1/1/97
   capital assets                                                               through 12/31/97, (ii) $30,000,000 from 1/1/98
                                                                                through 12/31/98, (iii) $30,000,000 from 1/1/99
                                                                                through 12/31/99, (iv) $37,500,000 from 1/1/00
                                                                                through 12/31/00, and (v) $37,500,000 from
                                                                                1/1/01 through 12/31/01.
4. Section 7.04(ii) Stock Repurchases

   Stock repurchases                                  ___________________       Not to exceed $10,000,000 after March 31, 1997


5. Section 7.05(e)

   Other loans and investments                        ___________________       Not to exceed $5,000,000


6. Section 7.07(d) Sale and Leaseback

   Financing under sale and leaseback agreements of   ___________________       Not to exceed $5,000,000
   fixed or capital assets


7. Section 7.11 Quick Ratio

   A.       (i)      cash                             ___________________

           (ii)      net accounts receivable          ___________________


___________________________________
* All amounts determined on a consolidated basis.

                                                           S-1
<PAGE>

                                                      Actual                    Required/Permitted


          (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/B                    =        ___________________       Not less than 1.50 to 1.00


8. 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

                                                           S-2
<PAGE>

                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)            ____________________

                (i)-(ii)-(iii)-(iv)          =        ____________________

                      A/B                    =        ____________________      Not greater than 0.75 to 1.00


9. Section 7.13 Tangible Net Worth

   Tangible Net Worth (from 8 above)                  ____________________      Not less than the sum of:


                                                                                A.  $105,000,000

                                                                                       plus

                                                                                B.  75% of net income
                                                                                    after taxes (without
                                                                                    subtracting losses)
                                                                                    for each fiscal quarter
                                                                                    commencing after
                                                                                    3/31/97                 ________

                                                                                            plus

                                                                                C.  100% of net proceeds
                                                                                    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

                                                          S-3
<PAGE>


                                                       Actual                        Required/Permitted


                                                                                E.  Stock repurchases from
                                                                                    and after 3/31/97 (not to
                                                                                    exceed $10,000,000)     ________


                                                                                A + B + C + D - E =         ________



10.  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 5% of Tangible Net
                                                                                Worth (from 8 above).

            (ii) Operating income (loss) for fiscal
                 quarter reported on                  ____________________      Not in excess of 5% of Tangible Net
                                                                                Worth (from 8 above).

     B.     (i)  Net (after tax) income (loss)
                 immediately preceding fiscal quarter ____________________

            (ii) Net (after tax) income (loss) for
                 fiscal quarter reported on           ____________________      If (i) is a loss, (ii) shall not
                                                                                be a loss.
     C.     (i)  Operating income (loss) for the
                 immediately preceding fiscal quarter ____________________

            (ii) Operating income (loss) for fiscal
                 quarter reported on                  ____________________      If (i) is a loss, (ii) shall not
                                                                                be a loss.

</TABLE>

                                                   S-4