CREDIT AGREEMENT


                                      among


                            TEL-SAVE HOLDINGS, INC.,
                               TEL-SAVE, INC. and
                           EMERGENCY TRANSPORT CORP.,
                                  as Borrowers,


                            THE LENDERS NAMED HEREIN,


                                       and


                           FIRST UNION NATIONAL BANK,
                                    as Agent


                   $65,000,000, 364-Day Senior Credit Facility


                                   Arranged by
                        FIRST UNION CAPITAL MARKETS CORP.


                            Dated as of July 11, 1997







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                                TABLE OF CONTENTS

                                                                                                               Page
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                                     RECITALS...................................................................-1-

                                    ARTICLE I

                                   DEFINITIONS

         1.1.          Defined Terms............................................................................-1-
         1.2.          Accounting Terms........................................................................-12-
         1.3.          Other Terms; Construction; Time.........................................................-13-

                                   ARTICLE II

                          AMOUNT AND TERMS OF THE LOANS

         2.1.          Commitments.............................................................................-13-
         2.2.          Borrowings..............................................................................-13-
         2.3.          Disbursements; Funding Reliance; Domicile of Loans......................................-14-
         2.4.          Notes...................................................................................-15-
         2.5.          Termination and Reduction of Commitments................................................-15-
         2.6.          Mandatory Payments and Prepayments......................................................-15-
         2.7.          Voluntary Prepayments...................................................................-16-
         2.8.          Interest................................................................................-16-
         2.9.          Fees....................................................................................-17-
         2.10.         Interest Periods........................................................................-18-
         2.11.         Conversions and Continuations...........................................................-18-
         2.12.         Method of Payments; Computations........................................................-19-
         2.13.         Recovery of Payments....................................................................-20-
         2.14.         Use of Proceeds.........................................................................-20-
         2.15.         Pro Rata Treatment......................................................................-20-
         2.16.         Increased Costs; Change in Circumstances; Illegality; etc...............................-21-
         2.17.         Taxes...................................................................................-23-
         2.18.         Compensation............................................................................-25-
 
                                   ARTICLE III

                        CLOSING; CONDITIONS OF BORROWING

         3.1.          Closing.................................................................................-25-
         3.2.          Conditions of Closing. .................................................................-25-
         3.3.          Conditions of All Borrowings............................................................-27-

                                       -i-

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                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         4.1.          Corporate Organization and Power........................................................-28-
         4.2.          Authorization; Enforceability...........................................................-28-
         4.3.          No Violation............................................................................-28-
         4.4.          Governmental and Third-Party Authorization; Permits.....................................-29-
         4.5.          Litigation..............................................................................-29-
         4.6.          Taxes...................................................................................-29-
         4.7.          Subsidiaries............................................................................-29-
         4.8.          Full Disclosure.........................................................................-29-
         4.9.          Margin Regulations......................................................................-30-
         4.10.         No Material Adverse Change..............................................................-30-
         4.11.         Financial Matters.......................................................................-30-
         4.12.         Ownership of Properties.................................................................-30-
         4.13.         ERISA...................................................................................-31-
         4.14.         Environmental Matters...................................................................-31-
         4.15.         Compliance With Laws....................................................................-32-
         4.16.         Regulated Industries....................................................................-32-
         4.17.         Insurance...............................................................................-32-
         4.18.         Material Contracts......................................................................-32-
         4.19.         Labor Relations.........................................................................-32-
         4.20.         Single Business Enterprise..............................................................-32-

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

         5.1.          Financial Statements....................................................................-33-
         5.2.          Other Business and Financial Information................................................-33-
         5.3.          Corporate Existence; Franchises; Maintenance of Properties..............................-35-
         5.4.          Compliance with Laws....................................................................-35-
         5.5.          Payment of Obligations..................................................................-35-
         5.6.          Insurance...............................................................................-35-
         5.7.          Maintenance of Books and Records; Inspection............................................-36-
         5.8.          Permitted Acquisitions..................................................................-36-
         5.9.          Creation or Acquisition of Subsidiaries.................................................-36-
         5.10.         Further Assurances......................................................................-37-

                                   ARTICLE VI

                               FINANCIAL COVENANTS

         6.1.          Leverage Ratio..........................................................................-37-
         6.2.          Current Ratio...........................................................................-37-



                                      -ii-

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                                   ARTICLE VII

                               NEGATIVE COVENANTS

         7.1.          Merger; Consolidation...................................................................-37-
         7.2.          Indebtedness............................................................................-38-
         7.3.          Liens...................................................................................-38-
         7.4.          Disposition of Assets...................................................................-39-
         7.5.          Investments.............................................................................-40-
         7.6.          Restricted Payments.....................................................................-41-
         7.7.          Transactions with Affiliates............................................................-41-
         7.8.          Lines of Business.......................................................................-41-
         7.9.          Certain Amendments......................................................................-42-
         7.10.         Limitation on Certain Restrictions......................................................-42-
         7.11.         Fiscal Year.............................................................................-42-
         7.12.         Accounting Changes......................................................................-42-
  
                                  ARTICLE VIII

                                EVENTS OF DEFAULT

         8.1.          Events of Default.......................................................................-42-
         8.2.          Remedies: Termination of Commitments, Acceleration, etc.................................-44-
         8.3.          Remedies: Set-Off.......................................................................-45-

                                   ARTICLE IX

                                    THE AGENT

         9.1.          Appointment.............................................................................-45-
         9.2.          Nature of Duties........................................................................-45-
         9.3.          Exculpatory Provisions..................................................................-46-
         9.4.          Reliance by Agent.......................................................................-46-
         9.5.          Non-Reliance on Agent and Other Lenders.................................................-46-
         9.6.          Notice of Default.......................................................................-47-
         9.7.          Indemnification.........................................................................-47-
         9.8.          The Agent in its Individual Capacity....................................................-47-
         9.9.          Successor Agent.........................................................................-48-

                                    ARTICLE X

                                  MISCELLANEOUS

         10.1.         Fees and Expenses.......................................................................-48-
         10.2.         Indemnification.  ......................................................................-49-
         10.3.         Governing Law; Consent to Jurisdiction..................................................-49-
         10.4.         Arbitration; Preservation and Limitation of Remedies....................................-50-
         10.5.         Notices.................................................................................-50-


                                      -iii-
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         10.6.         Amendments, Waivers, etc................................................................-51-
         10.7.         Assignments, Participations.............................................................-52-
         10.8.         No Waiver...............................................................................-54-
         10.9.         Successors and Assigns..................................................................-54-
         10.10.        Survival................................................................................-54-
         10.11.        Severability............................................................................-54-
         10.12.        Construction............................................................................-54-
         10.13.        Confidentiality.........................................................................-55-
         10.14.        Counterparts; Effectiveness.............................................................-55-
         10.15.        The Borrowers as Co-Obligors............................................................-55-
         10.16.        Entire Agreement........................................................................-56-


                                      -iv-

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                                    EXHIBITS

Exhibit A                 Form of Note
Exhibit B-1               Form of Notice of Borrowing
Exhibit B-2               Form of Notice of Conversion/Continuation
Exhibit C                 Form of Compliance Certificate
Exhibit D                 Form of Assignment and Acceptance
Exhibit E                 Form of Subsidiary Guaranty
Exhibit F                 Form of Opinion of Arnold & Porter/Aloysius Lawn, Esq.
Exhibit G                 Form of Financial Condition Certificate




                                    SCHEDULES

Schedule 4.7                        Subsidiaries
Schedule 4.18                       Material Contracts
Schedule 7.2                        Existing Indebtedness
Schedule 7.3                        Existing Liens
Schedule 7.5                        Existing Investments


                                       -v-
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                                CREDIT AGREEMENT


         THIS  CREDIT  AGREEMENT,  dated as of the 11th day of July,  1997 (this
"Agreement"), is made among TEL-SAVE HOLDINGS, INC., a Delaware corporation with
its principal offices in New Hope, Pennsylvania ("Holdings"),  TEL-SAVE, INC., a
Pennsylvania  corporation with its principal  offices in New Hope,  Pennsylvania
("Tel-Save"),  EMERGENCY  TRANSPORT  CORP.,  a  Delaware  corporation  with  its
principal  offices  in New  Hope,  Pennsylvania  ("ETC"  and  collectively  with
Holdings and Tel-Save,  the "Borrowers"),  the banks and financial  institutions
listed on the  signature  pages hereto or that become  parties  hereto after the
date hereof (collectively, the "Lenders"), and FIRST UNION NATIONAL BANK ("First
Union"), as agent for the Lenders (in such capacity, the "Agent").


                                    RECITALS

         A. The Borrowers  have requested that the Lenders make available to the
Borrowers a 364-day revolving credit facility in the aggregate  principal amount
of up to  $65,000,000.  The Borrowers will use the proceeds of this facility for
working capital and general  corporate  purposes and for Permitted  Acquisitions
(as hereinafter defined), all as more fully described herein.

          B. The Lenders  are willing to make  available  to the  Borrowers  the
credit facility  described herein subject to and on the terms and conditions set
forth in this Agreement.


                                    AGREEMENT

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


                                    ARTICLE I

                                   DEFINITIONS

          1.1. Defined Terms. For purposes of this Agreement, in addition to the
terms defined elsewhere herein,  the following terms shall have the meanings set
forth below (such  meanings to be equally  applicable to the singular and plural
forms thereof):

         "Account  Designation Letter" shall mean a letter from the Borrowers to
the Agent,  duly  completed and signed by an  Authorized  Officer of each of the
Borrowers and in form and substance  satisfactory to the Agent,  listing any one
or more  accounts to which the Borrowers may from time to time request the Agent
to forward the proceeds of any Loans made hereunder.




<PAGE>



         "Acquisition"   shall  mean  any   transaction  or  series  of  related
transactions,  consummated  on or after the date  hereof,  by which any Borrower
directly, or indirectly through one or more Borrower Subsidiaries,  (i) acquires
any going business,  or all or substantially  all of the assets,  of any Person,
whether  through  purchase  of  assets,  merger  or  otherwise,   (ii)  acquires
securities or other ownership interests of any Person having at least a majority
of combined voting power of the then  outstanding  securities or other ownership
interests of such Person or (iii)  acquires less than  substantially  all of the
assets of any Person for a purchase price of $1,000,000 or more.

         "Adjusted  Base Rate" shall mean,  at any time with respect to any Base
Rate  Loan,  a rate per  annum  equal to the Base Rate as in effect at such time
minus the Applicable  Margin Percentage for Base Rate Loans as in effect at such
time.

         "Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan,  a rate per annum  equal to the LIBOR  Rate as in effect at such time plus
the Applicable Margin Percentage for LIBOR Loans as in effect at such time.

         "Affiliate"  shall  mean,  as to any  Person,  each other  Person  that
directly, or indirectly through one or more intermediaries, owns or controls, is
controlled  by or under  common  control  with,  such Person or is a director or
officer of such Person; provided that the term "Affiliate" shall not include any
"investment  company"  registered  with the Securities  and Exchange  Commission
under the  Investment  Company  Act of 1940,  as amended.  For  purposes of this
definition,  with respect to any Person "control" shall mean (i) the possession,
direct  or  indirect,  of the power to  direct  or cause  the  direction  of the
management and policies of such Person,  whether through the ownership of voting
securities,  by contract  or  otherwise,  or (ii) the  beneficial  ownership  of
securities or other ownership interests of such Person having 10% or more of the
combined  voting power of the then  outstanding  securities  or other  ownership
interests  of such  Person  ordinarily  (and apart from  rights  accruing  under
special  circumstances) having the right to vote in the election of directors or
other governing body of such Person.

         "Agent"  shall mean First  Union,  in its  capacity as Agent  appointed
under Article IX, and its successors and permitted assigns in such capacity.

         "Agreement" shall mean this Credit Agreement,  as amended,  modified or
supplemented from time to time.

         "Applicable  Margin  Percentage" shall mean, at any time from and after
the Closing Date, the applicable percentage (a) of 0.500%, to be subtracted from
the Base Rate pursuant to Section 2.8 for purposes of  determining  the Adjusted
Base Rate and, (b) of 0.875%,  to be added to the LIBOR Rate pursuant to Section
2.8 for purposes of determining the Adjusted LIBOR Rate.

         "Assignee"  shall  have  the  meaning  given  to such  term in  Section
10.7(a).

         "Assignment  and  Acceptance"  shall mean an Assignment  and Acceptance
entered  into between a Lender and an Assignee and accepted by the Agent and the
Borrowers, in substantially the form of Exhibit D.

         "Authorized  Officer"  shall mean,  with respect to any  Borrower,  any
officer of such Borrower duly authorized by resolution of the board of directors
of such  Borrower  to take such action on its behalf,  and whose  signature  and
incumbency  shall  have  been  certified  to the  Agent by the  secretary  or an
assistant secretary of such Borrower.


                                       -2-

<PAGE>




         "Bankruptcy Code" shall mean 11 U.S.C.  Section 101 et seq., as amended
from time to time, and any successor statute.

         "Base  Rate" shall mean the higher of (i) the per annum  interest  rate
publicly  announced  from  time to time  by  First  Union  in  Charlotte,  North
Carolina,  to be its prime rate (which may not  necessarily  be its best lending
rate),  as  adjusted  to conform to changes as of the opening of business on the
date of any such  change in such  prime  rate,  and (ii) 0.5% per annum plus the
Federal  Funds  Rate,  as  adjusted  to conform to changes as of the  opening of
business on the date of any such change in the Federal Funds Rate.

         "Base Rate Loan" shall mean, at any time,  any Loan that bears interest
at such time at the Adjusted Base Rate.

          "Borrower  Affiliate"  shall mean any Borrower or any  subsidiary of a
Borrower.

         "Borrowing" shall mean the incurrence by the Borrowers  (including as a
result of conversions and continuations of outstanding Loans pursuant to Section
2.11) on a single  date of a group of Loans of a single Type and, in the case of
LIBOR Loans, as to which a single Interest Period is in effect.

         "Borrowing  Date" shall mean,  with respect to any Borrowing,  the date
upon which such Borrowing is made.

         "Business  Day" shall mean (i) any day other than a Saturday or Sunday,
a legal holiday or a day on which commercial banks in Charlotte,  North Carolina
are  required  by law to be  closed  and (ii) in  respect  of any  determination
relevant to a LIBOR Loan,  any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.

         "Capital  Stock"  shall mean (i) with  respect to any Person  that is a
corporation,  any and all shares,  interests  or  equivalents  in capital  stock
(whether  voting  or  nonvoting,  and  whether  common  or  preferred)  of  such
corporation,  and (ii) with respect to any Person that is not a corporation, any
and all  partnership,  membership,  limited  liability  company or other  equity
interests  of such Person;  and in each case,  any and all  warrants,  rights or
options to purchase any of the foregoing.

         "Cash  Equivalents" shall mean (i) securities issued or unconditionally
guaranteed  by the United  States of  America  or any agency or  instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing  within 90 days from the date of  acquisition,  (ii)  commercial  paper
issued by any Person  organized  under the laws of the United States of America,
maturing  within  90 days  from  the  date of  acquisition  and,  at the time of
acquisition,  having  a rating  of at least  A-1 or the  equivalent  thereof  by
Standard & Poor's Ratings Services or at least P-1 or the equivalent  thereof by
Moody's Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing  within 90 days from the date of issuance and issued by a bank or trust
company  organized  under the laws of the United  States of America or any state
thereof that has combined capital and surplus of at least  $500,000,000 and that
has  (or is a  subsidiary  of a  bank  holding  company  that  has) a  long-term
unsecured  debt  rating of at least A or the  equivalent  thereof by  Standard &
Poor's  Ratings  Services  or at least A2 or the  equivalent  thereof by Moody's
Investors Service,  Inc., (iv) repurchase  obligations with a term not exceeding
seven (7) days with respect to underlying  securities of the types  described in
clause  (i)  above  entered  into  with any bank or trust  company  meeting  the
qualifications  specified in clause  (iii) above,  and (v) money market funds at
least 95% of the assets of which are continuously  invested in securities of the
type described in clause (i) above.



                                       -3-

<PAGE>



         "Closing" shall have the meaning given to such term in Section 3.1.

         "Closing Date" shall mean the date referred to in Section 3.1.

         "Commitment"  shall mean,  with respect to any Lender at any time,  the
amount set forth  opposite such Lender's name on its signature page hereto under
the  caption  "Commitment"  or,  if such  Lender  has  entered  into one or more
Assignment and Acceptances, the amount set forth for such Lender at such time in
the  Register  maintained  by the Agent  pursuant  to  Section  10.7(b)  as such
Lender's  "Commitment,"  as such  amount may be reduced at or prior to such time
pursuant to the terms hereof.

         "Compliance Certificate" shall mean a fully completed and duly executed
certificate  in the form of  Exhibit  C,  together  with a  Covenant  Compliance
Worksheet.

         "Consolidated   Current   Assets"   shall  mean,  as  of  any  date  of
determination, all assets of the Borrowers and their Subsidiaries that would, in
accordance  with GAAP,  be  classified  on a  consolidated  balance sheet of the
Borrowers and their Subsidiaries as current assets as of such date.

         "Consolidated  Current  Liabilities"  shall  mean,  as of any  date  of
determination,  all liabilities (without duplication) of the Borrowers and their
Subsidiaries   that  would,   in  accordance  with  GAAP,  be  classified  on  a
consolidated  balance sheet of the Borrowers and their  Subsidiaries  as current
liabilities  as of such  date;  provided,  however,  that  Consolidated  Current
Liabilities shall not include current maturities of any long-term Indebtedness.

         "Consolidated  Interest  Expense" shall mean,  for any period,  the sum
(without  duplication) of (i) total interest  expense of the Borrowers and their
Subsidiaries  for such  period in respect of Funded  Debt of the  Borrowers  and
their Subsidiaries  (including,  without  limitation,  all such interest expense
accrued or capitalized  during such period,  whether or not actually paid during
such period),  determined on a consolidated  basis in accordance with GAAP, (ii)
all net amounts payable under or in respect of Hedge  Agreements,  to the extent
paid or accrued by the Borrowers and their Subsidiaries  during such period, and
(iii) all  commitment  fees and other  ongoing  fees in respect  of Funded  Debt
including the  commitment  fee provided for under Section 2.9) paid,  accrued or
capitalized by the Borrowers and their Subsidiaries during such period.

         "Consolidated  Net Income" shall mean,  for any period,  net income (or
loss) for the Borrowers and their Subsidiaries for such period,  determined on a
consolidated basis in accordance with GAAP.

         "Contingent  Obligation"  shall mean,  with respect to any Person,  any
direct or indirect  liability of such Person with  respect to any  Indebtedness,
liability or other obligation (the "primary  obligation") of another Person (the
"primary obligor"),  whether or not contingent,  (a) to purchase,  repurchase or
otherwise acquire such primary obligation or any property constituting direct or
indirect security therefor,  (b) to advance or provide funds (i) for the payment
or discharge of any such primary  obligation or (ii) to maintain working capital
or equity capital of the primary  obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property,  securities or services primarily
for the  purpose of assuring  the owner of any such  primary  obligation  of the
ability  of the  primary  obligor in  respect  thereof  to make  payment of such
primary  obligation or (d) otherwise to assure or hold harmless the owner of any
such  primary  obligation  against  loss or failure or  inability  to perform in
respect  thereof;  provided,  however,  that,  with respect to the Borrowers and
their Subsidiaries, the


                                       -4-

<PAGE>



term  Contingent  Obligation  shall not include  endorsements  for collection or
deposit in the ordinary course of business.

         "Covenant Compliance  Worksheet" shall mean a fully completed worksheet
in the form of Attachment A to Exhibit C.

         "Credit Documents" shall mean this Agreement, the Notes, the Subsidiary
Guaranty, and all other agreements,  instruments, documents and certificates now
or hereafter  executed and  delivered to the Agent or any Lender by or on behalf
of any Borrower  Affiliate with respect to this  Agreement and the  transactions
contemplated hereby, in each case as amended, modified, supplemented or restated
from time to time.

         "Current Ratio" shall mean, at any date of determination,  the ratio of
(i)  Consolidated   Current  Assets  at  such  date  of  determination  to  (ii)
Consolidated Current Liabilities at such date of determination.

         "Default"  shall mean any event or condition  that, with the passage of
time or giving of notice, or both, would constitute an Event of Default.

         "Dollars" or "$" shall mean dollars of the United States of America.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as  amended  from time to time,  and any  successor  statute,  and all rules and
regulations from time to time promulgated thereunder.

         "ERISA  Affiliate"  shall  mean  any  Person  (including  any  trade or
business,  whether or not incorporated) that would be deemed to be under "common
control"  with,  or a member of the same  "controlled  group" as,  any  Borrower
Affiliate,  within  the  meaning  of  Sections  414(b),  (c),  (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.

         "ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer  Plan, (ii) a complete or partial  withdrawal by any Borrower
or any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section  4201 or 4204 of ERISA,  or the  receipt  by any  Borrower  or any ERISA
Affiliate of notice from a Multiemployer  Plan that it is in  reorganization  or
insolvency  pursuant  to  Section  4241 or 4245 of ERISA or that it  intends  to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by any Borrower or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate  any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by any Borrower or any ERISA Affiliate of a notice from any
Multiemployer  Plan that such action has been taken by the PBGC with  respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any  Multiemployer  Plan against any Borrower or any ERISA  Affiliate to enforce
Section 515 of ERISA,  which is not dismissed  within thirty (30) days, (vi) the
imposition upon any Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA,  other than for PBGC premiums due but not delinquent  under Section
4007 of ERISA,  or the imposition or threatened  imposition of any Lien upon any
assets of any Borrower or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal  Revenue Code or ERISA in respect of any Plan, (vii)
the  engaging  in  or  otherwise  becoming  liable  for a  nonexempt  Prohibited
Transaction  by any Borrower or any ERISA  Affiliate,  (viii) a violation of the
applicable requirements of Section 404 or


                                       -5-

<PAGE>



405 of ERISA or the exclusive  benefit rule under Section 401(a) of the Internal
Revenue  Code by any  fiduciary of any Plan for which any Borrower or any of its
ERISA Affiliates may be directly or indirectly liable or (ix) the adoption of an
amendment  to any Plan that,  pursuant  to Section  401(a)(29)  of the  Internal
Revenue  Code or Section 307 of ERISA,  would  result in the loss of  tax-exempt
status of the trust of which  such Plan is a part if any  Borrower  or any ERISA
Affiliate  fails to timely provide  security to such Plan in accordance with the
provisions of such sections.

         "Eligible  Assignee"  shall mean (i) a commercial  bank organized under
the laws of the United  States or any state  thereof and having  total assets in
excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the Organization for Economic  Cooperation and
Development or any successor thereto (the "OECD") or a political  subdivision of
any such country and having total assets in excess of  $1,000,000,000,  provided
that  such bank or other  financial  institution  is acting  through a branch or
agency located in the United  States,  in the country under the laws of which it
is organized or in another country that is also a member of the OECD,  (iii) the
central  bank of any  country  that is a  member  of the  OECD,  (iv) a  finance
company,  insurance  company  or other  financial  institution  or fund  that is
engaged in making,  purchasing  or otherwise  investing in loans in the ordinary
course of its business and having  total assets in excess of  $500,000,000,  (v)
any  Affiliate of an existing  Lender or (vi) any other  Person  approved by the
Required Lenders, which approval shall not be unreasonably withheld.

         "Environmental   Claims"   shall  mean  any  and  all   administrative,
regulatory or judicial actions, suits, demands,  demand letters,  claims, liens,
accusations,  allegations, notices of noncompliance or violation, investigations
(other than internal  reports  prepared by any Person in the ordinary  course of
its  business  and not in response  to any third party  action or request of any
kind) or proceedings  relating in any way to any actual or alleged  violation of
or liability under any  Environmental  Law or relating to any permit issued,  or
any approval given, under any such  Environmental Law (collectively,  "Claims"),
including,   without  limitation,   (i)  any  and  all  Claims  by  Governmental
Authorities  for  enforcement,  cleanup,  removal,  response,  remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking  damages,  contribution,  indemnification,
cost  recovery,  compensation  or injunctive  relief  resulting  from  Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.

         "Environmental  Laws" shall mean any and all  federal,  state and local
laws, statutes,  ordinances,  rules, regulations,  permits, licenses, approvals,
rules of common law and orders of courts or Governmental  Authorities,  relating
to the protection of human health or occupational safety or the environment, now
or hereafter in effect and in each case as amended from time to time, including,
without  limitation,  requirements  pertaining to the  manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transportation,  handling,
reporting,  licensing,  permitting,  investigation  or  remediation of Hazardous
Substances.

          "Event  of  Default"  shall  have the  meaning  given to such  term in
Section 8.1.

         "Exchange  Act"  shall mean the  Securities  Exchange  Act of 1934,  as
amended  from  time to  time,  and any  successor  statute,  and all  rules  and
regulations from time to time promulgated thereunder.

         "Federal  Funds Rate" shall mean,  for any period,  a  fluctuating  per
annum interest rate (rounded upwards, if necessary,  to the nearest 1/100 of one
percentage  point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with


                                       -6-

<PAGE>



members of the Federal  Reserve  System  arranged by federal funds  brokers,  as
published  for such day (or,  if such day is not a  Business  Day,  for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such rate
is not so  published  for any day that is a  Business  Day,  the  average of the
quotations  for such day on such  transactions  received by the Agent from three
federal funds brokers of recognized standing selected by the Agent.

         "Federal  Reserve  Board"  shall  mean the  Board of  Governors  of the
Federal Reserve System or any successor thereto.

         "Financial Condition Certificate" shall mean a fully completed and duly
executed certificate, substantially in the form of Exhibit G.

         "Financial Officer" shall mean, with respect to any Borrower, the chief
financial  officer,  vice  president - finance,  principal  accounting  officer,
controller or treasurer of such Borrower.

         "Funded Debt" shall mean,  with respect to any Person,  all obligations
and Indebtedness for borrowed money of such Person, including but not limited to
capitalized  leases,  subordinated  debt,  convertible  debentures,  letters  of
credit,  obligations  with  respect to the deferred  purchase  price of goods or
services,  and  Contingent  Obligations  and guarantees in respect of any of the
foregoing.

         "GAAP" shall mean  generally  accepted  accounting  principles,  as set
forth  in  the  statements,   opinions  and  pronouncements  of  the  Accounting
Principles Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, consistently applied and maintained, as in
effect from time to time (subject to the provisions of Section 1.2).

         "Governmental Authority" shall mean any nation or government, any state
or other  political  subdivision  thereof  and any  central  bank  thereof,  any
municipal,   local,  city  or  county  government,  and  any  entity  exercising
executive,  legislative,  judicial, regulatory or administrative functions of or
pertaining  to  government,  and  any  corporation  or  other  entity  owned  or
controlled,  through  stock or capital  ownership  or  otherwise,  by any of the
foregoing.

         "Hazardous  Substances" shall mean any substances or materials (i) that
are or become defined as hazardous  wastes,  hazardous  substances,  pollutants,
contaminants  or toxic  substances  under any  Environmental  Law, (ii) that are
defined by any  Environmental  Law as toxic,  explosive,  corrosive,  ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require  investigation or response under any Environmental  Law, (iv) that
constitute  a  nuisance,  trespass  or  health or safety  hazard to  Persons  or
neighboring  properties,  (v) that consist of underground or aboveground storage
tanks,  whether empty,  filled or partially  filled with any substance,  or (vi)
that contain,  without limitation,  asbestos,  polychlorinated  biphenyls,  urea
formaldehyde  foam  insulation,   petroleum   hydrocarbons,   petroleum  derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.

         "Hedge  Agreement"  shall mean any  interest or foreign  currency  rate
swap, cap, collar,  option,  hedge,  forward rate or other similar  agreement or
arrangement  designed  to protect  against  fluctuations  in  interest  rates or
currency exchange rates.

         "Indebtedness"   shall  mean,  with  respect  to  any  Person  (without
duplication),  (i) all  indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind,  (ii) all  obligations  of
such Person evidenced by notes, bonds, debentures or similar instruments,  (iii)
all  reimbursement  obligations  of such  Person with  respect to surety  bonds,
letters of


                                       -7-

<PAGE>



credit and bankers'  acceptances (in each case,  whether or not drawn or matured
and in the stated amount  thereof),  (iv) all  obligations of such Person to pay
the  deferred  purchase  price of property  or  services,  (v) all  indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property  acquired by such Person,  (vi) all obligations of such
Person as lessee under leases that are or are required to be, in accordance with
GAAP, recorded as capital leases, to the extent such obligations are required to
be so recorded,  (vii) the net termination  obligations of such Person under any
Hedge Agreements,  calculated as of any date as if such agreement or arrangement
were  terminated  as of such date,  (viii) all  Contingent  Obligations  of such
Person and (ix) all indebtedness referred to in clauses (i) through (viii) above
secured  by any  Lien on any  property  or asset  owned  or held by such  Person
regardless of whether the  indebtedness  secured thereby shall have been assumed
by such Person or is nonrecourse to the credit of such Person.

          "Interest Period" shall have the meaning given to such term in Section
2.10.

         "Internal  Revenue Code" shall mean the Internal  Revenue Code of 1986,
as  amended  from time to time,  and any  successor  statute,  and all rules and
regulations from time to time promulgated thereunder.

         "LIBOR Loan" shall mean, at any time,  any Loan that bears  interest at
such time at the Adjusted LIBOR Rate.

         "LIBOR  Rate" shall mean,  with  respect to each LIBOR Loan  comprising
part of the same Borrowing for any Interest  Period,  an interest rate per annum
obtained by dividing (i) (y) the  applicable  rate of interest for such Interest
Period appearing on Telerate Page 3750 (or any successor page) or (z) if no such
rate is available,  the rate of interest  determined by the Agent to be the rate
or the arithmetic mean of rates (rounded  upward,  if necessary,  to the nearest
1/16 of one percentage point) at which Dollar deposits in immediately  available
funds are offered by First  Union to  first-tier  banks in the London  interbank
Eurodollar  market, in each case under (y) and (z) above at approximately  11:00
a.m., London time, two (2) Business Days prior to the first day of such Interest
Period for a period substantially equal to such Interest Period and in an amount
substantially equal to the amount of First Union's LIBOR Loan comprising part of
such Borrowing,  by (ii) the amount equal to 1.00 minus the Reserve  Requirement
(expressed as a decimal) for such Interest Period.

         "Lender" shall mean each  financial  institution  signatory  hereto and
each other financial  institution that becomes a "Lender"  hereunder pursuant to
Section 10.7, and their respective successors and assigns.

         "Lending Office" shall mean, with respect to any Lender,  the office of
such Lender  designated as its "Lending  Office" on its signature page hereto or
in an  Assignment  and  Acceptance,  or such  other  office as may be  otherwise
designated  in writing  from time to time by such Lender to the Borrower and the
Agent.  A Lender may  designate  separate  Lending  Offices as  provided  in the
foregoing sentence for the purposes of making or maintaining  different Types of
Loans,  and,  with  respect to LIBOR  Loans,  such  office may be a domestic  or
foreign branch or Affiliate of such Lender.

         "Lien"  shall mean any  mortgage,  pledge,  hypothecation,  assignment,
security interest, lien (statutory or otherwise),  preference,  priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without  limitation,  the interest of any vendor or lessor under any conditional
sale agreement,  title retention agreement,  capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.


                                       -8-

<PAGE>




         "Loans" shall have the meaning given to such term in Section 2.1.

          "Margin Stock" shall have the meaning given to such term in Regulation
U.

         "Material  Adverse Change" shall mean a material  adverse change in (i)
the  condition  (financial  or  otherwise),   operations,  prospects,  business,
properties or assets of the Borrowers and their  Subsidiaries,  taken as a whole
or (ii) the ability of any Borrower  Affiliate to perform its obligations  under
this Agreement or any of the other Credit Documents to which it is a party.

         "Material Adverse Effect" shall mean a material adverse effect upon (i)
the  condition  (financial  or  otherwise),   operations,  prospects,  business,
properties or assets of the Borrowers and their Subsidiaries,  taken as a whole,
(ii) the ability of any Borrower Affiliate to perform its obligations under this
Agreement or any of the other  Credit  Documents to which it is a party or (iii)
the legality,  validity or  enforceability of this Agreement or any of the other
Credit  Documents  or the  rights  and  remedies  of the Agent  and the  Lenders
hereunder and thereunder.

          "Material  Contract"  shall  have the  meaning  given to such  term in
Section 4.18.

         "Maturity Date" shall mean July 9, 1998.

         "Merrill Lynch Indebtedness"  shall mean the Credit Facility,  dated as
of February 26, 1997,  between  Holdings and Merrill  Lynch  International  Bank
Limited.

         "Multiemployer  Plan" shall mean any  "multiemployer  plan"  within the
meaning  of  Section  4001(a)(3)  of ERISA to which  any  Borrower  or any ERISA
Affiliate makes, is making or is obligated to make  contributions or has made or
been obligated to make contributions.

         "Net Cash  Proceeds"  shall  mean in the case of any asset  disposition
permitted  pursuant to Section 7.4, the  aggregate  amount of all cash  payments
received by any Borrower  Affiliate in  connection  with such asset  disposition
less (x)  reasonable  fees and expenses  incurred by any  Borrower  Affiliate in
connection  therewith,  (y)  Indebtedness  to the extent  the amount  thereof is
secured by a Lien on the property that is the subject of such asset  disposition
and the  transferee  of (or holder of the Lien on) such  property  requires that
such  Indebtedness be repaid as a condition to such asset  disposition,  and (z)
any income or transfer taxes paid or reasonably estimated by the Borrowers to be
payable by any Borrower Affiliate as a result of such asset disposition.

         "Notes"   shall  mean  the   promissory   notes  of  the  Borrowers  in
substantially the form of Exhibit A, together with any amendments, modifications
and supplements thereto, substitutions therefor and restatements thereof.

          "Notice of  Borrowing"  shall have the  meaning  given to such term in
Section 2.2(b).

          "Notice of  Conversion/Continuation"  shall have the meaning  given to
such term in Section 2.11(b).

         "Obligations" shall mean all principal of and interest  (including,  to
the greatest extent permitted by law, post-petition  interest) on the Loans, and
all fees,  expenses,  indemnities and other obligations owing, due or payable at
any time by the Borrowers to the Agent, any Lender, or any other Person entitled
thereto, under this Agreement or any of the other Credit Documents.



                                       -9-

<PAGE>



         "Operating  Cash Flow" shall mean,  with respect to the  Borrowers  and
their  Subsidiaries on a consolidated basis for any period, the aggregate of (a)
Consolidated  Net Income for such period;  plus (b) the sum of (i)  Consolidated
Interest Expense, (ii) taxes paid by any Borrower Affiliate,  (iii) depreciation
and amortization;  (iv) the amount of any extraordinary losses recognized by any
Borrower Affiliate; and (v) (to the extent taken into account in the calculation
of Consolidated  Net Income for such period) other non-cash  expenses or charges
reducing  income,  all for such period,  minus (c) the sum of, (i) the amount of
any interest and dividend income  recognized by any Borrower  Affiliate and (ii)
the amount of any extraordinary gains recognized by any Borrower Affiliate.  For
purposes of this  Agreement,  calculations  of Operating  Cash Flow for a period
shall be  adjusted  with  respect to  entities  or assets  that are  acquired or
disposed of during such period as permitted  under pursuant to the terms of this
Agreement as if such transaction had occurred as of the first day of such period
(based upon a  certificate  in form and substance  reasonably  acceptable to the
Agent and signed by an  Authorized  Officer of each  Borrower  setting  forth in
reasonable  detail the  Operating  Cash Flow during such period of the entity or
assets  acquired  or  disposed  of  and  stating  that  the  assumptions  of the
Borrowers, in respect thereof, are reasonable).

          "PBGC" shall mean the Pension  Benefit  Guaranty  Corporation  and any
successor thereto.

          "Participant"  shall  have the  meaning  given to such term in Section
10.7(d).

          "Partition"  shall mean an  independent  long  distance and  marketing
company or other direct marketing agent of any Borrower that resells and markets
the telecommunications products of any Borrower.

         "Permitted  Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied:  (i) each business acquired
shall be within the permitted  lines of business  described in Section 7.8, (ii)
in the case of an  Acquisition  involving the  acquisition of control of Capital
Stock of any Person,  immediately  after giving effect to such  Acquisition such
Person (or the surviving Person, if the Acquisition is effected through a merger
or  consolidation)  shall  be a  Borrower  or a  Wholly  Owned  Subsidiary  of a
Borrower,  and (iii) all of the conditions and  requirements of Sections 5.8 and
5.9 applicable to such Acquisition are satisfied;  or (b) any other  Acquisition
to which the Required  Lenders (or the Agent on their  behalf)  shall have given
their prior written  consent (which consent may be in their sole  discretion and
may be given  subject to such  additional  terms and  conditions as the Required
Lenders shall  establish)  and with respect to which all of the  conditions  and
requirements set forth in this definition and in Section 5.8, and in or pursuant
to any such  consent,  have been  satisfied or waived in writing by the Required
Lenders (or the Agent on their  behalf).  Without  limiting  the  foregoing,  an
Acquisition in any  transaction or series of related  transactions  of less than
substantially  all of the assets of any Person for a purchase price of less than
$1,000,000 shall be deemed to be a Permitted Acquisition.

          "Permitted Liens" shall have the meaning given to such term in Section
7.3.

         "Person"  shall  mean  any  corporation,  association,  joint  venture,
partnership,  limited liability  company,  organization,  business,  individual,
trust,  government or agency or political subdivision thereof or any other legal
entity.

         "Plan"  shall  mean any  "employee  pension  benefit  plan"  within the
meaning of Section 3(2) of ERISA that is subject to the  provisions  of Title IV
of ERISA  (other  than a  Multiemployer  Plan) and to which any  Borrower or any
ERISA Affiliate may have any liability.



                                      -10-

<PAGE>



          "PNC Indebtedness"  shall mean the $50,000,000 line of credit from PNC
Bank,  N.A. to Holdings,  dated March 27, 1996, as modified by the  Modification
Agreement between Holdings and PNC Bank, N.A. dated February 24, 1997.

         "Prohibited  Transaction"  shall mean any transaction  described in (i)
Section  406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a  Department  of Labor  prohibited  transaction  individual  or class
exemption  or (ii)  Section  4975(c) of the  Internal  Revenue  Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.

          "Register"  shall  have  the  meaning  given to such  term in  Section
10.7(b).

         "Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.

         "Reportable  Event" shall mean (i) any  "reportable  event"  within the
meaning of Section  4043(c) of ERISA for which the 30-day  notice under  Section
4043(a) of ERISA has not been waived by the PBGC  (including any failure to meet
the minimum funding standard of, or timely make any required  installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA,  regardless of
the issuance of any waivers in  accordance  with Section  412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section  4043(b)(3)  of ERISA,  (iii) any  application  for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal  Revenue Code, and (iv) a cessation of operations  described in Section
4062(e) of ERISA.

         "Required Lenders" shall mean the Lenders holding outstanding Loans and
Commitments (or, after the termination of the Commitments and outstanding Loans)
representing  more  than  sixty-six  and  two-thirds  percent  (66-2/3%)  of the
aggregate at such time of all outstanding  Loans and Commitments  (or, after the
termination of the  Commitments,  the aggregate at such time of all  outstanding
Loans).

         "Requirement  of Law"  shall  mean,  with  respect to any  Person,  the
charter,  articles or certificate of organization or incorporation and bylaws or
other  organizational  or governing  documents of such Person,  and any statute,
law, treaty, rule, regulation,  order, decree, writ, injunction or determination
of any  arbitrator  or court  or  other  Governmental  Authority,  in each  case
applicable  to or binding  upon such  Person or any of its  property or to which
such Person or any of its property is subject or otherwise  pertaining to any or
all of the  transactions  contemplated  by this  Agreement  and the other Credit
Documents.

         "Reserve  Requirement" shall mean, with respect to any Interest Period,
the  reserve  percentage  (expressed  as a decimal)  in effect from time to time
during such Interest Period,  as provided by the Federal Reserve Board,  applied
for determining the maximum reserve requirements (including, without limitation,
basic, supplemental,  marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of  Regulation D, or under any similar or successor  regulation  with respect to
Eurocurrency liabilities or Eurocurrency funding.

         "Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the  outstanding  Capital
Stock  having  ordinary  voting  power  to  elect a  majority  of the  board  of
directors,  board of managers or other governing body of such Person,  is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof  (irrespective of whether, at
the time, securities of any other


                                      -11-

<PAGE>



class or classes of any such  corporation  or other  Person  shall or might have
voting power by reason of the happening of any  contingency).  When used without
reference to a parent entity,  the term "Subsidiary" shall be deemed to refer to
a Subsidiary of one of the Borrowers.

         "Subsidiary  Guarantor"  shall mean any Subsidiary  that is a guarantor
under the Subsidiary Guaranty.

         "Subsidiary  Guaranty"  shall  mean a  guaranty  agreement  made by the
Subsidiary  Guarantors in favor of the Agent and the Lenders,  in  substantially
the form of Exhibit E, as amended, modified or supplemented from time to time.

         "Termination Date" shall mean the Maturity Date or such earlier date of
termination of the Commitments pursuant to Section 2.5 or Section 8.2.

         "Total  Funded  Debt" shall  mean,  at any date of  determination,  the
aggregate  (without  duplication)  of all Funded Debt of the Borrowers and their
Subsidiaries as of such date,  determined on a consolidated  basis in accordance
with GAAP. For purposes of determining  Funded Debt at any date, each Contingent
Obligation  of  any  Borrower   Affiliate   required  to  be  included  in  such
determination shall be valued at the maximum aggregate principal amount (whether
or not  drawn or  outstanding)  of the  Indebtedness  that is the  corresponding
"primary  obligation"  (as such term is defined in the  definition of Contingent
Obligation) as of such date.

         "Total  Leverage Ratio" shall mean, at any date of  determination,  the
ratio of (a) Total Funded Debt on such date to (b)  Operating  Cash Flow for the
two most recently completed fiscal quarters of the Borrowers multiplied by two.

         "Type" shall have the meaning given to such term in Section 2.2(a).

         "Unfunded  Pension  Liability"  shall mean, with respect to any Plan or
Multiemployer  Plan,  the  excess  of  its  benefit  liabilities  under  Section
4001(a)(16)  of  ERISA  over the  current  value of its  assets,  determined  in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.

         "Unutilized  Commitment"  shall mean, with respect to any Lender at any
time, such Lender's  Commitment at such time less the aggregate principal amount
of all Loans made by such Lender that are outstanding at such time.

         "Wholly  Owned"  shall  mean,  with  respect to any  Subsidiary  of any
Person,  that 100% of the outstanding Capital Stock of such Subsidiary is owned,
directly or indirectly, by such Person.

         1.2.  Accounting Terms.  Except as specifically  provided  otherwise in
this  Agreement,  all  accounting  terms used herein  that are not  specifically
defined shall have the meanings  customarily given them in accordance with GAAP.
Notwithstanding  anything to the  contrary in this  Agreement,  for  purposes of
calculation  of the financial  covenants set forth in Article VI, all accounting
determinations and computations  hereunder shall be made in accordance with GAAP
as in effect as of the date of this Agreement applied on a basis consistent with
the application  used in preparing the most recent  financial  statements of the
Borrowers referred to in Section 4.11(a).  In the event that any changes in GAAP
after such date are required to be applied to the Borrowers and would affect the
computation  of the  financial  covenants  contained in Article VI, such changes
shall be followed


                                      -12-

<PAGE>



only from and after the date this Agreement shall have been amended to take into
account any such changes.

         1.3. Other Terms;  Construction;  Time.  Unless otherwise  specified or
unless the  context  otherwise  requires,  all  references  herein to  sections,
annexes,  schedules and exhibits are references to sections,  annexes, schedules
and exhibits in and to this  Agreement,  and all terms defined in this Agreement
shall have the defined  meanings  when used in any other Credit  Document or any
certificate or other document made or delivered  pursuant hereto. All references
to time in any Credit Document shall refer to Charlotte, North Carolina time.


                                   ARTICLE II

                          AMOUNT AND TERMS OF THE LOANS

         2.1. Commitments.  Each Lender severally agrees,  subject to and on the
terms and  conditions  of this  Agreement,  to make loans  (each,  a "Loan," and
collectively,  the "Loans") to the Borrowers,  from time to time on any Business
Day during the period from and  including  the Closing Date to but not including
the Termination  Date, in an aggregate  principal amount at any time outstanding
not greater  than the excess,  if any, of its  Commitment  at such time over the
amount of any Loans  made by such  Lender  then  outstanding;  provided  that no
Borrowing of Loans shall be made if,  immediately  after giving effect  thereto,
the sum of the  aggregate  principal  amount of Loans  outstanding  at such time
would exceed the aggregate Commitments at such time. Subject to and on the terms
and conditions of this Agreement,  the Borrowers may borrow,  repay and reborrow
Loans.

          2.2.  Borrowings.  (a) The Loans shall, at the option of the Borrowers
and subject to the terms and conditions of this  Agreement,  be either Base Rate
Loans or  LIBOR  Loans  (each,  a  "Type"  of  Loan);  provided  that all  Loans
comprising the same Borrowing  shall,  unless  otherwise  specifically  provided
herein, be of the same Type.

         (b) In order  to make a  Borrowing  (other  than  Borrowings  involving
continuations or conversions of outstanding  Loans, which shall be made pursuant
to Section 2.11),  an Authorized  Officer of each of the Borrowers will give the
Agent written notice not later than 11:00 a.m., three (3) Business Days prior to
each  Borrowing  to be comprised  of LIBOR Loans and on the  Borrowing  Date (as
hereinafter  defined)  for each  Borrowing  to be  comprised of Base Rate Loans;
provided,  however,  that  requests for the Borrowing of any Loans to be made on
the Closing Date may, at the  discretion  of the Agent,  be given later than the
times  specified  hereinabove.  Each such notice (each, a "Notice of Borrowing")
shall be  irrevocable,  shall be given  in the  form of  Exhibit  B-1 and  shall
specify (1) the aggregate  principal  amount and initial Type of the Loans to be
made pursuant to such Borrowing,  (2) in the case of a Borrowing of LIBOR Loans,
the initial  Interest  Period to be  applicable  thereto,  and (3) the requested
Borrowing  Date,  which shall be a Business Day. Upon its receipt of a Notice of
Borrowing, the Agent will promptly notify each Lender of the proposed Borrowing.
Notwithstanding anything to the contrary contained herein:

                    (i)  the  aggregate   principal  amount  of  each  Borrowing
         comprised of Base Rate Loans shall not be less than  $1,000,000  or, if
         greater,  an integral  multiple of $500,000 in excess  thereof  (or, if
         less, in the amount of the aggregate Unutilized  Commitments),  and the
         aggregate  principal amount of each Borrowing  comprised of LIBOR Loans
         shall not be less than $5,000,000 or, if greater,  an integral multiple
         of $1,000,000 in excess thereof;



                                      -13-

<PAGE>



                   (ii) if the Borrowers shall have failed to designate the Type
         of Loans comprising a Borrowing,  the Borrowers shall be deemed to have
         requested a Borrowing comprised of Base Rate Loans; and

                  (iii)  if the  Borrowers  shall  have  failed  to  select  the
         duration of the Interest  Period to be  applicable  to any Borrowing of
         LIBOR Loans,  then the  Borrowers  shall be deemed to have  selected an
         Interest Period with a duration of one month.

         (c) Not later than 1:00 p.m., on the  requested  Borrowing  Date,  each
Lender  will make  available  to the Agent at its office  referred to in Section
10.5 (or at such  other  location  as the Agent may  designate)  an  amount,  in
Dollars and in immediately  available funds,  equal to the amount of the Loan to
be made by such  Lender.  To the  extent  the  Lenders  have made  such  amounts
available  to the  Agent  as  provided  hereinabove,  the  Agent  will  make the
aggregate of such amounts  available to the Borrower in accordance  with Section
2.3(a) and in like funds as received by the Agent.

         2.3.  Disbursements;  Funding  Reliance;  Domicile  of  Loans.  (a) The
Borrowers  hereby authorize the Agent to disburse the proceeds of each Borrowing
in  accordance  with the terms of any written  instructions  from an  Authorized
Officer of each Borrower;  provided that the Agent shall not be obligated  under
any  circumstances  to forward  amounts to any  account not listed in an Account
Designation  Letter.  The  Borrowers  may at any time  deliver  to the  Agent an
Account  Designation  Letter  listing any  additional  accounts or deleting  any
accounts listed in a previous Account Designation Letter.

         (b) Unless the Agent has  received,  prior to 1:00 p.m. on the relevant
Borrowing  Date,  written  notice  from a Lender  that such Lender will not make
available to the Agent such Lender's ratable portion of the relevant  Borrowing,
the Agent may assume that such  Lender has made such  portion  available  to the
Agent in immediately  available  funds on such Borrowing Date in accordance with
the  applicable  provisions  of Section 2.2, and the Agent may, in reliance upon
such  assumption,  but shall not be obligated  to, make a  corresponding  amount
available to the  Borrowers on such  Borrowing  Date.  If and to the extent that
such Lender  shall not have made such portion  available  to the Agent,  and the
Agent shall have made such corresponding amount available to the Borrowers, such
Lender, on the one hand, and the Borrowers, on the other, severally agree to pay
to the Agent  forthwith  on demand  such  corresponding  amount,  together  with
interest thereon for each day from the date such amount is made available to the
Borrowers until the date such amount is repaid to the Agent,  (i) in the case of
such Lender,  at the Federal Funds Rate,  and (ii) in the case of the Borrowers,
at the rate of interest  applicable at such time to the Type of Loans comprising
such  Borrowing,  as  determined  under the  provisions  of Section 2.8. If such
Lender  shall repay to the Agent such  corresponding  amount,  such amount shall
constitute  such  Lender's  Loan as part of such  Borrowing for purposes of this
Agreement.  The failure of any Lender to make any Loan required to be made by it
as part of any Borrowing  shall not relieve any other Lender of its  obligation,
if any,  hereunder  to make its Loan as part of such  Borrowing,  but no  Lender
shall be responsible  for the failure of any other Lender to make the Loan to be
made by such other Lender as part of any Borrowing.

         (c) Each Lender may, at its option,  make and  maintain any Loan at, to
or for the account of any of its Lending Offices;  provided that any exercise of
such option shall not affect the obligation of the Borrowers to repay such Loans
to or for the  account  of such  Lender  in  accordance  with the  terms of this
Agreement.



                                      -14-

<PAGE>



          2.4. Notes.  (a) The Loans made by each Lender shall be evidenced by a
Note appropriately completed in substantially the form of Exhibit A.

         (b)  Each  Note  issued  to a  Lender  shall  (i)  be  executed  by the
Borrowers, (ii) be payable to the order of such Lender, (iii) be dated as of the
Closing  Date,  (iv) be in a stated  principal  amount  equal  to such  Lender's
Commitment,  (v) bear interest in accordance with the provisions of Section 2.8,
as the  same  may be  applicable  from  time to time to the  Loans  made by such
Lender,  and (vi) be entitled to all of the benefits of this  Agreement  and the
other Credit Documents and subject to the provisions hereof and thereof.

         (c) Each Lender will record on its internal records the amount and Type
of each Loan made by it and each payment  received by it in respect  thereof and
will,  in the event of any transfer of any of its Notes,  either  endorse on the
reverse  side  thereof or on a schedule  attached  thereto (or any  continuation
thereof)  the  outstanding  principal  amount  and Type of the  Loans  evidenced
thereby as of the date of transfer or provide such  information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
the  failure of any  Lender to make any such  recordation  or  provide  any such
information,  or any error therein,  shall not affect the Borrowers' obligations
under this Agreement or the Notes.

         2.5.  Termination  and Reduction of  Commitments.  (a) The  Commitments
shall be  automatically  and permanently  terminated on the Maturity Date (or on
July 11, 1997,  but only if the Closing Date shall not have occurred on or prior
to such date),  unless sooner terminated pursuant to any other provision of this
Section 2.5 or Section 8.2.

         (b) At any time and from time to time after the date  hereof,  upon not
less than five (5) Business Days' prior written notice to the Agent, executed by
an Authorized Officer of each Borrower,  the Borrowers may terminate in whole or
reduce in part the  aggregate  Unutilized  Commitments;  provided  that any such
partial  reduction  shall be in an aggregate  amount of not less than $5,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof. The amount
of any  termination  or  reduction  made  under  this  subsection  (c)  may  not
thereafter be reinstated.

         (c) Each  reduction  of the  Commitments  pursuant to this  Section 2.5
shall be  applied  ratably  among  the  Lenders  according  to their  respective
Commitments.

          2.6. Mandatory Payments and Prepayments.  (a) Except to the extent due
or paid sooner  pursuant to the  provisions  of this  Agreement,  the  aggregate
outstanding  principal  of the  Loans  shall be due and  payable  in full on the
Maturity Date.

         (b) In the event that, at any time, the aggregate  principal  amount of
Loans  outstanding  at such time shall exceed the aggregate  Commitments at such
time (after giving effect to any concurrent  termination or reduction  thereof),
the Borrowers will  immediately  prepay the outstanding  principal amount of the
Loans in the amount of such excess.

         (c) Each  payment or  prepayment  of a LIBOR Loan made  pursuant to the
provisions  of this Section 2.6 on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
Section 2.18 to be paid as a consequence thereof.

         (d) In the event that the Net Cash Proceeds of any sale or  disposition
of assets permitted pursuant to Section 7.4 are not reinvested in similar assets
within 180 days of such sale or


                                      -15-

<PAGE>



disposition,  the Borrowers will  immediately  prepay the outstanding  principal
amount of the Loans in the amount of such non-reinvested Net Cash Proceeds.

         2.7. Voluntary Prepayments.  (a) At any time and from time to time, the
Borrowers shall have the right to prepay the Loans, in whole or in part, without
premium or penalty  (except as provided in clause  (iii)  below),  upon  written
notice executed by an Authorized Officer of each Borrower given to the Agent not
later than 11:00 a.m., three (3) Business Days prior to each intended prepayment
of LIBOR Loans and one (1) Business  Day prior to each  intended  prepayment  of
Base  Rate  Loans;  provided  that (i) each  partial  prepayment  shall be in an
aggregate  principal  amount of not less than  $1,000,000  or,  if  greater,  an
integral multiple of $500,000 in excess thereof,  (ii) no partial  prepayment of
LIBOR Loans made  pursuant to any single  Borrowing  shall reduce the  aggregate
outstanding  principal  amount of the remaining LIBOR Loans under such Borrowing
to less than  $5,000,000  or to any greater  amount not an integral  multiple of
$1,000,000  in excess  thereof,  and (iii) unless made together with all amounts
required  under Section 2.18 to be paid as a consequence of such  prepayment,  a
prepayment  of a LIBOR  Loan may be made  only on the  last day of the  Interest
Period applicable  thereto.  Each such notice shall specify the proposed date of
such prepayment and the aggregate  principal  amount and Type of the Loans to be
prepaid (and, in the case of LIBOR Loans,  the Interest  Period of the Borrowing
pursuant to which made),  and shall be irrevocable  and shall bind the Borrowers
to make such prepayment on the terms specified  therein.  Loans prepaid pursuant
to this subsection (a) may be reborrowed, subject to the terms and conditions of
this Agreement.

         (b) Each  prepayment of the Loans made pursuant to subsection (a) above
shall be applied ratably among the Lenders  holding the Loans being prepaid,  in
proportion to the principal amount held by each.

         2.8.  Interest.  (a) The Borrowers  will pay interest in respect of the
unpaid principal  amount of each Loan, from the date of Borrowing  thereof until
such  principal  amount shall be paid in full, (i) at the Adjusted Base Rate, as
in effect  from time to time  during  such  periods  as such Loan is a Base Rate
Loan, and (ii) at the Adjusted LIBOR Rate, as in effect from time to time during
such periods as such Loan is a LIBOR Loan.

         (b) Upon the  occurrence  and  during  the  continuance  of an Event of
Default as the result of failure by the  Borrowers  to pay any  principal  of or
interest on any Loan,  any fees or other amount  hereunder  when due (whether at
maturity,  pursuant to acceleration  or otherwise),  and (at the election of the
Required Lenders) upon the occurrence and during the continuance of any Event of
Default as the result of failure by any  Borrower to observe,  perform or comply
with any  condition,  covenant or  agreement  contained in Article VI or Article
VII, all outstanding  principal amounts of the Loans and, to the greatest extent
permitted by law, all  interest  accrued on the Loans and all other  accrued and
outstanding fees and other amounts hereunder,  shall bear interest at a rate per
annum equal to the interest rate applicable from time to time thereafter to such
Loans  (whether the Adjusted Base Rate or the Adjusted  LIBOR Rate) plus 2% (or,
in the case of fees and other amounts,  at the Adjusted Base Rate plus 2%), and,
in each case, such default interest shall be payable on demand.  To the greatest
extent  permitted by law,  interest shall continue to accrue after the filing by
or against any  Borrower of any  petition  seeking any relief in  bankruptcy  or
under any law pertaining to insolvency or debtor relief.

          (c) Accrued  (and  theretofore  unpaid)  interest  shall be payable as
follows:



                                      -16-

<PAGE>



                    (i) in  respect of each Base Rate Loan  (including  any Base
         Rate Loan or portion thereof paid or prepaid pursuant to the provisions
         of Section 2.6, except as provided hereinbelow), in arrears on the last
         Business Day of each calendar  quarter,  beginning  with the first such
         day to occur after the Closing  Date;  provided,  that in the event the
         Loans  are  repaid or  prepaid  in full and the  Commitments  have been
         terminated,  then  accrued  interest  in respect of all Base Rate Loans
         shall be payable together with such repayment or prepayment on the date
         thereof;

                   (ii) in respect of each LIBOR Loan  (including any LIBOR Loan
         or  portion  thereof  paid or prepaid  pursuant  to the  provisions  of
         Section  2.6,  except as provided  hereinbelow),  in arrears (y) on the
         last Business Day of the Interest Period applicable thereto (subject to
         the provisions of clause (iv) in Section 2.10) and (z) in addition,  in
         the case of a LIBOR Loan with an Interest  Period  having a duration of
         six  months,  on the date  three  months  after  the  first day of such
         Interest  Period;  provided,  that in the event all  LIBOR  Loans  made
         pursuant  to a single  Borrowing  are repaid or  prepaid in full,  then
         accrued  interest  in  respect  of such  LIBOR  Loans  shall be payable
         together with such repayment or prepayment on the date thereof; and

                  (iii) in respect of any Loan, at maturity (whether pursuant to
         acceleration or otherwise) and, after maturity, on demand.

         (d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable  law. If the amount
of interest  payable for the account of any Lender on any interest  payment date
would exceed the maximum  amount  permitted by  applicable  law to be charged by
such  Lender,  the amount of interest  payable for its account on such  interest
payment date shall be automatically  reduced to such maximum permissible amount.
In the event of any such  reduction  affecting any Lender,  if from time to time
thereafter the amount of interest  payable for the account of such Lender on any
interest  payment  date  would be less  than the  maximum  amount  permitted  by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent  interest payment date shall be automatically
increased to such maximum permissible amount; provided that at no time shall the
aggregate  amount by which  interest paid for the account of any Lender has been
increased  pursuant  to this  sentence  exceed  the  aggregate  amount  by which
interest  paid for its  account has  theretofore  been  reduced  pursuant to the
previous sentence.

         (e) The Agent shall promptly  notify the Borrowers and the Lenders upon
determining  the  interest  rate for each  Borrowing  of LIBOR  Loans  after its
receipt    of   the    relevant    Notice    of    Borrowing    or   Notice   of
Conversion/Continuation,  and  upon  each  change  in the Base  Rate;  provided,
however,  that the failure of the Agent to provide the  Borrowers or the Lenders
with any such notice shall neither  affect any  obligations  of the Borrowers or
the Lenders  hereunder  nor result in any  liability on the part of the Agent to
any  Borrower  or  any  Lender.   Each  such   determination   (including   each
determination  of the Reserve  Requirement)  shall,  absent  manifest  error, be
conclusive and binding on all parties hereto.

         2.9.  Fees.  The Borrowers  jointly and  severally  agree to pay to the
Agent,  for the  account of each  Lender,  a  commitment  fee for each  calendar
quarter (or portion  thereof) for the period from the date of this  Agreement to
the Termination  Date, at a per annum rate of 0.125%,  on such Lender's  ratable
share  (based  on the  proportion  that its  Commitment  bears to the  aggregate
Commitments) of the average daily aggregate Unutilized  Commitments,  payable in
arrears (i) on the last Business Day


                                      -17-

<PAGE>



of each calendar  quarter,  beginning with the first such day to occur after the
Closing Date, and (ii) on the Termination Date.

         2.10.  Interest  Periods.  Concurrently  with the giving of a Notice of
Borrowing  or Notice of  Conversion/Continuation  in  respect  of any  Borrowing
comprised  of Base  Rate  Loans  to be  converted  into,  or  LIBOR  Loans to be
continued as, LIBOR Loans, the Borrowers shall have the right to elect, pursuant
to  such  notice,  the  interest  period  (each,  an  "Interest  Period")  to be
applicable to such LIBOR Loans,  which Interest  Period shall,  at the option of
the Borrowers, be a one-, three- or six-month period; provided, however, that:

                    (i)   all LIBOR Loans comprising a single Borrowing shall at
         all times have the same Interest Period;

                   (ii) the  initial  Interest  Period  for any LIBOR Loan shall
         commence on the date of the Borrowing of such LIBOR Loan (including the
         date of any  continuation of, or conversion into, such LIBOR Loan), and
         each  successive  Interest  Period  applicable to such LIBOR Loan shall
         commence  on the  day on  which  the  next  preceding  Interest  Period
         applicable thereto expires;

                  (iii) LIBOR Loans may not be outstanding under more than three
         (3)  separate  Interest  Periods  at any one time  (for  which  purpose
         Interest  Periods  shall  be  deemed  to be  separate  even if they are
         coterminous);

                   (iv) if any Interest  Period  otherwise would expire on a day
         that is not a Business Day,  such  Interest  Period shall expire on the
         next succeeding  Business Day unless such next succeeding  Business Day
         falls in another  calendar  month,  in which case such Interest  Period
         shall expire on the next preceding Business Day;

                    (v) the  Borrowers  may not select any Interest  Period that
         begins  prior to the Closing  Date or that  expires  after the Maturity
         Date;

                   (vi) if any Interest  Period  begins on a day for which there
         is no numerically  corresponding day in the calendar month during which
         such Interest Period would otherwise expire, such Interest Period shall
         expire on the last Business Day of such calendar month; and

                  (vii)  if,  upon  the   expiration  of  any  Interest   Period
         applicable  to a Borrowing of LIBOR  Loans,  the  Borrowers  shall have
         failed to elect a new Interest  Period to be  applicable  to such LIBOR
         Loans,  then the  Borrowers  shall be deemed to have elected to convert
         such LIBOR Loans into Base Rate Loans as of the  expiration of the then
         current Interest Period applicable thereto.

         2.11.  Conversions and Continuations.  (a) The Borrowers shall have the
right,  on any Business Day occurring on or after the Closing Date, to elect (i)
to convert all or a portion of the outstanding principal amount of any Base Rate
Loans into LIBOR Loans,  or to convert any LIBOR Loans the Interest  Periods for
which end on the same day into Base Rate  Loans,  or (ii) to  continue  all or a
portion of the  outstanding  principal  amount of any LIBOR  Loans the  Interest
Periods  for  which  end on the  same  day for an  additional  Interest  Period;
provided that (w) any such  conversion of LIBOR Loans into Base Rate Loans shall
involve  an  aggregate  principal  amount  of not less  than  $1,000,000  or, if
greater, an integral multiple of $500,000 in excess thereof; any such conversion
of Base Rate Loans into,  or  continuation  of,  LIBOR  Loans  shall  involve an
aggregate principal amount


                                      -18-

<PAGE>



of not less than $5,000,000 or, if greater,  an integral  multiple of $1,000,000
in excess thereof;  and no partial  conversion of LIBOR Loans made pursuant to a
single  Borrowing  shall reduce the outstanding  principal  amount of such LIBOR
Loans to less than $5,000,000 or to any greater amount not an integral  multiple
of $1,000,000  in excess  thereof,  (x) except as otherwise  provided in Section
2.16(d),  LIBOR Loans may be converted into Base Rate Loans only on the last day
of the Interest Period applicable thereto (and, in any event, if a LIBOR Loan is
converted  into a Base  Rate  Loan on any day  other  than  the  last day of the
Interest  Period  applicable   thereto,   the  Borrowers  will  pay,  upon  such
conversion,  all amounts required under Section 2.18 to be paid as a consequence
thereof),  and  (y) no  conversion  of Base  Rate  Loans  into  LIBOR  Loans  or
continuation  of LIBOR  Loans shall be  permitted  during the  continuance  of a
Default or Event of Default.

         (b) The  Borrowers  shall make each such  election  by giving the Agent
written notice,  executed by an Authorized  Officer of each Borrower,  not later
than 11:00 a.m., three (3) Business Days prior to the intended effective date of
any conversion of Base Rate Loans into, or continuation  of, LIBOR Loans and one
(1) Business Day prior to the intended effective date of any conversion of LIBOR
Loans  into  Base  Rate   Loans.   Each  such   notice   (each,   a  "Notice  of
Conversion/Continuation")  shall be  irrevocable,  shall be given in the form of
Exhibit B-2 and shall specify (x) the date of such  conversion  or  continuation
(which  shall be a Business  Day),  (y) in the case of a conversion  into,  or a
continuation of, LIBOR Loans, the Interest Period to be applicable thereto,  and
(z) the  aggregate  amount and Type of the Loans being  converted or  continued.
Upon the receipt of a Notice of Conversion/Continuation, the Agent will promptly
notify each Lender of the proposed conversion or continuation. In the event that
the  Borrowers  shall  fail to  deliver a Notice of  Conversion/Continuation  as
provided  herein with respect to any outstanding  LIBOR Loans,  such LIBOR Loans
shall  automatically  be converted to Base Rate Loans upon the expiration of the
then current Interest Period  applicable  thereto (unless repaid pursuant to the
terms hereof).

         2.12.  Method  of  Payments;  Computations.  (a)  All  payments  by the
Borrowers hereunder shall be made without setoff, counterclaim or other defense,
in Dollars and in immediately  available funds to the Agent,  for the account of
the Lenders  entitled to such payment  (except as otherwise  expressly  provided
herein as to payments required to be made directly to the Lenders) at its office
referred to in Section 10.5, prior to 12:00 noon on the date payment is due. Any
payment made as required  hereinabove,  but after 12:00 noon, shall be deemed to
have been made on the next succeeding  Business Day. If any payment falls due on
a day that is not a Business  Day,  then such due date shall be  extended to the
next  succeeding  Business  Day (except that in the case of LIBOR Loans to which
the  provisions  of clause (iv) in Section  2.10 are  applicable,  such due date
shall be the next preceding Business Day), and such extension of time shall then
be included in the computation of payment of interest,  fees or other applicable
amounts.

         (b) The Agent will  distribute to the Lenders like amounts  relating to
payments made to the Agent for the account of the Lenders as follows: (i) if the
payment is received by 12:00 noon, in  immediately  available  funds,  the Agent
will make  available to each relevant  Lender on the same date, by wire transfer
of  immediately  available  funds,  such Lender's  ratable share of such payment
(based on the percentage  that the amount of the relevant  payment owing to such
Lender bears to the total  amount of such  payment  owing to all of the relevant
Lenders),  and (ii) if such  payment is received  after 12:00 noon,  or in other
than  immediately  available  funds,  the Agent will make available to each such
Lender  its  ratable  share of such  payment  by wire  transfer  of  immediately
available  funds  on the  next  succeeding  Business  Day  (or in  the  case  of
uncollected  funds, as soon as practicable after collected).  If the Agent shall
not have made a required  distribution  to the  appropriate  Lenders as required
hereinabove after receiving a payment for the account of such Lenders, the Agent
will pay to each such Lender, on demand,  its ratable share of such payment with
interest thereon at the Federal


                                      -19-

<PAGE>



Funds Rate for each day from the date such amount was  required to be  disbursed
by the Agent until the date repaid to such Lender.

         (c) Unless the Agent shall have received written notice, executed by an
Authorized  Officer of each Borrower,  prior to the date on which any payment is
due to any Lender  hereunder  that such  payment  will not be made in full,  the
Agent may assume that the Borrowers  have made such payment in full to the Agent
on such date, and the Agent may, in reliance on such  assumption,  but shall not
be  obligated  to,  cause to be  distributed  to such Lender on such due date an
amount  equal to the amount  then due to such  Lender.  If and to the extent the
Borrowers shall not have so made such payment in full to the Agent,  and without
limiting the obligation of the Borrowers to make such payment in accordance with
the terms hereof,  such Lender shall repay to the Agent forthwith on demand such
amount so  distributed to such Lender,  together with interest  thereon for each
day from the date such amount is so  distributed  to such Lender  until the date
repaid to the Agent, at the Federal Funds Rate.

         (d) Each Lender for whose  account any payment is to be made  hereunder
may,  but shall not be  obligated  to,  debit the amount of any such payment not
made as and when  required  hereunder  to any  ordinary  deposit  account of the
Borrowers with such Lender (with prompt notice to the Agent and the  Borrowers);
provided,  however,  that the failure to give such  notice  shall not affect the
validity of such debit by such Lender.

         (e)  All  computations  of  interest  and  fees  hereunder   (including
computations  of the Reserve  Requirement)  shall be made on the basis of a year
consisting  of (i) in the case of Base Rate Loans,  365 or 366 days, as the case
may be, and (ii) in all other instances, 360 days, and the actual number of days
(including the first day, but excluding the last day) elapsed.

         2.13. Recovery of Payments.  (a) The Borrowers agree that to the extent
any  Borrower  makes a payment or payments to or for the account of the Agent or
any  Lender,  which  payment or payments  or any part  thereof are  subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid  to a  trustee,  receiver  or any other  party  under any  bankruptcy,
insolvency or similar state or federal law, common law or equitable cause, then,
to the extent of such  payment  or  repayment,  the  Obligation  intended  to be
satisfied  shall be revived  and  continued  in full force and effect as if such
payment had not been received.

         (b)  If any  amounts  distributed  by  the  Agent  to  any  Lender  are
subsequently  returned  or  repaid  by the  Agent  to  the  Borrowers  or  their
representatives  or  successors  in  interest,  whether  by  court  order  or by
settlement  approved by the Lender in question,  such Lender will, promptly upon
receipt of notice thereof from the Agent, pay the Agent such amount. If any such
amounts are recovered by the Agent from the  Borrowers or their  representatives
or  successors  in  interest,  the Agent will  redistribute  such amounts to the
Lenders on the same basis as such amounts were originally distributed.

          2.14.  Use of  Proceeds.  The  proceeds of the Loans shall be used for
working capital and general corporate purposes,  for Permitted  Acquisitions and
in accordance with the terms and provisions of this Agreement.

          2.15.  Pro  Rata  Treatment.  (a)  All  fundings,   continuations  and
conversions of Loans shall be made by the Lenders pro rata on the basis of their
respective  Commitments (in the case of the initial funding of Loans pursuant to
Section 2.2) or on the basis of their respective  outstanding Loans (in the case
of  continuations  and  conversions  of Loans  pursuant  to  Section  2.11,  and
additionally in


                                      -20-

<PAGE>



all cases in the event the Commitments have expired or have been terminated), as
the case may be from time to time.  All  payments on account of  principal of or
interest on any Loans, fees or any other Obligations owing to or for the account
of any one or more Lenders  shall be  apportioned  ratably among such Lenders in
proportion to the amounts of such principal, interest, fees or other Obligations
owed to them respectively.

         (b) Each Lender  agrees that if it shall  receive any amount  hereunder
(whether by voluntary payment, exercise of the right of setoff or banker's lien,
counterclaim or cross action, or otherwise, other than pursuant to Section 10.7)
applicable  to the payment of any of the  Obligations  that  exceeds its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable  to such  Lender  at such  time to (ii)  the  aggregate  amount  of such
Obligations  due and payable to all Lenders at such time) of payments on account
of such Obligations then or therewith  obtained by all the Lenders to which such
payments are required to have been made,  such Lender shall  forthwith  purchase
from the other  Lenders  such  participations  in such  Obligations  as shall be
necessary to cause such  purchasing  Lender to share the excess payment or other
recovery  ratably  with  each of  them;  provided,  however,  that if all or any
portion of such excess  payment is  thereafter  recovered  from such  purchasing
Lender,  such  purchase  from each such other Lender shall be rescinded and each
such other Lender shall repay to the purchasing Lender the purchase price to the
extent of such  recovery,  together with an amount equal to such other  Lender's
ratable  share  (according  to the  proportion  of (i) the  amount of such other
Lender's  required  repayment  to (ii) the total  amount so  recovered  from the
purchasing  Lender)  of any  interest  or other  amount  paid or  payable by the
purchasing  Lender in respect of the total amount so  recovered.  Each  Borrower
agrees  that any  Lender so  purchasing  a  participation  from  another  Lender
pursuant  to the  provisions  of this  subsection  may,  to the  fullest  extent
permitted  by law,  exercise any and all rights of payment  (including,  without
limitation,  setoff,  banker's  lien  or  counterclaim)  with  respect  to  such
participation  as fully as if such  participant  were a direct  creditor of such
Borrower  in  the  amount  of  such  participation.   If  under  any  applicable
bankruptcy,  insolvency  or similar law, any Lender  receives a secured claim in
lieu of a setoff to which this  subsection  applies,  such Lender shall,  to the
extent  practicable,  exercise its rights in respect of such secured  claim in a
manner  consistent with the rights of the Lenders entitled under this subsection
to share in the benefits of any recovery on such secured claim.

         2.16.  Increased Costs; Change in Circumstances;  Illegality;  etc. (a)
If, at any time after the date hereof and from time to time, the introduction of
or any change in any applicable law, rule or regulation or in the interpretation
or  administration  thereof  by any  Governmental  Authority  charged  with  the
interpretation or administration  thereof,  or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge,  or
change the basis of taxation of  payments to such  Lender,  in respect of any of
its LIBOR Loans or any other  amounts  payable  hereunder or its  obligation  to
make,  fund or maintain  any LIBOR  Loans  (other than any change in the rate or
basis of tax on the overall net income of such Lender or its applicable  Lending
Office), (ii) impose, modify or deem applicable any reserve,  special deposit or
similar  requirement  (other  than as a  result  of any  change  in the  Reserve
Requirement)  against assets of,  deposits with or for the account of, or credit
extended by, such Lender or its applicable  Lending  Office,  or (iii) impose on
such Lender or its applicable Lending Office any other condition, and the result
of any of the  foregoing  shall be to increase the cost to such Lender of making
or  maintaining  any LIBOR Loans or to reduce the amount of any sum  received or
receivable by such Lender hereunder,  the Borrowers will,  promptly upon written
demand therefor by such Lender,  pay to such Lender such  additional  amounts as
shall compensate such Lender for such increase in costs or reduction in return.



                                      -21-

<PAGE>



         (b) If, at any time after the date  hereof  and from time to time,  any
Lender shall have reasonably  determined that the  introduction of or any change
in any applicable law, rule or regulation  regarding  capital adequacy or in the
interpretation or administration  thereof by any Governmental  Authority charged
with the interpretation or administration  thereof, or compliance by such Lender
with any guideline or request from any such Governmental  Authority  (whether or
not having the force of law), has or would have the effect,  as a consequence of
such Lender's Commitment or Loans, of reducing the rate of return on the capital
of such Lender or any Person controlling such Lender to a level below that which
such Lender or controlling Person could have achieved but for such introduction,
change or compliance (taking into account such Lender's or controlling  Person's
policies with respect to capital  adequacy),  the Borrowers will,  promptly upon
written  demand  therefor  by such  Lender  therefor,  pay to such  Lender  such
additional amounts as will compensate such Lender or controlling Person for such
reduction in return.

         (c) If, on or prior to the first day of any  Interest  Period,  (y) the
Agent shall have determined that adequate and reasonable  means do not exist for
ascertaining the applicable LIBOR Rate for such Interest Period or (z) the Agent
shall  have  received   written  notice  from  the  Required  Lenders  of  their
determination  that the rate of interest referred to in the definition of "LIBOR
Rate" upon the basis of which the  Adjusted  LIBOR Rate for LIBOR Loans for such
Interest  Period is to be determined  will not adequately and fairly reflect the
cost to such Lenders of making or  maintaining  LIBOR Loans during such Interest
Period,  the Agent will forthwith so notify the Borrowers and the Lenders.  Upon
such notice,  (i) all then outstanding LIBOR Loans shall  automatically,  on the
expiration date of the respective  Interest Periods  applicable  thereto (unless
then repaid in full), be converted into Base Rate Loans,  (ii) the obligation of
the Lenders to make,  to convert  Base Rate Loans into,  or to  continue,  LIBOR
Loans shall be  suspended  (including  pursuant to the  Borrowing  to which such
Interest  Period  applies),  and (iii)  any  Notice  of  Borrowing  or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR Loans
shall be deemed to be a request  for Base  Rate  Loans,  in each case  until the
Agent or the Required  Lenders,  as the case may be, shall have  determined that
the  circumstances  giving  rise to such  suspension  no longer  exist  (and the
Required  Lenders,  if making such  determination,  shall have so  notified  the
Agent), and the Agent shall have so notified the Borrowers and the Lenders.

         (d) Notwithstanding  any other provision in this Agreement,  if, at any
time  after  the date  hereof  and from  time to time,  any  Lender  shall  have
determined  in  good  faith  that  the  introduction  of or  any  change  in any
applicable law, rule or regulation or in the  interpretation  or  administration
thereof  by any  Governmental  Authority  charged  with  the  interpretation  or
administration  thereof,  or  compliance  with any guideline or request from any
such  Governmental  Authority  (whether or not having the force of law),  has or
would  have the  effect  of  making it  unlawful  for such  Lender to make or to
continue to make or maintain  LIBOR Loans,  such Lender will forthwith so notify
the Agent and the  Borrowers;  provided  that prior to giving any such notice to
the Agent  pursuant  to this  Section  2.16(d),  such Lender  shall  designate a
different  applicable Lending Office if such designation will avoid the need for
giving such notice and will not, in the reasonable  judgment of such Lender,  be
otherwise  disadvantageous  to such Lender.  Upon such notice,  (i) each of such
Lender's then  outstanding  LIBOR Loans shall  automatically,  on the expiration
date of the respective Interest Period applicable thereto (or, to the extent any
such  LIBOR  Loan may not  lawfully  be  maintained  as a LIBOR  Loan until such
expiration date, upon such notice), be converted into a Base Rate Loan, (ii) the
obligation  of such  Lender to make,  to  convert  Base Rate Loans  into,  or to
continue,  LIBOR Loans shall be suspended  (including  pursuant to any Borrowing
for  which  the  Agent has  received  a Notice  of  Borrowing  but for which the
Borrowing Date has not arrived),  and (iii) any Notice of Borrowing or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR Loans
shall,  as to such  Lender,  be deemed to be a request for a Base Rate Loan,  in
each case until


                                      -22-

<PAGE>



such Lender shall have  determined  that the  circumstances  giving rise to such
suspension  no longer exist and shall have so notified the Agent,  and the Agent
shall have so notified the Borrowers.

         (e) Each Lender will promptly notify the Borrowers and the Agent of any
event of which it has  knowledge,  occurring  after the date hereof,  which will
entitle  such  Lender to  compensation  pursuant to this  Section  2.16 and will
designate a different  applicable  Lending Office if such designation will avoid
the need for,  or reduce the amount of, such  compensation  and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

         (f)  Determinations  by the Agent or any  Lender for  purposes  of this
Section 2.16 of any increased costs,  reduction in return, market contingencies,
illegality or any other matter shall,  absent  manifest  error,  be  conclusive,
provided  that such  determinations  are made in good  faith.  No failure by the
Agent or any Lender at any time to demand  payment of any amounts  payable under
this  Section 2.16 shall  constitute a waiver of its right to demand  payment of
any additional  amounts arising at any subsequent time.  Nothing in this Section
2.16 shall require or be construed to require the Borrowers to pay any interest,
fees, costs or other amounts in excess of that permitted by applicable law.

         2.17.  Taxes.  (a) Any and all payments by the  Borrowers  hereunder or
under any Note shall be made, in  accordance  with the terms hereof and thereof,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions,  charges or withholdings,  and all liabilities with
respect thereto,  other than net income and franchise taxes imposed on the Agent
or any  Lender by the  United  States or by the  jurisdiction  under the laws of
which the Agent or such Lender, as the case may be, is organized or in which its
principal  office or (in the case of a Lender) its applicable  Lending Office is
located,  or any political  subdivision  or taxing  authority  thereof (all such
nonexcluded  taxes,  levies,  imposts,  deductions,  charges,  withholdings  and
liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be
required  by law to  deduct  any Taxes  from or in  respect  of any sum  payable
hereunder  or under any Note to the  Agent or any  Lender,  (i) the sum  payable
shall be  increased  as may be  necessary  so that  after  making  all  required
deductions  (including  deductions  applicable to additional  sums payable under
this Section 2.17),  the Agent or such Lender,  as the case may be,  receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrowers will make such  deductions,  (iii) the Borrowers will pay the
full amount  deducted to the relevant  taxation  authority or other authority in
accordance  with applicable law and (iv) the Borrowers will deliver to the Agent
or such Lender, as the case may be, evidence of such payment.

         (b) The Borrowers  will jointly and  severally  indemnify the Agent and
each Lender for the full amount of Taxes  (including,  without  limitation,  any
Taxes imposed by any  jurisdiction  on amounts  payable under this Section 2.17)
paid by the  Agent  or such  Lender,  as the  case  may  be,  and any  liability
(including  penalties,  interest and expenses) arising therefrom or with respect
thereto,  whether or not such Taxes were  correctly  or legally  asserted.  This
indemnification  shall be made  within  30 days  from the date the Agent or such
Lender, as the case may be, makes written demand therefor.

         (c) Each of the Agent and the Lenders  agrees  that if it  subsequently
recovers, or receives a permanent net tax benefit with respect to, any amount of
Taxes (i) previously paid by it and as to which it has been indemnified by or on
behalf of the Borrowers or (ii) previously deducted by the Borrowers (including,
without  limitation,  any Taxes deducted from any additional  sums payable under
clause (i) of subsection (a) above),  the Agent or such Lender,  as the case may
be,  shall  reimburse  the  Borrowers  to the  extent of the  amount of any such
recovery or permanent net tax


                                      -23-

<PAGE>



benefit  (but only to the  extent of  indemnity  payments  made,  or  additional
amounts  paid,  by or on behalf of the  Borrowers  under this  Section 2.17 with
respect to the Taxes  giving rise to such  recovery or tax  benefit);  provided,
however, that the Borrowers, upon the request of the Agent or such Lender, agree
to repay to the Agent or such  Lender,  as the case may be, the amount paid over
to the Borrowers  (together with any penalties,  interest or other charges),  in
the event  the Agent or such  Lender is  required  to repay  such  amount to the
relevant taxing authority or other Governmental Authority.  The determination by
the Agent or any Lender of the amount of any such  recovery or permanent net tax
benefit  shall,  in the absence of manifest  error,  be conclusive  and binding;
provided that such determination is made in good faith.

         (d) If any  Lender is  incorporated  or  organized  under the laws of a
jurisdiction  other  than the United  States of America or any state  thereof (a
"Non-U.S.  Lender") and claims  exemption  from United  States  withholding  tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Agent and the Borrowers, on or prior to the Closing Date (or, in the case
of a Non-U.S.  Lender that  becomes a party to this  Agreement as a result of an
assignment  after the Closing Date, on the effective  date of such  assignment),
(i) in the case of a Non-U.S.  Lender  that is a "bank" for  purposes of Section
881(c)(3)(A) of the Internal Revenue Code, a properly completed Internal Revenue
Service Form 4224 or 1001, as applicable (or successor  forms),  certifying that
such  Non-U.S.  Lender  is  entitled  to an  exemption  from or a  reduction  of
withholding or deduction for or on account of United States federal income taxes
in connection  with payments under this Agreement or any of the Notes,  together
with  a  properly  completed  Internal  Revenue  Service  Form  W-8 or  W-9,  as
applicable (or successor forms), and (ii) in the case of a Non-U.S.  Lender that
is not a "bank" for purposes of Section  881(c)(3)(A)  of the  Internal  Revenue
Code, a certificate in form and substance  reasonably  satisfactory to the Agent
and the Borrower and to the effect that (x) such Non-U.S. Lender is not a "bank"
for  purposes of Section  881(c)(3)(A)  of the  Internal  Revenue  Code,  is not
subject to regulatory or other legal requirements as a bank in any jurisdiction,
and has not been  treated as a bank for purposes of any tax,  securities  law or
other filing or submission made to any governmental  authority,  any application
made to a  rating  agency  or  qualification  for any  exemption  from  any tax,
securities law or other legal requirements,  (y) is not a 10-percent shareholder
for purposes of Section 881(c)(3)(B) of the Internal Revenue Code and (z) is not
a controlled  foreign  corporation  receiving interest from a related person for
purposes of Section  881(c)(3)(C) of the Internal Revenue Code,  together with a
properly  completed  Internal Revenue Service Form W-8 or W-9, as applicable (or
successor  forms).  Each such Non-U.S.  Lender  further agrees to deliver to the
Agent and the  Borrowers an  additional  copy of each such  relevant  form on or
before  the date  that  such  form  expires  or  becomes  obsolete  or after the
occurrence of any event  (including a change in its applicable  Lending  Office)
requiring a change in the most  recent  forms so  delivered  by it, in each case
certifying  that such  Non-U.S.  Lender is  entitled to an  exemption  from or a
reduction of withholding or deduction for or on account of United States federal
income taxes in  connection  with  payments  under this  Agreement or any of the
Notes, unless an event (including, without limitation, any change in treaty, law
or  regulation)  has occurred prior to the date on which any such delivery would
otherwise be required,  which event renders all such forms  inapplicable  or the
exemption  to which such  forms  relate  unavailable  and such  Non-U.S.  Lender
notifies the Agent and the Borrowers that it is not entitled to receive payments
without  deduction or withholding  of United States  federal income taxes.  Each
such  Non-U.S.  Lender will  promptly  notify the Agent and the Borrowers of any
changes  in  circumstances  that  would  modify or render  invalid  any  claimed
exemption or reduction.

         (e) If any Lender is  entitled  to a  reduction  in (and not a complete
exemption from) the applicable  withholding tax, the Borrowers and the Agent may
withhold  from any interest  payment to such Lender an amount  equivalent to the
applicable  withholding tax after taking into account such reduction.  If any of
the forms or other documentation required under subsection (d) above are not


                                      -24-

<PAGE>



delivered to the Agent as therein required, then the Borrowers and the Agent may
withhold from any interest  payment to such Lender not  providing  such forms or
other documentation an amount equivalent to the applicable withholding tax.

         2.18.  Compensation.  The Borrowers  will  compensate  each Lender upon
demand for all losses, expenses and liabilities (including,  without limitation,
any  loss,  expense  or  liability  incurred  by reason  of the  liquidation  or
reemployment  of  deposits  or other  funds  required  by such Lender to fund or
maintain  LIBOR  Loans)  that such  Lender may incur or  sustain  (i) if for any
reason (other than a default by such Lender) a Borrowing or continuation  of, or
conversion  into, a LIBOR Loan does not occur on a date specified  therefor in a
Notice of Borrowing or Notice of Conversion/Continuation, (ii) if any repayment,
prepayment  or conversion of any LIBOR Loan occurs on a date other than the last
day of an Interest  Period  applicable  thereto  (including as a consequence  of
acceleration of the maturity of the Loans pursuant to Section 8.2), (iii) if any
prepayment  of any LIBOR Loan is not made on any date  specified  in a notice of
prepayment  given by the Borrowers or (iv) as a consequence of any other failure
by the  Borrowers to make any  payments  with respect to any LIBOR Loan when due
hereunder.  Calculation  of all amounts  payable to a Lender  under this Section
2.18 shall be made as though such Lender had actually  funded its relevant LIBOR
Loan through the purchase of a Eurodollar  deposit bearing interest at the LIBOR
Rate in an amount  equal to the  amount of such  LIBOR  Loan,  having a maturity
comparable to the relevant Interest Period; provided,  however, that each Lender
may fund its LIBOR Loans in any manner it sees fit and the foregoing  assumption
shall be utilized only for the calculation of amounts payable under this Section
2.18. Determinations by any Lender for purposes of this Section 2.18 of any such
losses,  expenses or liabilities  shall,  absent  manifest error, be conclusive,
provided that such determinations are made in good faith.


                                   ARTICLE III

                        CLOSING; CONDITIONS OF BORROWING

         3.1.  Closing.  The closing of the  transactions  contemplated  by this
Agreement (the "Closing") shall take place at the offices of Robinson,  Bradshaw
& Hinson,  P.A., 101 North Tryon Street, Suite 1900,  Charlotte,  North Carolina
28246 at 10:00 a.m.  on July 11,  1997,  or at such  other  time as the  parties
hereto shall mutually agree (the "Closing Date").

          3.2. Conditions of Closing. The Closing is subject to the satisfaction
of the following conditions precedent:

         (a) The Agent shall have received the  following,  each dated as of the
Closing  Date  (unless  otherwise  specified)  and,  except  for the  Notes,  in
sufficient copies for each Lender:

                    (i) A Note for each Lender that is a party  hereto as of the
         Closing  Date,  in the amount of such  Lender's  Commitment,  each duly
         completed in accordance with the relevant provisions of Section 2.4 and
         executed by each Borrower;

                   (ii) the  Subsidiary Guaranty, duly completed and executed by
         each Subsidiary; and

                  (iii) the  favorable  opinions  of  Arnold &  Porter,  special
         counsel to the Borrowers,  and Aloysius Lawn, Esq., General Counsel and
         Secretary of each Borrower, in substantially


                                      -25-

<PAGE>



         the form of  Exhibit  F,  addressed  to the Agent and the  Lenders  and
         addressing such other matters as the Agent or any Lender may reasonably
         request.

         (b)  The  Agent  shall  have  received  a  certificate,  signed  by the
president, the chief executive officer or the chief financial officer of each of
the Borrowers,  in form and substance satisfactory to the Agent, certifying that
(i) all  representations  and  warranties  of the  Borrowers  contained  in this
Agreement  and  the  other  Credit  Documents  that  are  not  qualified  as  to
materiality   are  true  and  correct  in  all   material   respects,   and  all
representations  and warranties of the Borrowers contained in this Agreement and
the other Credit  Documents  that are qualified as to  materiality  are true and
correct,  in each case as of the Closing Date, both immediately before and after
giving effect to the consummation of the transactions  contemplated hereby, (ii)
no Default or Event of Default has occurred and is continuing,  both immediately
before  and  after  giving  effect  to  the  consummation  of  the  transactions
contemplated  hereby,  (iii) both immediately  before and after giving effect to
the consummation of the transactions  contemplated  hereby,  no Material Adverse
Change  has  occurred  since  December  31,  1996,  and  there  exists no event,
condition  or state of facts that could  reasonably  be  expected to result in a
Material  Adverse Change,  and (iv) all conditions to the Closing  hereunder set
forth in this Section 3.2 have been satisfied or waived as required hereunder.

         (c) The Agent shall have received a certificate  of the secretary or an
assistant  secretary  of  each  Borrower   Affiliate,   in  form  and  substance
satisfactory  to the Agent,  certifying (i) that attached  thereto is a true and
complete copy of the articles or certificate of incorporation and all amendments
thereto  of  such  Borrower  Affiliate,  certified  as of a  recent  date by the
Secretary of State (or comparable Governmental Authority) of its jurisdiction of
organization,  and that the same  has not been  amended  since  the date of such
certification,  (ii) that  attached  thereto is a true and complete  copy of the
bylaws of such  Borrower  Affiliate  as then in  effect  and as in effect at all
times from the date on which the  resolutions  referred to in clause (iii) below
were  adopted  to and  including  the date of such  certificate,  and (iii) that
attached thereto is a true and complete copy of resolutions adopted by the board
of directors of such Borrower Affiliate authorizing the execution,  delivery and
performance  of this  Agreement and the other Credit  Documents to which it is a
party, and as to the incumbency and genuineness of the signature of each officer
of such Borrower Affiliate  executing this Agreement or any of such other Credit
Documents, and attaching all such copies of the documents described above.

         (d) The Agent shall have received a certificate  as of a recent date of
the good standing of each Borrower  Affiliate under the laws of its jurisdiction
of  organization,  from the  Secretary  of  State  (or  comparable  Governmental
Authority) of such jurisdiction.

         (e)  All  legal   matters,   documentation,   and  corporate  or  other
proceedings   incident  to  the  transactions   contemplated   hereby  shall  be
satisfactory  in form and  substance to the Agent;  all  approvals,  permits and
consents of any Governmental Authorities or other Persons required in connection
with the execution and delivery of this Agreement and the other Credit Documents
and the consummation of the transactions  contemplated  hereby and thereby shall
have been obtained, without the imposition of conditions that are not acceptable
to the Agent,  and all related  filings,  if any,  shall have been made, and all
such approvals,  permits, consents and filings shall be in full force and effect
and the  Agent  shall  have  received  such  copies  thereof  as it  shall  have
requested; all applicable waiting periods shall have expired without any adverse
action being taken by any  Governmental  Authority having  jurisdiction;  and no
action,  proceeding,  investigation,  regulation or legislation  shall have been
instituted,  threatened or proposed before,  and no order,  injunction or decree
shall have been  entered by, any court,  Governmental  Authority or other Person
(i) against or affecting any Borrower Affiliate


                                      -26-

<PAGE>



or any of their respective  properties or (ii) with respect to this Agreement or
any of the other Credit Documents.

          (f) Since December 31, 1996, both immediately  before and after giving
effect to the consummation of the  transactions  contemplated by this Agreement,
there  shall  not have  occurred  any  Material  Adverse  Change  or any  event,
condition  or state of facts that could  reasonably  be  expected to result in a
Material Adverse Change.

          (g) The  Borrowers  shall have paid all fees and expenses of the Agent
and the Lenders required hereunder or under any other Credit Document to be paid
on or prior to the  Closing  Date  (including  fees and  expenses of counsel) in
connection with this Agreement and the transactions contemplated hereby.

          (h) The Agent shall have received a Financial  Condition  Certificate,
in form and substance satisfactory to the Agent.

          (i) The  Agent  shall  have  received  written  confirmation  from the
applicable lenders under the PNC Indebtedness and the Merrill Lynch Indebtedness
to the effect that (i) all  principal,  interest and other  amounts  outstanding
with respect to the PNC Indebtedness and the Merrill Lynch Indebtedness,  as the
case may be, have been repaid and  satisfied in full,  (ii) all  commitments  to
extend credit under the agreements and  instruments  relating  thereto have been
terminated,  (iii) any Liens securing any PNC  Indebtedness or any Merrill Lynch
Indebtedness,  as the case may be, have been  released  and any related  filings
have been terminated of record (or  arrangements  satisfactory to the Agent made
therefor),  and (iv) any letters of credit  outstanding  with respect to the PNC
Indebtedness  or the Merrill Lynch  Indebtedness,  as the case may be, have been
terminated or cancelled.

          (j) The Agent  shall  have  received  an Account  Designation  Letter,
together with written  instructions from an Authorized Officer of each Borrower,
including  wire transfer  information,  directing the payment of the proceeds of
Loans to be made hereunder.

          (k)  The  Agent  and  each  Lender  shall  have  received  such  other
documents,  certificates,  opinions  and  instruments  in  connection  with  the
transactions contemplated hereby as it shall have reasonably requested.

          (l) The Agent shall have  completed  its due  diligence  review of the
Borrowers and shall have been satisfied with the results thereof.

          3.3.  Conditions of All  Borrowings.  The obligation of each Lender to
make any  Loans  hereunder  is  subject  to the  satisfaction  of the  following
conditions precedent on the relevant Borrowing Date or date of issuance:

          (a) The Agent shall have  received a Notice of Borrowing in accordance
with Section 2.2(b);

          (b) Each of the representations and warranties contained in Article IV
and in the other Credit Documents that is not qualified as to materiality  shall
be true and correct in all material  respects,  and each of the  representations
and  warranties  of the  Borrowers  contained in Article IV and the other Credit
Documents that is qualified as to materiality shall be true and correct, in each
case on and as of such  Borrowing Date with the same effect as if made on and as
of such date, both


                                      -27-

<PAGE>



immediately  before and after giving effect to the Loans to be made on such date
(except to the extent any such representation or warranty is expressly stated to
have been made as of a  specific  date,  in which  case such  representation  or
warranty  shall be true and correct in all  material  respects as of such date);
and

         (c)  No  Default  or  Event  of  Default  shall  have  occurred  and be
continuing on such date, both immediately  before and after giving effect to the
Loans to be made on such date.

         Each  giving of a Notice of  Borrowing,  and the  consummation  of each
Borrowing,  shall be deemed to constitute a representation  by the Borrower that
the statements  contained in subsections  (b) and (c) above are true, both as of
the date of such notice and as of the relevant Borrowing Date.


                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         To induce the Agent and the Lenders to enter into this Agreement and to
induce  the  Lenders to extend the credit  contemplated  hereby,  the  Borrowers
jointly  and  severally  represent  and  warrant to the Agent and the Lenders as
follows:

         4.1. Corporate Organization and Power. Each Borrower Affiliate (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation,  (ii) has the full corporate power and
authority  to execute and deliver and perform its  obligations  under the Credit
Documents to which it is or will be a party, to own and hold its property and to
engage in its business as presently conducted, and (iii) is duly qualified to do
business as a foreign  corporation and is in good standing in each  jurisdiction
where the nature of its business or the ownership of its properties  requires it
to be so  qualified,  except to the extent that the  failure to be so  qualified
would not have a Material Adverse Effect.

         4.2. Authorization;  Enforceability. Each Borrower Affiliate has taken,
or on the  Closing  Date will have  taken,  all  necessary  corporate  action to
execute, deliver and perform each of the Credit Documents to which it is or will
be a party,  and has, or on the Closing Date (or any later date of execution and
delivery) will have, validly executed and delivered each of the Credit Documents
to which it is or will be a party. This Agreement  constitutes,  and each of the
other Credit Documents upon execution and delivery will  constitute,  the legal,
valid and binding  obligation of each Borrower  Affiliate that is a party hereto
or thereto,  enforceable against each such Borrower Affiliate in accordance with
its terms,  except as enforceability  may be limited by bankruptcy,  insolvency,
reorganization,   moratorium,   fraudulent  conveyance  or  other  similar  laws
affecting  creditors'  rights generally,  by general equitable  principles or by
principles of good faith and fair dealing.

         4.3. No Violation.  The  execution,  delivery and  performance  by each
Borrower  Affiliate of this Agreement and each of the other Credit  Documents to
which it is a party,  and compliance by each such Borrower  Affiliate,  with the
terms  hereof and thereof,  do not (i) violate any  provision of its articles or
certificate of  incorporation  or bylaws or contravene any other  Requirement of
Law  applicable to it, (ii) conflict  with,  result in a breach of or constitute
(with notice, lapse of time or both) a default under any indenture, agreement or
other instrument to which it is a party, by which it or any of its properties is
bound or to which it is subject,  or (iii)  result in or require the creation or
imposition  of any Lien  upon  any of its  properties  or  assets.  No  Borrower
Affiliate is a party to any agreement or instrument or otherwise  subject to any
restriction or encumbrance that restricts or limits


                                      -28-

<PAGE>



its ability to make dividend  payments or other  distributions in respect of its
Capital Stock, to repay  Indebtedness owed to any Borrower or any other Borrower
Affiliate,  to make loans or advances to any Borrower Affiliate,  or to transfer
any of its assets or  properties to any Borrower  Affiliate,  in each case other
than such restrictions or encumbrances existing under or by reason of the Credit
Documents or applicable Requirements of Law.

         4.4.  Governmental  and  Third-Party  Authorization;  Permits.  (a)  No
consent, approval,  authorization or other action by, notice to, or registration
or filing  with,  any  Governmental  Authority  or other Person is required as a
condition to or otherwise in  connection  with the due  execution,  delivery and
performance  by each  Borrower  Affiliate of this  Agreement or any of the other
Credit Documents to which it is or will be a party or the legality,  validity or
enforceability hereof or thereof.

         (b) Each Borrower  Affiliate  has, and is in good standing with respect
to, all governmental approvals,  licenses,  permits and authorizations necessary
to conduct its business as presently  conducted  and to own or lease and operate
its  properties,  except  to the  extent  that  the  failure  to have  any  such
governmental  approval,  license,  permit  or  authorization  would  not  have a
Material Adverse Effect.

         4.5.  Litigation.  There  are  no  actions,  investigations,  suits  or
proceedings pending or, to the knowledge of any Borrower, threatened, at law, in
equity or in  arbitration,  before any court,  other  Governmental  Authority or
other Person,  (i) against or affecting  any Borrower  Affiliate or any of their
respective properties or (ii) with respect to this Agreement or any of the other
Credit Documents,  other than any actions,  investigations,  suits or proceeding
that would not have a Material Adverse Effect.

         4.6. Taxes. Each Borrower Affiliate has timely filed all federal, state
and local tax returns  and  reports  required to be filed by it and has paid all
taxes, assessments, fees and other charges levied upon it or upon its properties
that are shown  thereon  as due and  payable,  other  than  those that are being
contested  in good  faith  and by  proper  proceedings  and for  which  adequate
reserves have been established in accordance with GAAP. Such returns  accurately
reflect  in all  material  respects  all  liability  for taxes of each  Borrower
Affiliate  for the  periods  covered  thereby.  There  is no  ongoing  audit  or
examination  or, to the knowledge of any Borrower,  other  investigation  by any
Governmental  Authority of the tax liability of any Borrower Affiliate and there
is no  unresolved  claim  by  any  Governmental  Authority  concerning  the  tax
liability  of any Borrower  Affiliate  for any period for which tax returns have
been or were required to have been filed,  other than claims for which  adequate
reserves have been  established in accordance  with GAAP. No Borrower  Affiliate
has waived or extended or has been  requested  to waive or extend the statute of
limitations relating to the payment of any taxes.

         4.7.  Subsidiaries.  Schedule 4.7 sets forth a list,  as of the Closing
Date, of all of the  Subsidiaries  of any of the Borrowers  and, as to each such
Subsidiary,  the percentage  ownership (direct and indirect) of each Borrower in
each class of its capital  stock and each direct owner  thereof.  Except for the
shares of capital stock expressly indicated on Schedule 4.7, there are no shares
of capital stock, warrants, rights, options or other equity securities, or other
Capital Stock of any  Subsidiary  outstanding  or reserved for any purpose.  All
outstanding  shares of capital  stock of each  Borrower  Affiliate  are duly and
validly issued, fully paid and nonassessable.

         4.8.   Full   Disclosure.   All  factual   information   heretofore  or
contemporaneously  furnished  to the  Agent or any  Lender in  writing  by or on
behalf of any  Borrower  Affiliate  for purposes of or in  connection  with this
Agreement  and the  transactions  contemplated  hereby  is,  and all other  such
factual


                                      -29-

<PAGE>



information  hereafter  furnished to the Agent or any Lender in writing by or on
behalf of any  Borrower  Affiliate  will be, true and  accurate in all  material
respects on the date as of which such  information is dated or certified (or, if
such information has been amended or  supplemented,  on the date as of which any
such amendment or supplement is dated or certified)  and not made  incomplete by
omitting to state a material  fact  necessary to make the  statements  contained
therein,  in  light  of the  circumstances  under  which  such  information  was
provided, not misleading.

         4.9.  Margin  Regulations.  No  proceeds  of the  Loans  will be  used,
directly or indirectly,  to purchase or carry any Margin Stock, to extend credit
for such purpose or for any other purpose that would violate or be  inconsistent
with Regulations G, T, U or X or any provision of the Exchange Act.

         4.10. No Material  Adverse Change.  There has been no Material  Adverse
Change since December 31, 1996, and there exists no event, condition or state of
facts that could reasonably be expected to result in a Material Adverse Change.

         4.11. Financial Matters. (a) The Borrowers have heretofore furnished to
the Agent copies of (i) the audited  consolidated balance sheets of Holdings and
its  Subsidiaries  as of December  31,  1996,  1995,  and 1994,  and the related
statements  of income and cash flows for the fiscal  years  ended  December  31,
1996, 1995 and 1994, together with the opinion of BDO Seidman,  LLP thereon, and
(ii) the unaudited  consolidated  balance sheet of Holdings and its Subsidiaries
as of March 31, 1997,  and the related  statements  of income and cash flows for
the three-month period then ended. Such financial  statements have been prepared
in  accordance  with GAAP  (subject,  with  respect to the  unaudited  financial
statements,  to the  absence of notes  required  by GAAP and to normal  year-end
adjustments) and present fairly in all material respects the financial condition
of Holdings and its  Subsidiaries  on a consolidated  basis as of the respective
dates  thereof and the  consolidated  results of  operations of Holdings and its
Subsidiaries  for the  respective  periods  then ended,  except as may have been
indicated in a separate  letter dated the date hereof from the  Borrowers to the
Agent.  Except  as fully  reflected  in the  most  recent  financial  statements
referred to above and the notes  thereto,  there are no material  liabilities or
obligations  with  respect to any Borrower  Affiliate  of any nature  whatsoever
(whether absolute, contingent or otherwise and whether or not due).

         (b) Each Borrower Affiliate, after giving effect to the consummation of
the transactions contemplated hereby, (i) has capital sufficient to carry on its
businesses as conducted and as proposed to be conducted,  (ii) has assets with a
fair saleable value,  determined on a going concern basis, (y) not less than the
amount  required to pay the probable  liability  on its  existing  debts as they
become  absolute  and  matured  and (z)  greater  than the  total  amount of its
liabilities (including identified contingent  liabilities,  valued at the amount
that can reasonably be expected to become absolute and matured),  and (iii) does
not intend to, and does not believe  that it will,  incur  debts or  liabilities
beyond its ability to pay such debts and liabilities as they mature.

         4.12. Ownership of Properties. Each Borrower Affiliate (i) has good and
marketable  title to all real  property  owned by it,  (ii) holds  interests  as
lessee  under valid leases in full force and effect with respect to all material
leased real and personal  property used in connection  with its business,  (iii)
possesses  or has  rights  to use  licenses,  patents,  copyrights,  trademarks,
service marks,  trade names and other assets sufficient to enable it to continue
to conduct its business  substantially  as heretofore  conducted and without any
material  conflict with the rights of others,  and (iv) has good title to all of
its  other  properties  and  assets  reflected  in  the  most  recent  financial
statements  referred to in Section 4.11(a) (except as sold or otherwise disposed
of since the date thereof in the ordinary


                                      -30-

<PAGE>



course of business), in each case under (i), (ii), (iii) and (iv) above free and
clear of all Liens other than Permitted Liens.

         4.13.  ERISA.  Each Plan is and has been  administered in compliance in
all  material  respects  with all  applicable  Requirements  of Law,  including,
without limitation,  the applicable provisions of ERISA and the Internal Revenue
Code. No ERISA Event has occurred and is continuing  or, to the knowledge of any
Borrower,  is  reasonably  expected to occur with respect to any Plan, in either
case that would be reasonably likely,  individually or in the aggregate, to have
a Material  Adverse  Effect.  No Plan has any Unfunded  Pension  Liability,  and
neither any  Borrower  nor any ERISA  Affiliate of any Borrower has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA, in either
instance  where the same  would be  reasonably  likely,  individually  or in the
aggregate, to have a Material Adverse Effect. Neither any Borrower nor any ERISA
Affiliate  of any  Borrower is required to  contribute  to or has, or has at any
time had, any liability to a Multiemployer Plan.

         4.14.  Environmental  Matters.  (a) No Hazardous Substances are or have
been generated, used, located,  released,  treated, disposed of or stored by any
Borrower  Affiliate or, to the  knowledge of any  Borrower,  by any other Person
(including  any  predecessor  in  interest)  or  otherwise,  in, on or under any
portion of any real property, leased or owned, of any Borrower Affiliate, except
in material compliance with all applicable Environmental Laws, and no portion of
any such real  property  or, to the  knowledge of any  Borrower,  any other real
property at any time leased,  owned or operated by any Borrower  Affiliate,  has
been  contaminated  by any  Hazardous  Substance;  and no  portion  of any  real
property,  leased or owned,  of any Borrower  Affiliate has been or is presently
the subject of an environmental audit, assessment or remedial action.

         (b) No portion of any real property,  leased or owned,  of any Borrower
Affiliate  has been used by any Borrower  Affiliate  or, to the knowledge of any
Borrower,  by any other  Person,  as or for a mine, a landfill,  a dump or other
disposal  facility,  a gasoline  service  station,  or (other than for petroleum
substances  stored in the  ordinary  course of  business) a  petroleum  products
storage facility; no portion of such real property or any other real property at
any time leased,  owned or operated by any Borrower  Affiliate has,  pursuant to
any Environmental Law, been placed on the "National Priorities List" or "CERCLIS
List" (or any similar federal, state or local list) of sites subject to possible
environmental  problems;  and there are not and have never been any  underground
storage tanks  situated on any real property,  leased or owned,  of any Borrower
Affiliate.

         (c) All  activities  and  operations  of any Borrower  Affiliate are in
compliance with the requirements of all applicable Environmental Laws, except to
the extent the failure so to comply, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect.  Each Borrower Affiliate
has obtained all licenses and permits under  Environmental Laws necessary to its
respective  operations;  all such  licenses and permits are being  maintained in
good standing;  and each Borrower  Affiliate is in compliance with all terms and
conditions  of such  licenses and permits,  except for such licenses and permits
the failure to obtain,  maintain  or comply  with which would not be  reasonably
likely,  individually or in the aggregate, to have a Material Adverse Effect. No
Borrower  Affiliate  is  involved  in any  suit,  action or  proceeding,  or has
received  any  notice,  complaint  or other  request  for  information  from any
Governmental  Authority or other  Person,  with respect to any actual or alleged
Environmental Claims that, if adversely determined,  would be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect; and, to the
knowledge of any Borrower,  there are no threatened actions, suits,  proceedings
or investigations  with respect to any such Environmental  Claims, nor any basis
therefor.



                                      -31-

<PAGE>



         4.15.  Compliance With Laws.  Each Borrower  Affiliate has timely filed
all material reports,  documents and other materials  required to be filed by it
under all applicable  Requirements of Law with any Governmental  Authority,  has
retained all material records and documents  required to be retained by it under
all  applicable  Requirements  of Law, and is otherwise in  compliance  with all
applicable Requirements of Law in respect of the conduct of its business and the
ownership and operation of its properties,  except for such  Requirements of Law
the failure to comply with which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.

         4.16. Regulated Industries. No Borrower Affiliate is (i) an "investment
company," a company  "controlled" by an "investment  company," or an "investment
advisor," within the meaning of the Investment  Company Act of 1940, as amended,
or (ii) a "holding  company," a "subsidiary  company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company,"  within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

         4.17. Insurance.  The assets,  properties and business of each Borrower
Affiliate are insured against such hazards and liabilities, under such coverages
and in  such  amounts,  as  are  customarily  maintained  by  prudent  companies
similarly   situated  and  under  policies  issued  by  insurers  of  recognized
responsibility.

         4.18. Material Contracts.  Schedule 4.18 lists, as of the Closing Date,
each "material  contract"  (within the meaning of Item  601(b)(10) of Regulation
S-K under the Exchange Act) to which any Borrower Affiliate is a party, by which
any of them or their  respective  properties is bound or to which any of them is
subject (collectively,  "Material  Contracts"),  and also indicates the parties,
subject  matter and term  thereof.  As of the Closing  Date,  (i) each  Material
Contract  is in  full  force  and  effect  and is  enforceable  by the  Borrower
Affiliate  that is a party  thereto in  accordance  with its terms,  and (ii) no
Borrower  Affiliate  (nor,  to the  knowledge of any  Borrower,  any other party
thereto) is in breach of or default under any Material  Contract in any material
respect or has given  notice of  termination  or  cancellation  of any  Material
Contract.

         4.19. Labor Relations.  No Borrower  Affiliate is engaged in any unfair
labor practice  within the meaning of the National Labor  Relations Act of 1947,
as amended.  There is (i) no unfair labor practice complaint before the National
Labor Relations Board, or grievance or arbitration  proceeding arising out of or
under any collective bargaining  agreement,  pending or, to the knowledge of the
Borrower,  threatened, against any Borrower Affiliate, (ii) no strike, lock-out,
slowdown,  stoppage, walkout or other labor dispute pending or, to the knowledge
of any Borrower,  threatened,  against any Borrower Affiliate,  and (iii) to the
knowledge of any Borrower,  no petition for  certification  or union election or
union organizing activities taking place with respect to any Borrower Affiliate.

         4.20.  Single  Business  Enterprise.  The Borrowers  have  historically
operated as, and intend to continue operating as, a single business  enterprise.
Although separate entities,  the Borrowers operate under a common business plan.
Each of the Borrowers will  accordingly  benefit from the financing  arrangement
established by this Agreement.








                                      -32-

<PAGE>



                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

         The Borrowers  covenant and agree that,  until the  termination  of the
Commitments  and the payment in full of all  principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:

         5.1. Financial Statements. The Borrowers will deliver to each Lender:

         (a) As soon as  practicable  after the end of each of the  first  three
fiscal  quarters of each fiscal year,  beginning  with the fiscal quarter ending
June 30,  1997,  and in any  event not later  than five (5) days  following  the
filing  thereof  with  the  Securities   and  Exchange   Commission,   unaudited
consolidated  balance sheets of Holdings and its  Subsidiaries  as of the end of
such fiscal  quarter and  unaudited  consolidated  statements of income and cash
flows for Holdings and its  Subsidiaries  for the fiscal  quarter then ended and
for that  portion of the fiscal  year then  ended,  in each case  setting  forth
comparative  consolidated  figures  as of the end of and  for the  corresponding
period in the preceding  fiscal year,  all in reasonable  detail and prepared in
accordance  with GAAP  (subject  to the  absence of notes  required  by GAAP and
subject to normal year-end  adjustments) applied on a basis consistent with that
of the preceding quarter or containing disclosure of the effect on the financial
condition  or  results  of  operations  of  any  change  in the  application  of
accounting principles and practices during such quarter; and

         (b) As soon as practicable after the end of each fiscal year, beginning
with the fiscal year ending  December 31, 1997,  and in any event not later than
five (5) days  following  the filing  thereof with the  Securities  and Exchange
Commission,   an  audited   consolidated  balance  sheet  of  Holdings  and  its
Subsidiaries  as of  the  end of  such  fiscal  year  and  audited  consolidated
statements  of income and cash flows for Holdings and its  Subsidiaries  for the
fiscal year then ended,  including the notes thereto, in each case setting forth
comparative  figures as of the end of and for the preceding  fiscal year, all in
reasonable  detail and certified by the independent  certified public accounting
firm regularly retained by the Borrowers or another independent certified public
accounting firm of recognized  national  standing  reasonably  acceptable to the
Required Lenders, together with a report thereon by such accountants that is not
qualified  as to going  concern  or scope of audit and to the  effect  that such
financial  statements  present fairly in all material  respects the consolidated
financial  condition and results of operations of Holdings and its  Subsidiaries
as of the dates and for the periods indicated in accordance with GAAP applied on
a basis  consistent with that of the preceding year or containing  disclosure of
the effect on the financial  condition or results of operations of any change in
the application of accounting principles and practices during such year.

         5.2.  Other  Business and Financial  Information.  The  Borrowers  will
deliver to each Lender:

         (a)  Concurrently  with  each  delivery  of  the  financial  statements
described in Section 5.1, a  Compliance  Certificate  with respect to the period
covered  by  the  financial  statements  then  being  delivered,  executed  by a
Financial  Officer  of  each  Borrower,  together  with  a  Covenant  Compliance
Worksheet  reflecting the  computation  of the financial  covenants set forth in
Sections 6.1 and 6.2 as of the last day of the period  covered by such financial
statements.

         (b) Promptly upon the sending, filing or receipt thereof, copies of (i)
all  financial  statements,  reports,  notices  and  proxy  statements  that any
Borrower Affiliate shall send or make


                                      -33-

<PAGE>



available generally to its shareholders,  (ii) all regular, periodic and special
reports,  registration statements and prospectuses (other than on Form S-8) that
any Borrower  Affiliate shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities  exchange,  and (iii) all press  releases and other  statements  made
available  generally by any Borrower Affiliate to the public concerning material
developments in the business of any Borrower Affiliate;

         (c)  Promptly  upon (and in any event  within  five (5)  Business  Days
after) any  Responsible  Officer of any Borrower  obtaining  knowledge  thereof,
written notice of any of the following:

                    (i) the  occurrence  of any  Default  or Event  of  Default,
         together  with a written  statement  of an  Authorized  Officer of such
         Borrower specifying the nature of such Default or Event of Default, the
         period of existence thereof and the action that such Borrower has taken
         and proposes to take with respect thereto;

                   (ii) the institution or threatened institution of any action,
         suit,  investigation  or  proceeding  against or affecting any Borrower
         Affiliate,  including  any  such  investigation  or  proceeding  by any
         Governmental   Authority  (other  than  routine   periodic   inquiries,
         investigations  or reviews),  that would, if adversely  determined,  be
         reasonably likely, individually or in the aggregate, to have a Material
         Adverse Effect, and any material development in any litigation or other
         proceeding  previously reported pursuant to Section 4.5 or this Section
         5.2(c)(ii);

                  (iii)  the  receipt  by  any  Borrower   Affiliate   from  any
         Governmental  Authority of (y) any notice  asserting any failure by any
         Borrower Affiliate to be in compliance with applicable  Requirements of
         Law or that  threatens  the taking of any action  against such Borrower
         Affiliate  or sets  forth  circumstances  that,  if taken or  adversely
         determined,  would be  reasonably  likely  to have a  Material  Adverse
         Effect,  or (z) any  notice  of any  actual or  threatened  suspension,
         limitation or  revocation  of,  failure to renew,  or imposition of any
         restraining  order,  escrow or impoundment of funds in connection with,
         any license,  permit,  accreditation  or  authorization of any Borrower
         Affiliate,  where  such  action  would be  reasonably  likely to have a
         Material Adverse Effect;

                   (iv) the  occurrence of any ERISA Event,  together with (x) a
         written  statement of an  Authorized  Officer of each of the  Borrowers
         specifying  the  details  of such ERISA  Event and the action  that the
         Borrowers  have taken and propose to take with respect  thereto,  (y) a
         copy of any  notice  with  respect  to such  ERISA  Event  that  may be
         required  to be  filed  with  the  PBGC  and (z) a copy  of any  notice
         delivered  by the PBGC to any  Borrower  or any  ERISA  Affiliate  with
         respect to such ERISA Event;

                    (v) the  occurrence of any material  default  under,  or any
         proposed or threatened  termination  or  cancellation  of, any Material
         Contract or other material  contract or agreement to which any Borrower
         Affiliate is a party, the termination or cancellation of which would be
         reasonably likely to have a Material Adverse Effect;

                   (vi)  the  occurrence  of  any  of  the  following:  (x)  the
         assertion of any Environmental  Claim against or affecting any Borrower
         Affiliate or any of their  respective  real property,  leased or owned;
         (y) the  receipt by any  Borrower  Affiliate  of notice of any  alleged
         violation of or noncompliance  with any Environmental  Laws; or (z) the
         taking of any remedial action


                                      -34-

<PAGE>



         by any Borrower Affiliate or any other Person in response to the actual
         or alleged generation,  storage,  release, disposal or discharge of any
         Hazardous  Substances on, to, upon or from any real property  leased or
         owned by any Borrower  Affiliate;  but in each case under  clauses (x),
         (y) and (z) above,  only to the  extent  the same  would be  reasonably
         likely to have a Material Adverse Effect; and

                  (vii)  any  other  matter  or  event  that  has,  or  would be
         reasonably  likely to have, a Material Adverse Effect,  together with a
         written  statement of an Authorized  Officer of each  Borrower  setting
         forth the nature and period of  existence  thereof  and the action that
         the Borrower has taken and proposes to take with respect thereto.

         (d) As soon as is available  and in any event within  fifteen (15) days
after the end of each  calendar  month,  a  subscriber  count for each  Borrower
Affiliate.

         (e) As promptly as reasonably  possible,  such other  information about
the business,  condition  (financial or otherwise),  operations or properties of
any Borrower  Affiliate  (including any Plan and any information  required to be
filed under  ERISA) as the Agent or any Lender may from time to time  reasonably
request.

         5.3. Corporate Existence;  Franchises;  Maintenance of Properties. Each
of the Borrowers will, and will cause each of its  Subsidiaries to, (i) maintain
and  preserve  in full  force and  effect  its  corporate  existence,  except as
expressly permitted otherwise by Section 7.1, (ii) obtain, maintain and preserve
in full  force and  effect  all other  rights,  franchises,  licenses,  permits,
certifications,   approvals   and   authorizations   required  by   Governmental
Authorities and necessary to the ownership,  occupation or use of its properties
or the conduct of its business,  except to the extent the failure to do so would
not be reasonably  likely to have a Material Adverse Effect,  and (iii) keep all
material  properties in good working  order and condition  (normal wear and tear
excepted) and from time to time make all  necessary  repairs to and renewals and
replacements  of  such  properties,  except  to the  extent  that  any  of  such
properties are obsolete or are being replaced.

         5.4.  Compliance  with Laws. Each of the Borrowers will, and will cause
each of its Subsidiaries to, comply in all respects with all Requirements of Law
applicable  in respect of the  conduct of its  business  and the  ownership  and
operation of its properties, except to the extent the failure so to comply could
not be reasonably be expected to have a Material Adverse Effect.

         5.5. Payment of Obligations. Each of the Borrowers will, and will cause
each of its Subsidiaries to, (i) pay all liabilities and obligations as and when
due (subject to any applicable subordination  provisions),  except to the extent
failure to do so could not  reasonably  be expected  to have a Material  Adverse
Effect,  and (ii) pay and  discharge  all taxes,  assessments  and  governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties,  prior to the date on which penalties would attach thereto,  and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
any Borrower Affiliate;  provided,  however, that no Borrower Affiliate shall be
required to pay any such tax,  assessment,  charge,  levy or claim that is being
contested in good faith and by proper  proceedings and as to which such Borrower
Affiliate is maintaining  adequate  reserves with respect  thereto in accordance
with GAAP.

         5.6. Insurance.  Each of the Borrowers will, and will cause each of its
Subsidiaries  to,  maintain  with  financially  sound  and  reputable  insurance
companies insurance with respect to its assets, properties and business, against
such hazards and liabilities, of such types and in such


                                      -35-

<PAGE>



amounts,  as is  customarily  maintained  by  companies  in the same or  similar
businesses similarly situated.

         5.7.  Maintenance  of  Books  and  Records;  Inspection.  Each  of  the
Borrowers  will,  and will  cause  each of its  Subsidiaries  to,  (i)  maintain
adequate  books,  accounts and records,  in which full, true and correct entries
shall be made of all  financial  transactions  in relation to its  business  and
properties,  and prepare all financial statements required under this Agreement,
in each case in accordance with GAAP and in compliance with the  requirements of
any  Governmental  Authority  having  jurisdiction  over  it,  and  (ii)  permit
employees  or agents of the Agent or any Lender to inspect  its  properties  and
examine or audit its books, records, working papers and accounts and make copies
and  memoranda of them,  and to discuss its affairs,  finances and accounts with
its officers and employees  and, upon notice to the Borrowers,  the  independent
public  accountants  of the  Borrowers  and  their  Subsidiaries  (and  by  this
provision the Borrower  authorizes such  accountants to discuss the finances and
affairs of the  Borrowers  and their  Subsidiaries),  all at such times and from
time to time,  upon  reasonable  notice and  during  business  hours,  as may be
reasonably requested.

         5.8.  Permitted   Acquisitions.   (a)  Subject  to  the  provisions  of
subsection  (b)  below  and the  requirements  contained  in the  definition  of
Permitted  Acquisition,  and subject to the other terms and  conditions  of this
Agreement,  the  Borrowers  may from time to time on or after the  Closing  Date
effect  Permitted  Acquisitions,  provided that,  with respect to each Permitted
Acquisition,  no  Default  or  Event  of  Default  shall  have  occurred  and be
continuing at the time of the  consummation  of such  Permitted  Acquisition  or
would exist immediately after giving effect thereto;

         (b) Not less than two (2) Business  Days prior to the  consummation  of
any Permitted  Acquisition,  the Borrowers shall have delivered to the Agent and
each Lender a certificate,  in form and substance reasonably satisfactory to the
Agent,  executed by a Financial  Officer of each Borrower to the effect that, to
the best of such individual's knowledge,  (w) the consummation of such Permitted
Acquisition will not result in a violation of any provision of this Section 5.8,
and after giving effect to such Permitted Acquisition and any Borrowings made in
connection  therewith,  the Borrowers  will be in compliance  with the financial
covenants  contained in Sections 6.1 and 6.2, such  compliance  determined  with
regard to  calculations  made on a pro forma basis in accordance with GAAP as if
each Person or business that is the subject of a Permitted  Acquisition had been
consolidated  with the Borrowers for those periods  applicable to such covenants
(such calculations to be attached to the certificate); (x) the Borrowers believe
in good faith that they will  continue to comply with such  financial  covenants
for a  period  of one  year  following  the  date  of the  consummation  of such
Permitted  Acquisition and (y) after giving effect to such Permitted Acquisition
and any Borrowings in connection therewith,  the Borrowers believe in good faith
that they will have sufficient  availability under the Commitments to meet their
ongoing working capital requirements.

         (c) The consummation of each Permitted  Acquisition  shall be deemed to
be a  representation  and warranty by the  Borrowers  that (except as shall have
been  approved in writing by the Required  Lenders) all  conditions  thereto set
forth in this  Section 5.8 have been  satisfied,  that the same is  permitted in
accordance with the terms of this Agreement,  and that the matters  certified to
by  Financial  Officer  of  each  Borrower  in the  certificate  referred  to in
subsection (b) above are, to the best of such individual's  knowledge,  true and
correct in all material respects as of the date such certificate is given, which
representation  and warranty shall be deemed to be a representation and warranty
as  of  the  date  thereof  for  all  purposes  hereunder,   including,  without
limitation, for purposes of Sections 3.3 and 8.1.



                                      -36-

<PAGE>



         5.9. Creation or Acquisition of Subsidiaries. Subject to the provisions
of Section 7.5, each Borrower may from time to time create or acquire new Wholly
Owned Subsidiaries in connection with Permitted  Acquisitions or otherwise,  and
the Wholly Owned  Subsidiaries of each Borrower may create or acquire new Wholly
Owned  Subsidiaries;  provided,  that concurrently with (and in any event within
ten  (10)  Business  Days   thereafter)  the  creation  or  direct  or  indirect
acquisition by a Borrower  thereof,  each such new  Subsidiary  will execute and
deliver to the Agent a joinder to the  Subsidiary  Guaranty,  pursuant  to which
such new Subsidiary shall become a party thereto and shall guarantee the payment
in full of the  Obligations  of the Borrower  under this Agreement and the other
Credit Documents.

         5.10.  Further  Assurances.  Each of the Borrowers will, and will cause
each of its Subsidiaries to, make, execute, endorse, acknowledge and deliver any
amendments,  modifications or supplements hereto and restatements hereof and any
other  agreements,  instruments  or  documents,  and take any and all such other
actions,  as may from time to time be  reasonably  requested by the Agent or the
Required  Lenders to effect,  confirm or further  assure or protect and preserve
the  interests,  rights and  remedies  of the Agent and the  Lenders  under this
Agreement and the other Credit Documents.


                                   ARTICLE VI

                               FINANCIAL COVENANTS

         The Borrowers,  jointly and severally,  covenant and agree that,  until
the  termination of the Commitments and the payment in full of all principal and
interest with respect to the Loans  together with all other amounts then due and
owing hereunder:

         6.1.  Leverage Ratio.  The Borrowers will not permit the Total Leverage
Ratio at any time of determination to be greater than 2.00:1.00.

         6.2.  Current Ratio.  The Borrower will not permit the Current Ratio at
any time of determination to be less than 1.50:1.00.


                                   ARTICLE VII

                               NEGATIVE COVENANTS

         Each of the Borrowers jointly and severally  covenants and agrees that,
until  the  termination  of the  Commitments  and  the  payment  in  full of all
principal and interest with respect to the Loans together with all other amounts
then due and owing hereunder:

         7.1.  Merger;  Consolidation.  No Borrower will, and each Borrower will
cause its Subsidiaries not to, liquidate, wind up or dissolve, or enter into any
consolidation, merger or other combination, or agree to do any of the foregoing;
provided, however, that:

                     (i) any  Borrower  may merge or  consolidate  with  another
         Person so long as (x) such Borrower is the surviving entity, (y) unless
         such other Person is a Wholly  Owned  Subsidiary  immediately  prior to
         giving effect thereto,  such merger or consolidation shall constitute a
         Permitted Acquisition and the applicable conditions and requirements of


                                      -37-

<PAGE>



         Sections  5.8 and 5.9 shall be  satisfied,  and (z)  immediately  after
         giving effect thereto, no Default or Event of Default would exist; and

                    (ii) any Subsidiary  may merge or  consolidate  with another
         Person so long as (x) the surviving entity is a Borrower Affiliate, (y)
         unless such other Person is a Wholly Owned Subsidiary immediately prior
         to giving effect thereto, such merger or consolidation shall constitute
         a Permitted  Acquisition and the applicable conditions and requirements
         of Sections 5.8 and 5.9 shall be satisfied,  and (z) immediately  after
         giving effect thereto, no Default or Event of Default would exist.

         7.2.  Indebtedness.  No Borrower will, and each Borrower will cause its
Subsidiaries not to, create,  incur,  assume or suffer to exist any Indebtedness
other than:

                   (i)   Indebtedness  incurred under this Agreement,  the Notes
         and the Subsidiary Guaranty;

                   (ii) Indebtedness  existing on the Closing Date and described
         in Section 7.2 and renewals, extensions, modifications and replacements
         thereof which do not increase the principal amount thereof;

                  (iii) accrued expenses (including  salaries,  accrued vacation
         and other  compensation),  current trade or other accounts  payable and
         other current  liabilities  arising in the ordinary  course of business
         and not incurred through the borrowing of money, provided that the same
         shall be paid when due except to the  extent  being  contested  in good
         faith and by appropriate proceedings;

                   (iv) loans and  advances  by any  Borrower  Affiliate  to any
         other  Borrower  Affiliate;  provided  that any such loan or advance is
         subordinated  in right and time of  payment to the  Obligations  and is
         evidenced by a promissory  note, in form and substance  satisfactory to
         the Agent;

                    (v) purchase money  Indebtedness  of the Borrowers and their
         Subsidiaries  incurred  solely to finance the payment of all or part of
         the  purchase  price of any  equipment,  real  property  or other fixed
         assets  acquired  in  the  ordinary   course  of  business,   including
         Indebtedness in respect of capital lease obligations, and any renewals,
         refinancings or replacements thereof (subject to the limitations on the
         principal  amount  thereof  set  forth  in this  clause  (vii)),  which
         Indebtedness shall not exceed $5,000,000 in aggregate  principal amount
         outstanding at any time; and

                   (vi) other unsecured Indebtedness not exceeding $5,000,000 in
         aggregate principal amount outstanding at any time.

         7.3.  Liens.  No  Borrower  will,  and each  Borrower  will  cause  its
Subsidiaries  not to, directly or indirectly,  make,  create,  incur,  assume or
suffer to exist,  any Lien upon or with  respect to any part of its  property or
assets,  whether now owned or hereafter  acquired,  or file or permit the filing
of, or permit to remain in effect,  any  financing  statement  or other  similar
notice of any Lien with respect to any such property,  asset,  income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice  statute,  or agree to do any of the foregoing,  other than the following
(collectively, "Permitted Liens"):



                                      -38-

<PAGE>



                    (i) Liens in  existence on the Closing Date and set forth on
         Schedule 7.3 securing Indebtedness  permitted by clause (ii) of Section
         7.2;  provided  that no such  Lien is  amended  after  the date of this
         Agreement  to cover any  additional  property  or to secure  additional
         Indebtedness;

                   (ii)  Liens  imposed  by law,  such  as  Liens  of  carriers,
         warehousemen,  mechanics,  materialmen and landlords, and other similar
         Liens  incurred  in the  ordinary  course  of  business  for  sums  not
         constituting  borrowed  money that are not overdue for a period of more
         than  thirty  (30) days or that are being  contested  in good  faith by
         appropriate  proceedings  and for  which  adequate  reserves  have been
         established in accordance with GAAP (if so required);

                  (iii)  Liens  (other  than  any Lien  imposed  by  ERISA,  the
         creation or  incurrence  of which  would  result in an Event of Default
         under Section  8.1(i))  incurred in the ordinary  course of business in
         connection with worker's compensation,  unemployment insurance or other
         forms  of  governmental   insurance  or  benefits,  or  to  secure  the
         performance of letters of credit, bids, tenders, statutory obligations,
         surety and appeal bonds, leases, government contracts and other similar
         obligations (other than obligations for borrowed money) entered into in
         the ordinary course of business;

                   (iv)  Liens  for  taxes,  assessments  or other  governmental
         charges or  statutory  obligations  that are not  delinquent  or remain
         payable  without any penalty or that are being  contested in good faith
         by appropriate  proceedings  and for which adequate  reserves have been
         established in accordance with GAAP (if so required);

                    (v) Liens securing the purchase money Indebtedness permitted
         under clause (v) of Section 7.2;  provided that any such Lien (a) shall
         attach to such property concurrently with or within ten (10) days after
         the  acquisition  thereof  by such  Borrower  Affiliate,  (b) shall not
         exceed the lesser of (y) the fair market value of such  property or (z)
         the cost thereof to such Borrower  Affiliate and (c) shall not encumber
         any other property of any Borrower Affiliate;

                   (vi) any  attachment  or judgment  Lien not  constituting  an
         Event of Default under Section  8.1(h) that is being  contested in good
         faith by appropriate  proceedings and for which adequate  reserves have
         been established in accordance with GAAP (if so required);

                  (vii) Liens arising from the filing, for notice purposes only,
         of financing statements in respect of true leases;

                 (viii)  with  respect  to any  real  property  occupied  by the
         Borrowers or any of their Subsidiaries,  all easements,  rights of way,
         licenses  and  similar  encumbrances  on title  that do not  materially
         impair the use of such property for its intended purposes; and

                   (ix) other Liens  securing  obligations  of the Borrowers and
         their  Subsidiaries  not  exceeding   $5,000,000  in  aggregate  amount
         outstanding at any time.

         7.4.  Disposition  of Assets.  No Borrower will, and each Borrower will
cause  its  Subsidiaries  not to,  sell,  assign,  lease,  convey,  transfer  or
otherwise  dispose of  (whether in one or a series of  transactions)  all or any
portion of its assets,  business or properties  (including,  without limitation,
any Capital Stock of any  Subsidiary),  or enter into any  arrangement  with any
Person providing for the lease by any Borrower  Affiliate as lessee of any asset
that has been sold or


                                      -39-

<PAGE>



transferred by such Borrower Affiliate to such Person, or agree to do any of the
foregoing, except for:

                    (i)   sales of inventory in the ordinary course of business;

                   (ii) the sale or exchange of used or  obsolete  equipment  to
         the extent (y) the proceeds of such sale are applied  towards,  or such
         equipment is exchanged for, replacement equipment or (z) such equipment
         is no longer  necessary for the operations of the  applicable  Borrower
         Affiliate in the ordinary course of business;

                  (iii)  the  sale,  lease or other  disposition  of assets by a
         Borrower  Affiliate to another Borrower Affiliate if, immediately after
         giving effect thereto, no Default or Event of Default would exist; and

                   (iv) the sale or  disposition  of assets outside the ordinary
         course of business for fair value and for cash,  provided  that (x) the
         Net Cash Proceeds  from such sales or  dispositions  are  reinvested in
         similar assets within 180 days of such sale or  disposition  or, if not
         so reinvested, such Net Cash Proceeds are delivered to the Agent within
         such 180 day period for application in prepayment of the Loans,  (y) in
         no event shall any Borrower  Affiliate sell or otherwise dispose of any
         of  the  Capital  Stock  of  any  Subsidiary  of a  Borrower,  and  (z)
         immediately after giving effect thereto, no Default or Event of Default
         would exist.

         7.5.  Investments.  No Borrower  will, and each Borrower will cause its
Subsidiaries  not to,  directly  or  indirectly,  purchase,  own,  invest  in or
otherwise  acquire  any  Capital  Stock,   evidence  of  indebtedness  or  other
obligation or security or any interest  whatsoever in any other Person,  or make
or  permit to exist any  loans,  advances  or  extensions  of credit  to, or any
investment in cash or by delivery of property in, any other Person,  or purchase
or otherwise  acquire (whether in one or a series of related  transactions)  any
portion of the  assets,  business or  properties  of another  Person  (including
pursuant to an  Acquisition),  or create or acquire any Subsidiary,  or become a
partner or joint  venturer in any  partnership  or joint venture  (collectively,
"Investments"),  or  make  a  commitment  or  otherwise  agree  to do any of the
foregoing, other than:

                    (i)    Cash Equivalents;

                   (ii) Investments  consisting of purchases and acquisitions of
         inventory,  supplies,  materials and equipment or licenses or leases of
         intellectual  property and other  assets,  in each case in the ordinary
         course of business,

                  (iii)   Investments   consisting  of  loans  and  advances  to
         employees for reasonable  travel,  relocation and business  expenses in
         the  ordinary  course of  business,  loans and  advances  to  employees
         secured by shares of capital  stock of  Holdings or options to purchase
         capital  stock of Holdings  and not  exceeding  $500,000  in  aggregate
         amount  outstanding  at any  time,  extensions  of trade  credit in the
         ordinary  course of  business,  and  prepaid  expenses  incurred in the
         ordinary course of business;

                  (iv)    without   duplication,   Investments   consisting   of
         intercompany Indebtedness permitted under clause (iv) of Section 7.2;

                  (v) Investments  existing on the Closing Date and described in
         Schedule 7.5;



                                      -40-

<PAGE>



                  (vi)  Investments  consisting  of loans  and  advances  in the
         ordinary course of business to Partitions secured by the assets of such
         Partitions;

                  (vii)   Investments   consisting  of  the  making  of  capital
         contributions  or  the  purchase  of  Capital  Stock  by  any  Borrower
         Affiliate in any other Wholly Owned  Subsidiary that is (or immediately
         after  giving  effect  to such  Investment  will  be) a  Borrower  or a
         Subsidiary  Guarantor,  provided that such  Borrower  complies with the
         provisions of Section 5.10;

                 (viii) Investments (A) not exceeding $5,000,000 in an aggregate
         amount outstanding at any time in equity or debt securities and (B) not
         exceeding $20,000,000 in an aggregate amount outstanding at any time in
         non-equity  securities rated BBB+ or better by Standard & Poor's Rating
         Services  or Baa1 or better by  Moody's  Investors  Service,  Inc.  and
         equity securities in any Person with a debt rating of BBB+ or better by
         Standard & Poor's Rating Service or Baa1 or better by Moody's  Investor
         Service, Inc.;

                   (ix)  Investments  consisting  of the  purchase of a minority
         interest  in  the  Capital  Stock  of  another  Person  purchased  with
         consideration consisting solely of Capital Stock of Holdings; and

                    (x)    Permitted Acquisitions.

         7.6. Restricted Payments.  (a) No Borrower will, and each Borrower will
cause its  Subsidiaries  not to,  directly  or  indirectly,  declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect  of any of its  Capital  Stock or any  warrants,  rights or  options  to
acquire its Capital Stock, or purchase,  redeem, retire or otherwise acquire for
value any  shares of its  Capital  Stock or any  warrants,  rights or options to
acquire its Capital Stock,  or set aside funds for any of the foregoing,  except
that:

                  (i) any  Borrower  may declare and make  dividend  payments or
         other distributions payable solely in its common stock; and

                   (ii) each Wholly Owned Subsidiary of any Borrower may declare
         and make dividend  payments or other  distributions to such Borrower or
         another  Wholly Owned  Subsidiary of such  Borrower,  to the extent not
         prohibited under applicable Requirements of Law.

         (b) Each of the Borrowers will not, and will not permit or cause any of
its  Subsidiaries  to, make (or give any notice in respect of) any  voluntary or
optional payment or prepayment of principal on any  Indebtedness  subordinate to
the  Obligations,  or  directly or  indirectly  make any  redemption  (including
pursuant to any change of control  provision),  retirement,  defeasance or other
acquisition for value of any  Indebtedness  subordinate to the  Obligations,  or
make any deposit or otherwise set aside funds for any of the foregoing purposes.

         7.7. Transactions with Affiliates.  No Borrower will, and each Borrower
will  cause its  Subsidiaries  not to,  enter into any  transaction  (including,
without  limitation,  any purchase,  sale,  lease or exchange of property or the
rendering  of any  service)  with any officer,  director,  stockholder  or other
Affiliate of such Borrower or any  Subsidiary,  except in the ordinary course of
its business and upon fair and reasonable terms that are no less favorable to it
than would obtain in a comparable  arm's length  transaction with a Person other
than an Affiliate of such Borrower or such Subsidiary.



                                      -41-

<PAGE>



         7.8. Lines of Business.  No Borrower will, and each Borrower will cause
its  subsidiaries  not to,  engage in any  business  other  than the  businesses
engaged in by it on the date hereof and  businesses  and  activities  reasonably
related thereto.

         7.9. Certain Amendments. No Borrower will, and each Borrower will cause
its Subsidiaries not to amend, modify or change any provision of its articles or
certificate of incorporation  or bylaws,  or the terms of any class or series of
its Capital Stock,  other than in a manner that could not reasonably be expected
to materially adversely affect the Lenders.

         7.10.  Limitation on Certain  Restrictions.  No Borrower will, and each
Borrower will cause its Subsidiaries  not to, directly or indirectly,  create or
otherwise  cause or suffer  to exist or  become  effective  any  restriction  or
encumbrance on (i) the ability of such Borrower and its  Subsidiaries to perform
and comply with their respective  obligations under the Credit Documents or (ii)
the  ability  of  any  Subsidiary  to  make  any  dividend   payments  or  other
distributions in respect of its Capital Stock, to repay Indebtedness owed to any
Borrower or any other  Subsidiary,  to make loans or advances to any Borrower or
any other  Subsidiary,  or to transfer  any of its assets or  properties  to any
Borrower or any other  Subsidiary,  in each case other than such restrictions or
encumbrances  existing under or by reason of the Credit  Documents or applicable
Requirements of Law.

         7.11.  Fiscal Year. No Borrower  will, and each Borrower will cause its
Subsidiaries  not to,  change the ending date of its fiscal year to a date other
than December 31.

         7.12.  Accounting  Changes.  No Borrower  will,  and each Borrower will
cause  its  Subsidiaries  not to,  make or  permit  any  material  change in its
accounting policies or reporting  practices,  except as may be required by GAAP,
except as may have been  indicated  in a separate  letter  dated the date hereof
from the Borrowers to the Agent.


                                  ARTICLE VIII

                                EVENTS OF DEFAULT

         8.1.  Events  of  Default.  The  occurrence  of any  one or more of the
following events shall constitute an "Event of Default":

         (a) Any Borrower  shall fail to pay any principal of or interest on any
Loan, any fee or any other Obligation when due;

         (b) Any  Borrower  shall fail to  observe,  perform or comply  with any
condition,  covenant or agreement  contained in any of Sections 2.14,  5.1, 5.2,
5.3(i), 5.8, or 5.9 or in Article VI or Article VII;

         (c) Any  Borrower  Affiliate  shall fail to observe,  perform or comply
with any condition,  covenant or agreement contained in this Agreement or any of
the Credit  Documents  other than those  enumerated in  subsections  (a) and (b)
above,  and such  failure  (i) is  deemed by the  terms of the  relevant  Credit
Document to constitute an Event of Default or (ii) shall continue unremedied for
any grace period specifically  applicable thereto or, if no such grace period is
applicable,  for a period of thirty  (30) days after the earlier of (y) the date
on which an officer of any Borrower acquires  knowledge thereof and (z) the date
on which written  notice  thereof is delivered by the Agent or any Lender to any
Borrower;


                                      -42-

<PAGE>




         (d) Any  representation or warranty made or deemed made by or on behalf
of any Borrower  Affiliate in this Agreement,  any of the other Credit Documents
or in any  certificate,  instrument,  report  or  other  document  furnished  in
connection  herewith  or  therewith  or  in  connection  with  the  transactions
contemplated  hereby or thereby  shall prove to have been false or misleading in
any material respect as of the time made, deemed made or furnished;

         (e) Any Borrower  Affiliate  shall (i) fail to pay when due (whether by
scheduled  maturity,  acceleration  or otherwise  and after giving effect to any
applicable grace period) any principal of or interest on any Indebtedness (other
than the Indebtedness  incurred  pursuant to this Agreement) having an aggregate
principal  amount of at least  $5,000,000  or (ii) fail to  observe,  perform or
comply with any condition,  covenant or agreement  contained in any agreement or
instrument  evidencing or relating to any such Indebtedness,  or any other event
shall  occur or  condition  exist in  respect  thereof,  and the  effect of such
failure, event or condition is to cause, or permit the holder or holders of such
Indebtedness  (or a trustee or agent on its or their  behalf) to cause (with the
giving of notice,  lapse of time, or both),  such Indebtedness to become due, or
to be prepaid, redeemed, purchased or defeased, prior to its stated maturity;

         (f) Any  Borrower  Affiliate  shall (i) file a  voluntary  petition  or
commence a  voluntary  case  seeking  liquidation,  winding-up,  reorganization,
dissolution,  arrangement,  readjustment  of debts or any other relief under the
Bankruptcy Code or under any other applicable bankruptcy,  insolvency or similar
law now or hereafter in effect,  (ii) consent to the  institution of, or fail to
controvert in a timely and appropriate  manner, any petition or case of the type
described in subsection (g) below, (iii) apply for or consent to the appointment
of or taking  possession by a custodian,  trustee,  receiver or similar official
for or of itself or all or a substantial part of its properties or assets,  (iv)
fail generally, or admit in writing its inability, to pay its debts generally as
they become due, (v) make a general  assignment  for the benefit of creditors or
(vi) take any corporate action to authorize or approve any of the foregoing;

         (g) Any  involuntary  petition  or case  shall be  filed  or  commenced
against any Borrower Affiliate seeking liquidation, winding-up,  reorganization,
dissolution, arrangement, readjustment of debts, the appointment of a custodian,
trustee, receiver or similar official for it or all or a substantial part of its
properties  or any other  relief  under the  Bankruptcy  Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall  continue  undismissed  and unstayed for a period of
sixty (60) days;  or an order,  judgment or decree  approving or ordering any of
the foregoing shall be entered in any such proceeding;

         (h) Any one or more money  judgments,  writs or warrants of attachment,
executions  or similar  processes  involving an aggregate  amount  (exclusive of
amounts  fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has  acknowledged  its  liability  in  writing) in excess of
$1,000,000  shall be entered or filed  against any Borrower  Affiliate or any of
their  respective  properties  and the same  shall not be  dismissed,  stayed or
discharged for a period of thirty (30) days or in any event later than five days
prior to the date of any proposed sale thereunder;

         (i) Any ERISA Event  shall  occur or exist with  respect to any Plan or
Multiemployer  Plan and,  as a result  thereof,  together  with all other  ERISA
Events  then  existing,  the  Borrowers  and  their  ERISA  Affiliates  would be
reasonably  likely to incur liability to any one or more Plans or  Multiemployer
Plans or to the PBGC (or to any combination thereof) in excess of $1,000,000;

         (j) Any one or more licenses, permits, accreditations or authorizations
of any Borrower Affiliate shall be suspended, limited or terminated or shall not
be renewed, or any other action shall


                                      -43-

<PAGE>



be taken,  by any  Governmental  Authority in response to any alleged failure by
any Borrower  Affiliate to be in compliance with applicable  Requirements of Law
(including,  without  limitation,  applicable laws and  regulations  relating to
telecommunications), and such action, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect;

         (k) Any one or more  Environmental  Claims  shall  have  been  asserted
against any Borrower  Affiliate  (or a reasonable  basis shall exist  therefor);
such  Borrower  Affiliate  would be  reasonably  likely to incur  liability as a
result thereof;  and such liability would be reasonably likely,  individually or
in the aggregate, to have a Material Adverse Effect;

         (l) Any  agreement  or contract to which any  Borrower  Affiliate  is a
party shall be  terminated or shall,  for any other  reason,  fail to be in full
force and effect and enforceable in accordance with its terms, and such event or
condition,  together with all other such events or conditions,  if any, would be
reasonably likely to have a Material Adverse Effect;

         (m) AT&T shall have  terminated its services under any contract  tariff
with any Borrower and such  Borrower  shall not have replaced such services with
other long distance providers within 30 days thereafter.

         (n) Dan Borislow shall have ceased to be the chief executive officer of
the  Borrower or to continue  to perform his current  duties as chief  executive
officer,  and the  Borrower  shall have failed to hire or appoint a  replacement
reasonably satisfactory to the Required Lenders within 120 days thereafter; or

         (o) Any of the  following  shall  occur:  (i) any  Person  or  group of
Persons  acting in  concert  as a  partnership  or other  group,  other than Dan
Borislow,  shall,  as a result  of a  tender  or  exchange  offer,  open  market
purchases,  privately negotiated purchases or otherwise,  have become, after the
date hereof,  the "beneficial owner" (within the meaning of such term under Rule
13d-3 under the Exchange Act) of securities of any Borrower  representing 20% or
more of the combined  voting power of the then  outstanding  securities  of such
Borrower ordinarily (and apart from rights accruing under special circumstances)
having  the right to vote in the  election  of  directors;  or (ii) the Board of
Directors  of  any  Borrower  shall  cease  to  consist  of a  majority  of  the
individuals  who constituted the Board of Directors as of the date hereof or who
shall have become a member  thereof  subsequent  to the date hereof after having
been  nominated,  or  otherwise  approved in writing,  by at least a majority of
individuals  who  constituted  the Board of Directors of such Borrower as of the
date hereof (or their replacements approved as herein required).

         8.2. Remedies: Termination of Commitments,  Acceleration, etc. Upon and
at any time after the  occurrence  and during  the  continuance  of any Event of
Default,  the Agent  shall at the  direction,  or may with the  consent,  of the
Required  Lenders,  take  any or all of the  following  actions  at the  same or
different times:

         (a) Declare the Commitments to be terminated,  whereupon the same shall
terminate (provided that, upon the occurrence of an Event of Default pursuant to
Section  8.1(f) or  Section  8.1(g),  the  Commitments  shall  automatically  be
terminated);

         (b) Declare all or any part of the outstanding  principal amount of the
Loans to be  immediately  due and payable,  whereupon  the  principal  amount so
declared to be immediately due and payable,  together with all interest  accrued
thereon and all other amounts  payable under this  Agreement,  the Notes and the
other Credit Documents, shall become immediately due and payable


                                      -44-

<PAGE>



without presentment,  demand,  protest,  notice of intent to accelerate or other
notice or legal  process  of any kind,  all of which are  hereby  knowingly  and
expressly waived by the Borrower (provided that, upon the occurrence of an Event
of Default pursuant to Section 8.1(f) or Section 8.1(g),  all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically  become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind,  all of which are  hereby  knowingly  and  expressly  waived by the
Borrowers); and

         (c)  Exercise  all  rights  and  remedies  available  to it under  this
Agreement, the other Credit Documents and applicable law.

         8.3.  Remedies:  Set-Off.  In addition to all other rights and remedies
available under the Credit Documents or applicable law or otherwise, upon and at
any time  after  the  occurrence  and  during  the  continuance  of any Event of
Default, each Lender may, and each is hereby authorized by the Borrowers, at any
such time and from time to time, to the fullest  extent  permitted by applicable
law, without  presentment,  demand,  protest or other notice of any kind, all of
which are hereby knowingly and expressly waived by the Borrowers, to set off and
to apply any and all deposits (general or special,  time or demand,  provisional
or final) and any other property at any time held  (including at any branches or
agencies,  wherever  located),  and any other indebtedness at any time owing, by
such Lender to or for the credit or the account of any  Borrower  against any or
all of the Obligations to such Lender now or hereafter existing,  whether or not
such  Obligations may be contingent or unmatured,  each Borrower hereby granting
to each Lender a continuing security interest in and Lien upon all such deposits
and other property as security for such Obligations. Each Lender agrees promptly
to notify the  Borrowers  and the Agent after any such set-off and  application;
provided,  however,  that the failure to give such  notice  shall not affect the
validity of such set-off and application.


                                   ARTICLE IX

                                    THE AGENT

         9.1.   Appointment.   Each  Lender  hereby  irrevocably   appoints  and
authorizes  First  Union to act as Agent  hereunder  and under the other  Credit
Documents  and to take such actions as agent on its behalf  hereunder  and under
the other  Credit  Documents,  and to exercise  such powers and to perform  such
duties,  as are  specifically  delegated  to the  Agent by the  terms  hereof or
thereof, together with such other powers and duties as are reasonably incidental
thereto.

         9.2.   Nature  of   Duties.   The  Agent   shall   have  no  duties  or
responsibilities  other than those expressly set forth in this Agreement and the
other Credit Documents. The Agent shall not have, by reason of this Agreement or
any other Credit  Document,  a fiduciary  relationship in respect of any Lender;
and nothing in this Agreement or any other Credit Document,  express or implied,
is  intended  to or shall be so  construed  as to  impose  upon  the  Agent  any
obligations  or  liabilities  in respect of this  Agreement  or any other Credit
Document except as expressly set forth herein or therein.  The Agent may execute
any of its duties  under  this  Agreement  or any other  Credit  Document  by or
through  agents  or  attorneys-in-fact  and  shall  not be  responsible  for the
negligence or misconduct of any agents or attorneys-in-fact that it selects with
reasonable  care.  The Agent shall be entitled  to consult  with legal  counsel,
independent  public accountants and other experts selected by it with respect to
all matters  pertaining to this Agreement and the other Credit Documents and its
duties  hereunder and thereunder and shall not be liable for any action taken or
omitted to be taken in good faith by it in


                                      -45-

<PAGE>



accordance with the advice of such counsel,  accountants or experts. The Lenders
hereby  acknowledge  that the  Agent  shall  not be  under  any duty to take any
discretionary  action  permitted to be taken by it pursuant to the provisions of
this  Agreement  or any other  Credit  Document  unless it shall be requested in
writing to do so by the Required  Lenders (or, where a higher  percentage of the
Lenders is expressly required hereunder, such Lenders).

         9.3. Exculpatory Provisions. Neither the Agent nor any of its officers,
directors,  employees,  agents,  attorneys-in-fact  or  Affiliates  shall be (i)
liable for any action taken or omitted to be taken by it or such Person under or
in  connection  with the Credit  Documents,  except for its or such Person's own
gross  negligence or willful  misconduct,  (ii) responsible in any manner to any
Lender for any recitals, statements, information,  representations or warranties
herein  or in  any  other  Credit  Document  or  in  any  document,  instrument,
certificate,  report  or other  writing  delivered  in  connection  herewith  or
therewith,   for   the   execution,   effectiveness,    genuineness,   validity,
enforceability or sufficiency of this Agreement or any other Credit Document, or
for the financial  condition of any Borrower  Affiliate or any other Person,  or
(iii) required to ascertain or make any inquiry  concerning  the  performance or
observance of any of the terms,  provisions  or conditions of this  Agreement or
any other Credit Document or the existence or possible  existence of any Default
or Event of  Default,  or to  inspect  the  properties,  books or records of the
Borrowers or any of their Subsidiaries.

         9.4.  Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully  protected  in relying,  upon any notice,  statement,  consent or other
communication  (including,   without  limitation,   any  thereof  by  telephone,
telecopy,  telex,  telegram or cable) believed by it in good faith to be genuine
and  correct  and to have  been  signed,  sent or made by the  proper  Person or
Persons.  The Agent may deem and treat each Lender as the owner of its  interest
hereunder  for all  purposes  hereof  unless  and until a written  notice of the
assignment,  negotiation or transfer  thereof shall have been given to the Agent
in accordance with the provisions of this Agreement. The Agent shall be entitled
to refrain  from taking or omitting to take any action in  connection  with this
Agreement or any other Credit  Document (i) if such action or omission would, in
the reasonable opinion of the Agent, violate any applicable law or any provision
of this Agreement or any other Credit Document or (ii) unless and until it shall
have received such advice or  concurrence  of the Required  Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder,  such Lenders)
as it  deems  appropriate  or it  shall  first  have  been  indemnified  to  its
satisfaction  by the Lenders  against any and all liability  and expense  (other
than  liability  and expense  arising from its own gross  negligence  or willful
misconduct)  that may be incurred by it by reason of taking,  continuing to take
or omitting to take any such action.  Without limiting the foregoing,  no Lender
shall have any right of action  whatsoever  against the Agent as a result of the
Agent's  acting or  refraining  from acting  hereunder or under any other Credit
Document in accordance with the  instructions of the Required Lenders (or, where
a higher  percentage  of the  Lenders  is  expressly  required  hereunder,  such
Lenders),  and such instructions and any action taken or failure to act pursuant
thereto  shall be binding  upon all of the  Lenders  (including  all  subsequent
Lenders).

         9.5.  Non-Reliance  on Agent and Other Lenders.  Each Lender  expressly
acknowledges  that  neither  the  Agent  nor  any  of its  officers,  directors,
employees,  agents,  attorneys-in-fact or Affiliates has made any representation
or warranty  to it and that no act by the Agent or any such  Person  hereinafter
taken,  including  any  review  of  the  affairs  of  the  Borrowers  and  their
Subsidiaries,  shall be deemed to constitute any  representation  or warranty by
the Agent to any Lender.  Each Lender  represents  to the Agent that (i) it has,
independently  and without reliance upon the Agent or any other Lender and based
on such  documents and  information as it has deemed  appropriate,  made its own
appraisal  of  and  investigation  into  the  business,  prospects,  operations,
properties, financial


                                      -46-

<PAGE>



and other condition and  creditworthiness  of the Borrower and its  Subsidiaries
and made its own decision to enter into this  Agreement and extend credit to the
Borrower  hereunder,  and (ii) it will,  independently and without reliance upon
the Agent or any other Lender and based on such documents and  information as it
shall deem  appropriate at the time,  continue to make its own credit  analysis,
appraisals and decisions in taking or not taking action  hereunder and under the
other Credit  Documents and to make such  investigation as it deems necessary to
inform itself as to the business, prospects,  operations,  properties, financial
and  other   condition   and   creditworthiness   of  the  Borrowers  and  their
Subsidiaries.  Except as  expressly  provided  in this  Agreement  and the other
Credit  Documents,  the  Agent  shall  have no duty  or  responsibility,  either
initially  or on a  continuing  basis,  to provide any Lender with any credit or
other information concerning the business,  prospects,  operations,  properties,
financial or other condition or  creditworthiness  of any Borrower  Affiliate or
any other Person that may at any time come into the  possession  of the Agent or
any  of  its  officers,  directors,  employees,  agents,   attorneys-in-fact  or
Affiliates.

         9.6. Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the  occurrence of any Default or Event of Default unless the Agent
shall have received written notice from a Borrower or a Lender referring to this
Agreement,  describing  such  Default or Event of Default and stating  that such
notice is a "notice of  default."  In the event that the Agent  receives  such a
notice,  the Agent will give notice thereof to the Lenders as soon as reasonably
practicable;  provided, however, that if any such notice has also been furnished
to the Lenders,  the Agent shall have no  obligation  to notify the Lenders with
respect  thereto.  The Agent shall  (subject to Sections 9.4 and 10.6) take such
action with respect to such Default or Event of Default as shall  reasonably  be
directed by the  Required  Lenders;  provided  that,  unless and until the Agent
shall have received such  directions,  the Agent may (but shall not be obligated
to) take such action,  or refrain from taking such action,  with respect to such
Default or Event of Default as it shall deem  advisable in the best interests of
the Lenders.

         9.7.  Indemnification.  To the extent the Agent is not reimbursed by or
on  behalf  of the  Borrowers,  and  without  limiting  the  joint  and  several
obligations  of the  Borrowers to do so, the Lenders  agree (i) to indemnify the
Agent and its officers,  directors,  employees,  agents,  attorneys-in-fact  and
Affiliates,  ratably in proportion to their  respective  percentages  as used in
determining  the  Required  Lenders  as of the date of  determination,  from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits,  costs,  expenses  (including,  without limitation,
attorneys' fees and expenses) or disbursements of any kind or nature  whatsoever
that may at any time (including,  without limitation,  at any time following the
repayment  in full of the  Loans  and the  termination  of the  Commitments)  be
imposed on, incurred by or asserted  against the Agent in any way relating to or
arising out of this  Agreement  or any other  Credit  Document or any  documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection  with
any of the  foregoing,  and (ii) to reimburse the Agent upon demand,  ratably in
proportion to their  respective  percentages as used in determining the Required
Lenders as of the date of determination,  for any expenses incurred by the Agent
in  connection  with  the   preparation,   negotiation,   execution,   delivery,
administration,  amendment, modification, waiver or enforcement (whether through
negotiations,  legal proceedings or otherwise) of, or legal advice in respect of
rights or  responsibilities  under,  this  Agreement  or any of the other Credit
Documents  (including,  without  limitation,   reasonable  attorneys'  fees  and
expenses and compensation of agents and employees paid for services  rendered on
behalf of the Lenders);  provided,  however,  that no Lender shall be liable for
any  portion  of such  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits,  costs,  expenses  or  disbursements  to the extent
resulting  from the gross  negligence  or willful  misconduct of the party to be
indemnified.



                                      -47-

<PAGE>



         9.8.  The  Agent  in  its  Individual  Capacity.  With  respect  to its
Commitment,  the Loans made by it and the Note or Notes  issued to it, the Agent
in its  individual  capacity  and not as Agent  shall  have the same  rights and
powers under the Credit  Documents as any other Lender and may exercise the same
as though it were not performing  the agency duties  specified  herein;  and the
terms "Lenders,"  "Required  Lenders,"  "holders of Notes" and any similar terms
shall, unless the context clearly otherwise indicates,  include the Agent in its
individual capacity. The Agent and its Affiliates may accept deposits from, lend
money to,  make  investments  in, and  generally  engage in any kind of banking,
trust,  financial  advisory  or other  business  with the  Borrower,  any of its
Subsidiaries  or any of their  respective  Affiliates  as if the Agent  were not
performing  the agency duties  specified  herein,  and may accept fees and other
consideration  from any of them for services in connection  with this  Agreement
and otherwise without having to account for the same to the Lenders.

         9.9.  Successor  Agent.  The Agent may resign at any time by giving ten
(10) days' prior written notice to the Borrowers and the Lenders.  Upon any such
notice of resignation, the Required Lenders will, with the prior written consent
of the Borrowers  (which consent shall not be  unreasonably  withheld),  appoint
from among the Lenders a successor to the Agent  (provided  that the  Borrowers'
consent  shall not be required in the event a Default or Event of Default  shall
have occurred and be  continuing).  In  connection  with such  appointment,  the
Lenders will consider the  recommendation  of the Borrowers.  If no successor to
the Agent shall have been so appointed  by the  Required  Lenders and shall have
accepted such  appointment  within such ten-day period,  then the retiring Agent
may,  on behalf of the  Lenders  and after  consulting  with the Lenders and the
Borrowers, appoint a successor Agent from among the Lenders. Upon the acceptance
of any  appointment as Agent by a successor  Agent,  such successor  Agent shall
thereupon succeed to and become vested with all the rights,  powers,  privileges
and duties of the retiring  Agent,  and the retiring  Agent shall be  discharged
from its duties and obligations  hereunder and under the other Credit Documents.
After any retiring Agent's  resignation as Agent, the provisions of this Article
shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was Agent.  If no successor to the Agent has  accepted  appointment  as
Agent by the  thirtieth  (30th)  day  following  a  retiring  Agent's  notice of
resignation,  the retiring  Agent's  resignation  shall  nevertheless  thereupon
become effective,  and the Lenders shall thereafter perform all of the duties of
the Agent  hereunder  and under the other Credit  Documents  until such time, if
any,  as the  Required  Lenders  appoint  a  successor  Agent  as  provided  for
hereinabove.


                                    ARTICLE X

                                  MISCELLANEOUS

         10.1. Fees and Expenses. Each of the Borrowers,  jointly and severally,
agrees (i) whether or not the transactions  contemplated by this Agreement shall
be  consummated,  to pay upon  demand  all  reasonable  out-of-pocket  costs and
expenses of the Agent (including,  without  limitation,  the reasonable fees and
expenses  of  counsel  to the  Agent) in  connection  with (y) the  Agent's  due
diligence  investigation in connection  with, and the preparation,  negotiation,
execution,  delivery and  syndication  of, this  Agreement  and the other Credit
Documents,  and any  amendment,  modification  or waiver  hereof or  thereof  or
consent with respect hereto or thereto,  and (z) the administration,  monitoring
and review of the Loans (including, without limitation, reasonable out-of-pocket
expenses for travel,  meals,  long-distance  telephone  calls,  wire  transfers,
facsimile  transmissions  and  copying  and with  respect to the  engagement  of
appraisers,  consultants,  auditors or similar Persons by the Agent at any time,
whether  before  or  after  the  Closing,  to  render  opinions  concerning  the
Borrower's  financial  condition,   (ii)  to  pay  upon  demand  all  reasonable
out-of-pocket


                                      -48-

<PAGE>



costs and expenses of the Agent and each Lender (including,  without limitation,
reasonable  attorneys' fees and expenses) in connection with (y) any refinancing
or  restructuring  of the credit  arrangement  provided  under  this  Agreement,
whether  in  the  nature  of a  "work-out,"  in  any  insolvency  or  bankruptcy
proceeding or otherwise and whether or not consummated, and (z) the enforcement,
attempted  enforcement  or  preservation  of any rights or  remedies  under this
Agreement or any of the other Credit Documents,  whether in any action,  suit or
proceeding (including any bankruptcy or insolvency proceeding) or otherwise, and
(iii) to pay and hold the Agent and each  Lender  harmless  from and against all
liability for any intangibles,  documentary,  stamp or other similar taxes, fees
and excises,  if any, including any interest and penalties,  and any finder's or
brokerage fees,  commissions  and expenses (other than any fees,  commissions or
expenses of finders or brokers engaged by the Agent or any Lender),  that may be
payable in connection with the  transactions  contemplated by this Agreement and
the other Credit Documents.

         10.2.  Indemnification.  Each of the  Borrowers  jointly and  severally
agrees, whether or not the transactions  contemplated by this Agreement shall be
consummated,  to indemnify  and hold the Agent and each Lender and each of their
respective  directors,  officers,  employees,  agents and Affiliates  (each,  an
"Indemnified  Person")  harmless  from and against  any and all claims,  losses,
damages,  obligations,  liabilities,  penalties,  costs and expenses (including,
without  limitation,  reasonable  attorneys'  fees and  expenses) of any kind or
nature  whatsoever,  whether direct,  indirect or  consequential  (collectively,
"Indemnified  Costs"),  that  may at any  time be  imposed  on,  incurred  by or
asserted against any such Indemnified  Person as a result of, arising from or in
any way relating to the  preparation,  execution,  performance or enforcement of
this  Agreement or any of the other Credit  Documents,  any of the  transactions
contemplated herein or therein or any transaction  financed or to be financed in
whole  or in part,  directly  or  indirectly,  with the  proceeds  of any  Loans
(including,  without  limitation,  in  connection  with the  actual  or  alleged
generation,  presence, discharge or release of any Hazardous Substances on, into
or from, or the  transportation  of Hazardous  Substances  to or from,  any real
property  at any time  owned or  leased  by any  Borrower  Affiliate,  any other
Environmental  Claims or any violation of or liability  under any  Environmental
Law), or any action, suit or proceeding (including any inquiry or investigation)
by any Person, whether threatened or initiated, related to any of the foregoing,
and in any case  whether or not such  Indemnified  Person is a party to any such
action,  proceeding  or suit or a subject of any such inquiry or  investigation;
provided,  however,  that no  Indemnified  Person  shall  have  the  right to be
indemnified hereunder for any Indemnified Costs to the extent resulting from the
gross negligence or willful  misconduct of such Indemnified  Person.  All of the
foregoing  Indemnified  Costs  of  any  Indemnified  Person  shall  be  paid  or
reimbursed by the Borrowers, as and when incurred and upon demand.

         10.3.  Governing Law; Consent to  Jurisdiction.  THIS AGREEMENT AND THE
OTHER CREDIT DOCUMENTS HAVE BEEN EXECUTED,  DELIVERED AND ACCEPTED IN, AND SHALL
BE DEEMED TO HAVE BEEN MADE IN,  NORTH  CAROLINA  AND SHALL BE  GOVERNED  BY AND
CONSTRUED  AND  ENFORCED  IN  ACCORDANCE  WITH  THE  LAWS OF THE  STATE OF NORTH
CAROLINA  (WITHOUT  REGARD TO THE  CONFLICTS OF LAW  PROVISIONS  THEREOF).  EACH
BORROWER  HEREBY  CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION OF ANY STATE COURT
WITHIN  MECKLENBURG  COUNTY,  NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN
THE  WESTERN  DISTRICT  OF THE  STATE  OF  NORTH  CAROLINA  FOR  ANY  PROCEEDING
INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS,  OR ARISING OUT
OF OR IN CONNECTION  WITH THIS  AGREEMENT OR ANY OF THE OTHER CREDIT  DOCUMENTS.
EACH BORROWER  IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF
APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES


                                      -49-

<PAGE>



ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF  JURISDICTION  OR IMPROPER VENUE
OR FORUM NON  CONVENIENS  TO THE CONDUCT OF ANY SUCH  PROCEEDING.  EACH BORROWER
CONSENTS  THAT ALL SERVICE OF PROCESS BE MADE BY  REGISTERED  OR CERTIFIED  MAIL
DIRECTED TO IT AT ITS ADDRESS SET FORTH  HEREINBELOW,  AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED  UPON THE EARLIER OF ACTUAL  RECEIPT  THEREOF OR THREE
(3) BUSINESS  DAYS AFTER  DEPOSIT IN THE UNITED  STATES  MAILS,  PROPER  POSTAGE
PREPAID AND PROPERLY  ADDRESSED.  NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW OR AFFECT THE RIGHT
OF THE AGENT OR ANY  LENDER  TO BRING  ANY  ACTION  OR  PROCEEDING  AGAINST  ANY
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.

         10.4.  Arbitration;  Preservation and Limitation of Remedies.  (a) Upon
demand of any party  hereto,  whether  made before or after  institution  of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this  Agreement  or any other Credit  Document  ("Disputes")
between or among the Borrowers,  their Subsidiaries,  the Agent and the Lenders,
or any of them,  shall be resolved by binding  arbitration  as provided  herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transactions  contemplated  by this  Agreement  and the other Credit  Documents.
Arbitration  shall be conducted  under and governed by the Commercial  Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA"), as in effect from time to time, and Title 9 of the U.S.
Code, as amended.  All  arbitration  hearings  shall be conducted in the city in
which the principal office of the Agent is located. The expedited procedures set
forth in Rule 51 et seq. of the Arbitration  Rules shall be applicable to claims
of less than  $1,000,000.  All applicable  statutes of limitation shall apply to
any  Dispute.  A  judgment  upon the award may be  entered  in any court  having
jurisdiction.  The  panel  from  which all  arbitrators  are  selected  shall be
comprised of licensed  attorneys.  The single arbitrator  selected for expedited
procedure   shall  be  a  retired  judge  from  the  highest  court  of  general
jurisdiction,  state  or  federal,  of the  state  where  the  hearing  will  be
conducted.

         (b) Notwithstanding the preceding binding arbitration  provisions,  the
parties hereto agree to preserve, without diminution,  certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute.  Any party hereto shall have the right to proceed in any court
of proper  jurisdiction  or by self-help to exercise or prosecute  the following
remedies,  as  applicable:  (i) all  rights  of  self-help,  including  peaceful
occupation  of real  property and  collection  of rents,  set-off,  and peaceful
possession  of  personal  property;  (ii)  obtaining  provisional  or  ancillary
remedies, including injunctive relief, sequestration,  garnishment,  attachment,
appointment of a receiver and filing an involuntary bankruptcy  proceeding;  and
(iii) when  applicable,  a judgment by confession of judgment.  Preservation  of
these  remedies  does not  limit  the power of an  arbitrator  to grant  similar
remedies that may be requested by a party in a Dispute. The parties hereto agree
that no party shall have a remedy of punitive or exemplary  damages  against any
other party in any Dispute,  and each party hereby  waives any right or claim to
punitive or exemplary damages that it has now or that may arise in the future in
connection with any Dispute,  whether such Dispute is resolved by arbitration or
judicially.

         10.5.  Notices.  All  notices  and other  communications  provided  for
hereunder  shall  be  in  writing  (including   telegraphic,   telex,  facsimile
transmission or cable communication) and mailed,


                                      -50-

<PAGE>



telegraphed,  telexed,  telecopied,  cabled  or  delivered  to the  party  to be
notified at the following addresses:

               (a) if to the Borrowers,  to Tel-Save Holdings,  Inc., 6805 Route
          202, New Hope, Pennsylvania 18938, Attention:  Aloysius T. Lawn, Esq.,
          Telecopy No. (215) 862- 1085, with a copy to Arnold & Porter, 399 Park
          Avenue, New York, New York 10022-4690,  Attention:  Michael W. Oshima,
          Telecopy No. (212) 715-1399;

               (b) if to the Agent,  to First  Union  National  Bank,  One First
          Union  Center,  DC-5,  301  South  College  Street,  Charlotte,  North
          Carolina  28288-0608,  Attention:  Hilda Weathers,  Telecopy No. (704)
          374-4092,  with a copy to Robinson,  Bradshaw & Hinson,  P.A.,  101 N.
          Tryon Street, Suite 1900, Charlotte,  North Carolina 28246, Attention:
          Benjamin W. Baldwin, Esq., Telecopy No. (704) 378-4000; and

               (c) if to any  Lender,  to it at the  address  set  forth  on its
          signature  page  hereto (or if to any Lender not a party  hereto as of
          the date  hereof,  at the  address  set  forth in its  Assignment  and
          Acceptance);

or in each case,  to such other address as any party may designate for itself by
like notice to all other  parties  hereto.  All such notices and  communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight  delivery service,  on the third Business Day after deposit
in the  mails,  (ii) if  mailed  by  overnight  delivery  service,  telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery,  delivered
to  the  telegraph  company,  confirmed  by  telex  answerback,  transmitted  by
telecopier  or  delivered  to the  cable  company,  respectively,  or  (iii)  if
delivered by hand, upon delivery;  provided that notices and  communications  to
the Agent shall not be effective until received by the Agent.

         10.6. Amendments, Waivers, etc. No amendment,  modification,  waiver or
discharge or termination  of, or consent to any departure by the Borrowers from,
any provision of this Agreement or any other Credit Document, shall be effective
unless  in a  writing  signed by the  Required  Lenders  (or by the Agent at the
direction or with the consent of the Required Lenders),  and then the same shall
be  effective  only in the specific  instance  and for the specific  purpose for
which given; provided,  however, that no such amendment,  modification,  waiver,
discharge, termination or consent shall:

         (a) unless  agreed to by each Lender  directly  affected  thereby,  (i)
reduce or  forgive  the  principal  amount of any  Loan,  reduce  the rate of or
forgive any interest thereon, or reduce or forgive any fees or other Obligations
(other than fees payable to the Agent for its own  account),  or (ii) extend the
Maturity  Date or any other date fixed for the  payment of any  principal  of or
interest on any Loan (other  than  additional  interest  payable  under  Section
2.8(b) at the election of the Required Lenders,  as provided therein),  any fees
(other  than  fees  payable  to the  Agent  for its own  account)  or any  other
Obligations;

         (b) unless agreed to by all of the Lenders,  (i) increase or extend any
Commitment  of any  Lender  (it being  understood  that a waiver of any Event of
Default,  if agreed to by the requisite Lenders hereunder,  shall not constitute
such an increase), (ii) change the percentage of the aggregate Commitments or of
the aggregate  unpaid principal amount of the Loans, or the number or percentage
of  Lenders,  that shall be  required  for the Lenders or any of them to take or
approve,  or direct the Agent to take,  any action  hereunder  (including as set
forth in the definition of "Required Lenders"), (iii) except as may be otherwise
specifically provided in this Agreement or in any other Credit


                                      -51-

<PAGE>



Document,  release  any  Subsidiary  Guarantor  from its  obligations  under the
Subsidiary  Guaranty,  or (iv)  change any  provision  of  Section  2.15 or this
Section 10.6; and

         (c) unless  agreed to by the Agent in addition to the Lenders  required
as provided  hereinabove to take such action,  affect the  respective  rights or
obligations of the Agent hereunder or under any of the other Credit Documents.

         10.7. Assignments, Participations. (a) Each Lender may assign to one or
more other Eligible  Assignees  (each,  an  "Assignee")  all or a portion of its
rights and obligations under this Agreement (including,  without limitation, all
or a portion of its Commitment, the outstanding Loans made by it and the Note or
Notes held by it); provided,  however,  that (i) any such assignment (other than
an assignment to a Lender or an Affiliate of a Lender) shall not be made without
the prior written consent of the Agent and the Borrowers (to be evidenced by its
counterexecution of the relevant Assignment and Acceptance), which consent shall
not be unreasonably  withheld (provided that the Borrowers' consent shall not be
required in the event a Default or Event of Default  shall have  occurred and be
continuing),  (ii) each such assignment shall be of a uniform,  and not varying,
percentage of all of the assigning  Lender's rights and  obligations  under this
Agreement, (iii) except in the case of an assignment to a Lender or an Affiliate
of a  Lender,  no such  assignment  shall be in an  aggregate  principal  amount
(determined as of the date of the Assignment and Acceptance with respect to such
assignment)  less than  $5,000,000,  determined  by combining  the amount of the
assigning  Lender's  outstanding Loans and Unutilized  Commitment being assigned
pursuant to such assignment (or, if less, the entire Commitment of the assigning
Lender),  and (iv) the parties to each such  assignment will execute and deliver
to the Agent,  for its acceptance  and recording in the Register,  an Assignment
and Acceptance,  together with any Note or Notes subject to such assignment, and
will pay a  nonrefundable  processing  fee of  $3,000  to the  Agent for its own
account.  Upon  such  execution,  delivery,  acceptance  and  recording  of  the
Assignment and Acceptance,  from and after the effective date specified therein,
which  effective  date shall be at least five  Business Days after the execution
thereof (unless the Agent shall otherwise  agree),  (A) the Assignee  thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance,  shall have
the rights and  obligations  of the  assigning  Lender  hereunder  with  respect
thereto  and (B) the  assigning  Lender  shall,  to the extent  that  rights and
obligations  hereunder have been assigned by it pursuant to such  Assignment and
Acceptance,  relinquish  its rights  (other than rights under the  provisions of
this Agreement and the other Credit  Documents  relating to  indemnification  or
payment of fees,  costs and  expenses,  to the extent such rights  relate to the
time prior to the  effective  date of such  Assignment  and  Acceptance)  and be
released  from its  obligations  under this  Agreement  (and,  in the case of an
Assignment  and  Acceptance  covering  all  or the  remaining  portion  of  such
assigning  Lender's  rights and obligations  under this  Agreement,  such Lender
shall cease to be a party hereto).  The terms and provisions of each  Assignment
and Acceptance shall, upon the effectiveness  thereof,  be incorporated into and
made a part of this Agreement, and the covenants,  agreements and obligations of
each Lender set forth therein shall be deemed made to and for the benefit of the
Agent and the other parties hereto as if set forth at length herein.

         (b) The Agent will  maintain at its  address  for  notices  referred to
herein a copy of each Assignment and Acceptance  delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the  "Register").  The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person  whose name is recorded in the Register as
a Lender hereunder for all


                                      -52-

<PAGE>



purposes of this  Agreement.  The Register  shall be available for inspection by
the Borrowers and each Lender at any reasonable  time and from time to time upon
reasonable prior notice.

         (c) Upon its  receipt of a duly  completed  Assignment  and  Acceptance
executed   by  an   assigning   Lender  and  an  Assignee   and,  if   required,
counterexecuted  by the  Borrowers,  together  with the Note or Notes subject to
such assignment and the processing fee referred to in subsection (a) above,  the
Agent will (i) accept such Assignment and Acceptance, (ii) on the effective date
thereof, record the information contained therein in the Register and (iii) give
notice  thereof to the Borrower and the Lenders.  Within five (5) Business  Days
after its receipt of such notice,  the  Borrowers,  at their own  expense,  will
execute and deliver to the Agent, in exchange for the surrendered Note or Notes,
a new Note or Notes to the order of the Assignee  (and, if the assigning  Lender
has retained any portion of its rights and obligations  hereunder,  to the order
of the assigning Lender),  prepared in accordance with the provisions of Section
2.4 as  necessary  to  reflect,  after  giving  effect  to the  assignment,  the
Commitments  of the Assignee and (to the extent of any retained  interests)  the
assigning Lender,  dated the date of the replaced Note or Notes and otherwise in
substantially  the form of Exhibit A. The Agent will return  cancelled  Notes to
the Borrowers.

         (d) Each Lender may, without the consent of the Borrowers, the Agent or
any other Lender,  sell to one or more other  Persons  (each,  a  "Participant")
participations  in any  portion  comprising  less  than  all of its  rights  and
obligations under this Agreement  (including,  without limitation,  a portion of
its Commitment,  the outstanding  Loans made by it and the Note or Notes held by
it); provided,  however, that (i) such Lender's obligations under this Agreement
shall remain  unchanged and such Lender shall remain solely  responsible for the
performance  of such  obligations,  (ii) no Lender shall sell any  participation
that,  when taken together with all other  participations,  if any, sold by such
Lender, covers all of such Lender's rights and obligations under this Agreement,
(iii) the  Borrowers,  the Agent and the other  Lenders  shall  continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement,  and no Lender shall permit any Participant to
have any voting  rights or any right to  control  the vote of such  Lender  with
respect  to  any  amendment,  modification,  waiver,  consent  or  other  action
hereunder  or under any other Credit  Document  (except as to actions that would
(x) reduce or forgive the  principal  amount of any Loan,  reduce the rate of or
forgive  any  interest  thereon,   or  reduce  or  forgive  any  fees  or  other
Obligations,  (y)  extend  the  Maturity  Date or any other  date  fixed for the
payment  of any  principal  of or  interest  on any Loan,  any fees or any other
Obligations,  or (z) increase or extend any Commitment of any Lender),  and (iv)
no  Participant  shall have any rights under this  Agreement or any of the other
Credit  Documents,  each  Participant's  rights  against the granting  Lender in
respect  of any  participation  to be  those  set  forth  in  the  participation
agreement,  and  all  amounts  payable  by  the  Borrowers  hereunder  shall  be
determined as if such Lender had not granted such participation. Notwithstanding
the foregoing,  each Participant  shall have the rights of a Lender for purposes
of Sections 2.16(a),  2.16(b),  2.17, 2.18 and 8.3, and shall be entitled to the
benefits  thereto,  to the extent that the Lender  granting  such  participation
would be  entitled  to such  benefits  if the  participation  had not been made;
provided  that no  Participant  shall be entitled to receive any greater  amount
pursuant to any of such  Sections than the Lender  granting  such  participation
would  have  been   entitled  to  receive  in  respect  of  the  amount  of  the
participation made by such Lender to such Participant had such participation not
been made.

         (e) Nothing in this Agreement shall be construed to prohibit any Lender
from  pledging  or  assigning  all or any  portion of its  rights  and  interest
hereunder  or  under  any  Note to any  Federal  Reserve  Bank as  security  for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release a Lender from any of its obligations hereunder.



                                      -53-

<PAGE>



         (f) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation  pursuant to this Section,
disclose to the Assignee or Participant or proposed  Assignee or Participant any
information relating to the Borrowers and their Subsidiaries  furnished to it by
or on  behalf  of any  other  party  hereto,  provided  that  such  Assignee  or
Participant or proposed  Assignee or Participant  agrees in writing to keep such
information  confidential  to the same  extent  required  of the  Lenders  under
Section 10.13.

         10.8.  No Waiver.  The rights and remedies of the Agent and the Lenders
expressly  set  forth in this  Agreement  and the  other  Credit  Documents  are
cumulative  and in  addition  to, and not  exclusive  of,  all other  rights and
remedies  available at law, in equity or  otherwise.  No failure or delay on the
part of the Agent or any  Lender in  exercising  any right,  power or  privilege
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such right, power or privilege preclude other or further exercise thereof or
the  exercise of any other  right,  power or  privilege  or be construed to be a
waiver of any Default or Event of Default.  No course of dealing  between any of
the Borrowers and the Agent or the Lenders or their agents or employees shall be
effective to amend,  modify or discharge any provision of this  Agreement or any
other  Credit  Document  or to  constitute  a waiver of any  Default or Event of
Default. No notice to or demand upon the Borrowers in any case shall entitle the
Borrowers  to any  other  or  further  notice  or  demand  in  similar  or other
circumstances  or constitute a waiver of the right of the Agent or any Lender to
exercise  any  right or  remedy  or take  any  other or  further  action  in any
circumstances without notice or demand.

         10.9.  Successors and Assigns.  This  Agreement  shall be binding upon,
inure to the benefit of and be  enforceable  by the  respective  successors  and
assigns of the parties hereto,  and all references  herein to any party shall be
deemed to include its successors and assigns;  provided,  however,  that (i) the
Borrowers  shall not sell,  assign or transfer any of their  rights,  interests,
duties or obligations  under this Agreement without the prior written consent of
all of the  Lenders  and (ii) any  Assignees  and  Participants  shall have such
rights and  obligations  with  respect to this  Agreement  and the other  Credit
Documents as are provided  for under and pursuant to the  provisions  of Section
10.7.

         10.10. Survival. All representations, warranties and agreements made by
or on behalf of the Borrowers or any of their Subsidiaries in this Agreement and
in the other Credit Documents shall survive the execution and delivery hereof or
thereof and the making and repayment of the Loans. In addition,  notwithstanding
anything herein or under applicable law to the contrary,  the provisions of this
Agreement and the other Credit Documents  relating to indemnification or payment
of fees, costs and expenses,  including,  without limitation,  the provisions of
Sections  2.16(a),  2.16(b),  2.17,  2.18, 9.7, 10.1 and 10.2, shall survive the
payment  in full of all  Loans,  the  termination  of the  Commitments,  and any
termination of this Agreement or any of the other Credit Documents.

         10.11.  Severability.  To the extent any provision of this Agreement is
prohibited  by or invalid under the  applicable  law of any  jurisdiction,  such
provision  shall  be  ineffective  only to the  extent  of such  prohibition  or
invalidity and only in such  jurisdiction,  without  prohibiting or invalidating
such  provision in any other  jurisdiction  or the remaining  provisions of this
Agreement in any jurisdiction.

         10.12. Construction. The headings of the various articles, sections and
subsections of this Agreement have been inserted for convenience  only and shall
not in any way  affect  the  meaning or  construction  of any of the  provisions
hereof.  Except as otherwise  expressly  provided herein and in the other Credit
Documents,  in the event of any  inconsistency or conflict between any provision
of


                                      -54-

<PAGE>



this  Agreement  and any  provision  of any of the other Credit  Documents,  the
provision of this Agreement shall control.

         10.13.  Confidentiality.  Each  Lender  agrees  to  keep  confidential,
pursuant to its customary procedures for handling confidential  information of a
similar  nature and in  accordance  with safe and sound banking  practices,  all
nonpublic  information provided to it by or on behalf of the Borrowers or any of
their  Subsidiaries  in  connection  with this  Agreement  or any  other  Credit
Document;  provided,  however, that any Lender may disclose such information (i)
to its  directors,  employees and agents and to its auditors,  counsel and other
professional  advisors  in  connection  with the  performance  of such  Lender's
obligations  hereunder,  (ii) at the demand or  request  of any bank  regulatory
authority,   court  or  other   Governmental   Authority   having  or  asserting
jurisdiction  over such Lender, as may be required pursuant to subpoena or other
legal process,  or otherwise in order to comply with any applicable  Requirement
of Law, (iii) in connection with any proceeding to enforce its rights  hereunder
or under any other Credit Document or any other litigation or proceeding related
hereto or to which it is a party, (iv) to the Agent or any other Lender,  (v) to
the extent the same has become  publicly  available  other than as a result of a
breach  of this  Agreement  and  (vi)  pursuant  to and in  accordance  with the
provisions  of Section  10.7(f).  Each  Borrower  agrees and consents to Agent's
disclosure of  information  on the specific  terms of this  transaction  to Gold
Sheets and other similar bank trade publications.  Such information will consist
of deal terms and other information customarily found in such publications.

         10.14. Counterparts;  Effectiveness.  This Agreement may be executed in
any  number  of  counterparts  and  by  different  parties  hereto  on  separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall  together  constitute one and the same  instrument.  This
Agreement shall become  effective upon the execution of a counterpart  hereof by
each of the parties hereto and receipt by the Agent and the Borrowers of written
or  telephonic  notification  of such  execution and  authorization  of delivery
thereof.

         10.15.       The Borrowers as Co-Obligors.

         (a) The  Borrowers  are  accepting  the  joint  and  several  liability
provided for hereunder in consideration of the financial accommodations provided
and to be provided by the Lenders under this  Agreement for the mutual  benefit,
directly and indirectly,  of the Borrowers and in  consideration  of each of the
undertakings of each Borrower  herein to accept joint and several  liability for
their mutual benefit, for the Obligations of each of the other of them.

         (b) The  Borrowers,  jointly and  severally as  hereinafter  described,
hereby irrevocably and unconditionally  accept, not merely as surety but also as
co-debtors,  joint  and  several  liability  with  respect  to the  payment  and
performance  of all of the  Obligations  under all of the Credit  Documents,  it
being the intention of the parties hereto that all the Obligations  shall be the
joint  and  several  obligations  of all the  Borrowers  without  preference  or
distinction among them, except for those obligations expressly set forth as only
applying to a single Borrower.

         (c) If and to the  extent  that  any  Borrower  shall  fail to make any
payment with respect to any of the Obligations  owed by it as and when due or to
perform any of such  Obligations in accordance  with the terms thereof,  then in
each such event each of the other Borrowers  will,  forthwith upon demand by the
Lenders, make such payment with respect to, or perform, such obligation pursuant
to the terms thereof.



                                      -55-

<PAGE>



         (d) Each Borrower hereby acknowledges and consents to all provisions of
each Credit  Document.  In connection  with its  obligations  under this Section
10.15, each Borrower hereby waives notice of acceptance of the joint and several
liability  contained in this Section 10.15,  notice of any and all Loans made or
of any  financial  accommodations  extended to any Borrower by the Lenders under
any Credit  Document,  notice of the  occurrence  of any Default or any Event of
Default or of any demand upon any Borrower for any payment under this  Agreement
or any other  Credit  Documents  whether  in  respect  of any Loans or any other
obligation owing hereunder or thereunder, notice of any action at any time taken
or omitted by the Lenders  under or in respect of any Credit  Document or any of
the  Obligations  and,  generally,  all  demands,  notices,  protests  and other
formalities  of every kind in  connection  with the joint and several  liability
contained in this Section 10.15,  the other  provisions of this Agreement or any
provisions of the other Credit  Documents.  In connection  with its  obligations
under this Section 10.15, each Borrower hereby assents to, and waives notice of,
any  extension  or  postponement  of the  time  for  the  payment  of any of the
Obligations,  the acceptance of any partial payment thereon, any waiver, consent
or other action or  acquiescence  by the Lenders at any time or times in respect
of any Default by any Borrower in the  performance or  satisfaction of any term,
covenant,  condition  or  provision  of any Credit  Document,  any and all other
indulgences whatsoever by the Lenders in respect of any of the Obligations,  and
the  addition,  substitution  or release,  in whole or in part, of any Person or
Persons  primarily or secondarily  liable in respect of any of the  Obligations.
Each of the Borrowers  also waives:  (I) any right to require the Lenders to (A)
proceed against any other person,  including any other  Borrower,  or (B) pursue
any other remedy;  and (II) any defense  arising by reason of (A) any disability
or other defense of any Borrower,  or any other Person,  (B) the cessation  from
any cause  whatsoever,  other than payment or performance in full, of any of the
obligations of the Borrowers, or any other Person, or (C) any act or omission by
the Lenders which directly or indirectly results in or aids the discharge of any
Borrower or any  Obligation  hereunder  by operation  of law or  otherwise.  The
obligations of each Borrower under this Section 10.15 shall not be diminished or
rendered   unenforceable  by  any  winding  up,   reorganization,   arrangement,
liquidation,  reconstruction or similar  proceeding with respect to any Borrower
or the Lenders. The joint and several liability of each Borrower in this Section
10.15 shall continue in full force and effect  notwithstanding  any  absorption,
merger,  amalgamation  or any other  change  whatsoever  in the  name,  charter,
membership,  constitution or place of formation of any Borrower,  or any Lender.
Each of the  Borrowers  agrees that each of the waivers set forth above are made
with such Borrower's full knowledge of their significance and consequences,  and
such Borrower agrees that, under the  circumstances,  the waivers are reasonable
and not contrary to public policy or law. If any of said waivers are  determined
to be contrary to any  applicable  law or public  policy,  such waivers shall be
effective only to the extent permitted by law.

         10.16.  Entire  Agreement.  THIS AGREEMENT AND THE OTHER  DOCUMENTS AND
INSTRUMENTS  EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND  UNDERSTANDING  BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE  SUBJECT  MATTER  HEREOF  AND  THEREOF,  (B)  SUPERSEDE  ANY AND  ALL  PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN,  RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO THE BORROWERS  DATED MAY 22, 1997, AND (C) MAY NOT BE
AMENDED, SUPPLEMENTED,  CONTRADICTED OR OTHERWISE MODIFIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.



                                      -56-

<PAGE>



         10.17. Post-Closing Matters. At the request of the Agent, each Borrower
will, and will cause each of their Subsidiaries to, use their reasonable efforts
to assist the Agent in the syndication of this Revolving Credit Facility and the
resultant addition of Lenders after the Closing Date.



                                      -57-

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.



                            TEL-SAVE HOLDINGS, INC.,
                              as a Borrower


                            By:
                               ------------------------------------

                            Title:
                                  ---------------------------------


                            TEL-SAVE, INC.,
                            as a Borrower


                            By:
                               ------------------------------------

                            Title:
                                  ---------------------------------


                           EMERGENCY TRANSPORT CORP.,
                             as a Borrower


                            By:
                               ------------------------------------

                            Title:
                                  ---------------------------------

















                             (signatures continued)


                                      -58-

<PAGE>



                           FIRST UNION NATIONAL BANK, as Agent and as
                             a Lender


                           By:
                              -----------------------------------------
Commitment:
$65,000,000                Title:
                                  -------------------------------------


                           Instructions  for wire  transfers to
                             the Agent:

                            First Union National Bank
                            ABA Routing No. 053000219
                            Charlotte, North Carolina
                            General Ledger No. 465906, RC No. 0000191
                            Attention: Hilda Weathers
                            Re: Tel-Save

                          Address for notices as a Lender:

                             First Union National Bank
                             One First Union Center, 5th Floor
                             301 South College Street
                             Charlotte, North Carolina 28288-0735
                             Attention: Jeffrey T. Hardesty
                             Telephone: (704) 383-1989
                             Telecopy: (704) 374-4092

                             Lending Office:

                             First Union National Bank
                             One First Union Center, 5th Floor
                             301 South College Street
                             Charlotte, North Carolina 28288-0735
                             Attention: Jeffrey T. Hardesty
                             Telephone: (704) 383-1989
                             Telecopy: (704) 374-4092



                                      -59-