================================================================================

                             TEL-SAVE HOLDINGS, INC.

                                       TO

                  FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION

                                                                         TRUSTEE



                                   -----------

                                    INDENTURE

                          DATED AS OF DECEMBER 10, 1997

                   5% CONVERTIBLE SUBORDINATED NOTES DUE 2004

================================================================================



                                       1

<PAGE>



                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----
ARTICLE I

Definitions and Incorporation by Reference
------------------------------------------
<S>      <C>                                                                    <C>
         SECTION 1.01.  Definitions..............................................1

         SECTION 1.02.  Other Definitions........................................6

         SECTION 1.03.  Incorporation by Reference of Trust Indenture Act........7

         SECTION 1.04.  Rules of Construction....................................7

ARTICLE II

The Securities
--------------

         SECTION 2.01.  Form and Dating..........................................7

         SECTION 2.02.  Execution, Authentication and Delivery...................9

         SECTION 2.03.  Registrars, Paying Agents and Conversion Agents.........10

         SECTION 2.04.  Paying Agent to Hold Money in Trust.....................10

         SECTION 2.05.  Noteholder Lists........................................10

         SECTION 2.06.  Transfer and Exchange...................................10

         SECTION 2.07.  Replacement Securities..................................13

         SECTION 2.08.  Outstanding Securities..................................14

         SECTION 2.09.  Treasury Securities.....................................14

         SECTION 2.10.  Temporary Securities; Exchange of Global Security for
                          Certificated Securities...............................14

         SECTION 2.11.  Cancellation............................................15

         SECTION 2.12.  Defaulted Interest......................................15

ARTICLE III

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                                       i

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<TABLE>
<CAPTION>

Redemption
----------

<S>      <C>                                                                    <C>
         SECTION 3.01.  Notices to Trustee......................................15

         SECTION 3.02.  Selection of Securities to be Redeemed..................15

         SECTION 3.03.  Notice of Redemption....................................17

         SECTION 3.04.  Effect of Notice of Redemption..........................17

         SECTION 3.05.  Deposit of Redemption Price.............................17

         SECTION 3.06.  Securities Redeemed in Part.............................17

         SECTION 3.07.  Optional Redemption.....................................17

         SECTION 3.08.  Designated Event Offer..................................17

ARTICLE IV

Covenants
---------

         SECTION 4.01.  Payment of Securities...................................19

         SECTION 4.02.  SEC Reports.............................................19

         SECTION 4.03.  Compliance Certificate..................................20

         SECTION 4.04.  Stay, Extension and Usury Law...........................20

         SECTION 4.05.  Corporate Existence.....................................21

         SECTION 4.06.  Taxes...................................................21

         SECTION 4.07.  Designated Event........................................21

         SECTION 4.08.  Investment Company Act..................................23

ARTICLE V

Conversion
----------

         SECTION 5.01.  Conversion Privilege....................................22

         SECTION 5.02.  Conversion Procedure....................................22

         SECTION 5.03.  Fractional Shares.......................................22

                                       ii

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<TABLE>
<CAPTION>

<S>      <C>                                                                    <C>
         SECTION 5.04.  Taxes on Conversion.....................................23

         SECTION 5.05.  Company to Provide Stock................................23

         SECTION 5.06.  Adjustment of Conversion Price..........................24

         SECTION 5.07.  No Adjustment...........................................27

         SECTION 5.08.  Other Adjustments.......................................27

         SECTION 5.09.  Adjustments for Tax Purposes............................27

         SECTION 5.10.  Adjustments by the Company..............................27

         SECTION 5.11.  Notice of Adjustment....................................28

         SECTION 5.12.  Notice of Certain Transactions..........................28

         SECTION 5.13.  Effect of Reclassifications, Consolidations, Mergers
                         or Sales on Conversion Privilege.......................28

         SECTION 5.14.  Trustee's Disclaimer....................................29

ARTICLE VI

Subordination
-------------

         SECTION 6.01.  Agreement to Subordinate................................29

         SECTION 6.02.  No Payment on Securities if Senior Debt in Default......30

         SECTION 6.03.  Distribution on Acceleration of Securities; 
                         Dissolution and Reorganization; Subrogation 
                         of Securities..........................................31

         SECTION 6.04.  Reliance by Senior Debt on Subordination Provisions.....34

         SECTION 6.05.  No Waiver of Subordination Provisions...................34

         SECTION 6.06.  Trustee's Relation to Senior Debt.......................34

         SECTION 6.07.  Other Provisions Subject Hereto.........................35

ARTICLE VII

Successors
----------

         SECTION 7.01.  Merger, Consolidation or Sale of Assets.................35

                                      iii

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<TABLE>
<CAPTION>
<S>      <C>                                                                    <C>
         SECTION 7.02.  Successor Corporation Substituted.......................36

ARTICLE VIII

Defaults and Remedies
---------------------

         SECTION 8.01.  Events of Default.......................................36

         SECTION 8.02.  Acceleration............................................38

         SECTION 8.03.  Other Remedies..........................................38

         SECTION 8.04.  Waiver of Past Defaults.................................38

         SECTION 8.05.  Control by Majority.....................................38

         SECTION 8.06.  Limitation on Suits.....................................39

         SECTION 8.07.  Rights of Noteholders to Receive Payment................39

         SECTION 8.08.  Collection Suit by Trustee..............................39

         SECTION 8.09.  Trustee May File Proofs of Claim........................39

         SECTION 8.10.  Priorities..............................................40

         SECTION 8.11.  Undertaking for Costs...................................40

ARTICLE IX

Trustee
-------

         SECTION 9.01.  Duties of Trustee.......................................40

         SECTION 9.02.  Rights of Trustee.......................................41

         SECTION 9.03.  Individual Rights of Trustee............................41

         SECTION 9.04.  Trustee's Disclaimer....................................42

         SECTION 9.05.  Notice of Defaults......................................42

         SECTION 9.06.  Reports by Trustee to Noteholders.......................42

         SECTION 9.07.  Compensation and Indemnity..............................42

         SECTION 9.08.  Replacement of Trustee..................................43

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                                       iv

<PAGE>

<TABLE>
<CAPTION>
<S>      <C>                                                                    <C>
         SECTION 9.09.  Successor Trustee by Merger, Etc........................44

         SECTION 9.10.  Eligibility; Disqualification...........................44

         SECTION 9.11.  Preferential Collection of Claims Against Company.......44

ARTICLE X

Discharge of Indenture
----------------------

         SECTION 10.01.  Termination of Company's Obligations...................44

         SECTION 10.02.  Repayment to Company...................................44

ARTICLE XI

Amendments, Supplements and Waivers
-----------------------------------

         SECTION 11.01.  Without Consent of Noteholders.........................45

         SECTION 11.02.  With Consent of Noteholders............................45

         SECTION 11.03.  Compliance with Trust Indenture Act....................46

         SECTION 11.04.  Revocation and Effect of Consents......................46

         SECTION 11.05.  Notation on or Exchange of Securities..................47

         SECTION 11.06.  Trustee Protected......................................47

ARTICLE XII

Miscellaneous
-------------

         SECTION 12.01.  Trust Indenture Act Controls...........................47

         SECTION 12.02.  Notices................................................47

         SECTION 12.03.  Communication by Noteholders with Other Noteholders....48

         SECTION 12.04.  Certificate and Opinion as to Conditions Precedent.....48

         SECTION 12.05.  Statements Required in Certificate or Opinion..........48

         SECTION 12.06.  Rules by Trustee and Agents............................49

         SECTION 12.07.  Legal Holidays.........................................49

</TABLE>

                                       v

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<CAPTION>
<S>      <C>                                                                    <C>
         SECTION 12.08.  No Recourse Against Others.............................49

         SECTION 12.09.  Counterparts...........................................49

         SECTION 12.10.  Variable Provisions....................................49

         SECTION 11.11.  GOVERNING LAW..........................................50

         SECTION 12.12.  No Adverse Interpretation of Other Agreements..........50

         SECTION 12.13.  Successors.............................................50

         SECTION 12.14.  Severability...........................................50

         SECTION 12.15.  Table of Contents, Headings, Etc.......................50

</TABLE>

                                       vi

<PAGE>

EXHIBIT A      FORM OF CONVERTIBLE SUBORDINATED NOTE.........................A-1

EXHIBIT B      FORM OF TRANSFER CERTIFICATE..................................B-1

EXHIBIT C      FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE............C-1

EXHIBIT D      FORM OF REGISTRATION AGREEMENT ...............................E-1


                                      vii

<PAGE>

                  INDENTURE  dated as of  December  10,  1997  between  Tel-Save
Holdings,  Inc., a Delaware corporation (the "Company"),  and First Trust of New
York, National Association, as trustee (the "Trustee").

                  Each  party  agrees as  follows  for the  benefit of the other
party and for the equal and ratable  benefit of the Noteholders of the Company's
5% Convertible Subordinated Notes Due 2004 (the "Securities"):

                                    ARTICLE I

                   Definitions and Incorporation by Reference

                  SECTION 1.01. Definitions. "Affiliate" of any specified person
means any other person  directly or indirectly  controlling  or controlled by or
under direct or indirect  common  control with such  specified  person.  For the
purposes of this definition,  "control"  (including,  with correlative meanings,
the terms  "controlling",  "controlled by" and "under common control with"),  as
used  with  respect  to any  person,  shall  mean the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of the  management or
policies of such person,  whether through the ownership of voting  securities or
by agreement or otherwise.

                  "Agent" means any Registrar, Paying Agent or Conversion Agent.

                  "Board  of  Directors"  means the  Board of  Directors  of the
Company or any authorized committee of the Board.

                  "Board  Resolution"  means a copy of a resolution of the Board
of Directors certified by the Secretary or an Assistant Secretary of the Company
to be in full force and effect on the date of such certification and delivery to
the Trustee.

                  "Business Day" means any day that is not a Legal Holiday.

                  "Capital   Stock"   means  any  and  all  shares,   interests,
participations,  rights  or other  equivalents  (however  designated)  of equity
interests in any entity,  including,  without  limitation,  corporate  stock and
partnership interests.

                  "Change of Control" means any event where: (i) any "person" or
"group" (as such terms are used in Section  13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial  owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) of shares  representing  more than 50% of the combined  voting
power of the then-outstanding securities entitled to vote generally in elections
of directors of the Company ("Voting Stock"), (ii) the Company consolidates with
or  merges  into any other  corporation,  or any other  person  merges  into the
Company, and, in the case of any such transaction,  the outstanding Common Stock
of the  Company is  reclassified  into or  exchanged  for any other  property or
security,  unless  the  stockholders  of the  Company  immediately  before  such
transaction own, directly or indirectly  immediately following such transaction,
at least a majority  of the  combined  voting  power of the


<PAGE>

outstanding voting securities of the corporation resulting from such transaction
in  substantially  the same  proportion  as their  ownership of the Voting Stock
immediately  before such  transaction,  (iii) the Company conveys,  transfers or
leases all or  substantially  all of its assets to any person (other than to one
or  more  wholly-owned  subsidiaries  of the  Company)  or  (iv)  any  time  the
Continuing  Directors do not  constitute a majority of the Board of Directors of
the Company (or, if applicable, a successor corporation to the Company).

                  "Common  Stock"  means the common  stock of the Company as the
same exists at the date of the execution of this  Indenture or as such stock may
be constituted from time to time.

                  "Company"  means  the  party  named  as  such  above  until  a
successor  replaces it in accordance  with Article VII and thereafter  means the
successor.

                  "Continuing  Directors" means as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of  Directors  on the date of this  Indenture  or (ii) was  nominated  for
election or elected to such Board of  Directors  with the approval of a majority
of the  Continuing  Directors who were members of such board at the time of such
nomination or election.

                  "Daily  Market  Price"  means  the  price of a share of Common
Stock on the relevant  date,  determined  (a) on the basis of the last  reported
sale price  regular  way of the Common  Stock as  reported  on the Nasdaq  Stock
Market's  National Market (the "NNM"), or if the Common Stock is not then listed
on the NNM, as  reported on such  national  securities  exchange  upon which the
Common Stock is listed,  or (b) if there is no such  reported sale on the day in
question,  on the basis of the average of the  closing bid and asked  quotations
regular way as so reported,  or (c) if the Common Stock is not listed on the NNM
or on any national securities exchange,  on the basis of the average of the high
bid  and  low  asked  quotations  regular  way on the  day  in  question  in the
over-the-counter  market as reported by the National  Association  of Securities
Dealers Automated Quotation System, or if not so quoted, as reported by National
Quotation Bureau, Incorporated, or a similar organization.

                  "Default" means any event that is, or with the passage of time
or the giving of notice or both, would be an Event of Default.

                  "Depositary" means The Depository Trust Company,  its nominees
and their respective successors.

                  "Designated Event" means the occurrence of a Change of Control
or a Termination of Trading.

                  "Designated  Senior Debt" means (i) any Senior Debt which,  as
of the date of this Indenture,  has an aggregate principal amount outstanding of
at  least  $15  million,  and  (ii)  any  Senior  Debt  which,  at the  date  of
determination,  has an aggregate principal amount outstanding of, or commitments
to lend up to,  at least  $15  million  and is  specifically  designated  by the
Company  in  the  instrument   evidencing  or  governing  such  Senior  Debt  as
"Designated Senior



                                       2
<PAGE>

Debt" for purposes of this Indenture  (provided,  that such instrument may place
limitations  and  conditions  on the right of such Senior  Debt to exercise  the
rights of Designated Senior Debt).

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended.

                  "GAAP" means  generally  accepted  accounting  principles  set
forth in the opinions and  pronouncements of the Accounting  Principles Board of
the American  Institute of  Certified  Public  Accountants  and  statements  and
pronouncements  of the  Financial  Accounting  Standards  Board or in such other
statements  by such other  entity as  approved by a  significant  segment of the
accounting profession, which are in effect from time to time.

                  "Global  Securities  Legend" means the legend  labeled as such
and that is set forth in Exhibit A hereto.

                  "Guarantee"  means a guarantee  (other than by  endorsement of
negotiable  instruments  for  collection  in the ordinary  course of  business),
direct or indirect,  in any manner (including,  without  limitation,  letters of
credit and reimbursement  agreements in respect thereof),  of all or any part of
any Indebtedness.

                  "Indebtedness"   means,  with  respect  to  any  person,   all
obligations, whether or not contingent, of such person (i)(a) for borrowed money
(including, but not limited to, any indebtedness secured by a security interest,
mortgage or other lien on the assets of such person which is (1) given to secure
all or part of the purchase price of property subject thereto,  whether given to
the vendor of such  property or to another,  or (2)  existing on property at the
time of  acquisition  thereof),  (b)  evidenced  by a note,  debenture,  bond or
written instrument,  (c) under a lease required to be capitalized on the balance
sheet of the lessee under GAAP or under any lease or related document (including
a purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased  property,  (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement  obligations  with  respect  to any of the  foregoing),  (e)  with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim  affecting  title or resulting in an  encumbrance  to which the
property or assets of such  person are  subject,  whether or not the  obligation
secured  thereby shall have been assumed or Guaranteed by or shall  otherwise be
such person's legal liability, (f) in respect of the balance of the deferred and
unpaid purchase price of any property or assets,  and (g) under interest rate or
currency swap  agreements,  cap, floor and collar  agreements,  spot and forward
contracts  and similar  agreements  and  arrangements;  (ii) with respect to any
obligation of others of the type described in the preceding  clause (i) or under
clause (iii) below  assumed by or  guaranteed in any manner by such person or in
effect  guaranteed by such person  through an agreement to purchase  (including,
without  limitation,  "take or pay" and  similar  arrangements),  contingent  or
otherwise  (and the  obligations  of such  person  under  any such  assumptions,
guarantees  or  other  such  arrangements);  and  (iii)  any and all  deferrals,
renewals,   extensions,   refinancings   and   refundings   of,  or  amendments,
modifications or supplements to, any of the foregoing.

                  "Indenture" means this Indenture as amended from time to time.



                                       3
<PAGE>

                  "Initial  Purchasers" means Smith Barney Inc., Deutsche Morgan
Grenfell Inc. and UBS Securities

LLC.

                  "Issuance  Date"  means the date on which the  Securities  are
first authenticated and issued.

                  "Material  Subsidiary"  means any  Subsidiary  of the  Company
which, at the date of determination, is a "significant subsidiary" as defined in
Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act (as
such Regulation is in effect on the date hereof).

                  "Noteholder"  or  "holder"  means a  person  in  whose  name a
Security is registered.

                  "Obligations" means any principal,  interest, penalties, fees,
indemnifications,  reimbursements,  damages and other liabilities  payable under
the documentation governing any Indebtedness.

                  "Offering  Memorandum" means the offering  memorandum relating
to the Securities dated December 5, 1997.

                  "Officers'  Certificate"  means a  certificate  signed  by two
Officers,  one of whom must be the  Chairman of the Board,  the Chief  Executive
Officer,  the  President,  the Chief  Financial  Officer or the Treasurer of the
Company. See Sections 12.04 and 12.05 hereof.

                  "Opinion  of  Counsel"  means a  written  opinion  from  legal
counsel who is acceptable  to the Trustee.  The counsel may be an employee of or
counsel to the Company or the Trustee. See Sections 12.04 and 12.05 hereof.

                  "person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

                  "principal"  of a debt  security  means the  principal  of the
security plus the premium, if any, on the security.

                  "Registration  Agreement"  means  the  Registration  Agreement
relating to the Securities dated December 10, 1997,  between the Company and the
Initial Purchasers, a form of which is attached as Exhibit D hereto.

                  "Representative"  means the trustee,  agent or  representative
(if any) for an issue of Senior Debt.

                  "Restricted  Securities  Legend"  means the legend  labeled as
such and that is set forth in Exhibit A hereto.

                  "SEC" means the Securities and Exchange Commission.



                                       4
<PAGE>

                  "Securities"  means the  Securities  described in the preamble
above that are issued, authenticated and delivered under this Indenture.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Senior Debt" means the  principal  of,  interest on and other
amounts due on Indebtedness of the Company,  whether  outstanding on the date of
the  Indenture or  thereafter  created,  incurred,  assumed or Guaranteed by the
Company;  unless, in the instrument  creating or evidencing or pursuant to which
Indebtedness is outstanding,  it is expressly provided that such Indebtedness is
not senior in right of payment to the  Securities.  Senior Debt  includes,  with
respect to the obligations described above,  interest accruing,  pursuant to the
terms of such Senior Debt,  on or after the filing of any petition in bankruptcy
or for  reorganization  relating  to the  Company,  whether  or not  post-filing
interest is allowed in such proceeding,  at the rate specified in the instrument
governing the relevant obligation.  Notwithstanding  anything to the contrary in
the foregoing,  Senior Debt shall not include:  (a)  Indebtedness  of or amounts
owed by the Company for  compensation  to employees,  or for goods,  services or
materials purchased in the ordinary course of business;  (b) Indebtedness of the
Company to a Subsidiary of the Company; or (c) any liability for Federal, state,
local or other taxes owed or owing by the Company.

                  "Shelf  Registration  Statement"  shall have the  meaning  set
forth in the Registration Agreement.

                  "Subsidiary"  means  any  corporation,  association  or  other
business  entity of which more than 50% of the total  voting  power of shares of
Capital Stock entitled  (without regard to the occurrence of any contingency) to
vote in the election of directors,  managers or trustees  thereof is at the time
owned or controlled, directly or indirectly, by any person or one or more of the
other Subsidiaries of that person or a combination thereof.

                  "Termination of Trading" means an event where the Common Stock
(or other securities into which the Securities are then  convertible) is neither
listed for trading on a United States national  securities exchange nor approved
for trading on an established automated  over-the-counter  trading market in the
United States.

                  "TIA"  means the  Trust  Indenture  Act of 1939 (15 U.S.  Code
ss.ss. 77aaa-77bbbb) as in effect on the date of execution of this Indenture.

                  "Trading  Day" shall mean (A) if the  applicable  security  is
listed or  admitted  for  trading  on the New York  Stock  Exchange  or  another
national securities exchange, a day on which the New York Stock Exchange or such
other national securities  exchange is open for business,  (B) if the applicable
security is quoted on the NNM, a day on which  trades may be made thereon or (C)
if the applicable security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which  banking  institutions  in
the State of New York are  authorized or obligated by law or executive  order to
close.



                                       5
<PAGE>

                  "Trustee"  means  the  party  named  as  such  above  until  a
successor  replaces it in  accordance  with the  applicable  provisions  of this
Indenture and thereafter means the successor.

                  "Trust Officer" means any officer or assistant  officer of the
Trustee assigned by the Trustee to administer this Indenture.

                  SECTION 1.02.  Other Definitions.

                                                                     Defined in
Term                                                                  Section
----                                                                  -------

"Agent Members".........................................................2.01
"Bankruptcy Law"........................................................8.01
"Cedel Bank"............................................................2.01
"Commencement Date".....................................................3.08
"Conversion Agent"......................................................2.03
"Conversion Date".......................................................5.02
"Conversion Price"......................................................5.01
"Conversion Shares".....................................................5.06
"Current Market Price"..................................................5.06
"Custodian".............................................................8.01
"Designated Event Offer"................................................4.07
"Designated Event Payment"..............................................4.07
"Designated Event Payment Date".........................................3.08
"Distribution Date".....................................................5.06
"Distribution Record Date"..............................................5.06
"Excess Payment"......................................................  5.06
"Euroclear".............................................................2.01
"Event of Default"......................................................8.01
"Global Security".......................................................2.01
"Legal Holiday"........................................................12.07
"Non-Global Purchasers".................................................2.01
"Offer Amount"..........................................................3.08
"Officer"..............................................................12.10
"Paying Agent"..........................................................2.03
"Payment Blockage Notice"...............................................6.02
"Payment Blockage Period"...............................................6.02
"Payment Default".......................................................8.01
"Purchase Agreement"....................................................2.01
"Purchase Date".........................................................5.06
"QIBs"..................................................................2.01
"Registrar".............................................................2.03
"Regulation S"..........................................................2.01
"Restricted Securities".................................................2.01
"Rights"................................................................5.06


                                       6
<PAGE>

"Rule 144A".............................................................2.01
"Tender Period".........................................................3.08


                  SECTION 1.03.  Incorporation  by Reference of Trust  Indenture
Act.  Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

                  The  following  TIA  terms  used in this  Indenture  have  the
following meanings:

                  "indenture securities" means the Securities;

                  "indenture security holder" means a Noteholder;

                  "indenture to be qualified" means this Indenture;

                  "indenture  trustee"  or  "institutional  trustee"  means  the
         Trustee; and

                  "obligor"  on the  Securities  means the  Company or any other
         obligor on the Securities.

                  All other terms used in this Indenture that are defined by the
TIA,  defined by TIA  reference to another  statute or defined by SEC rule under
the TIA have the meanings so assigned to them.

                  SECTION  1.04.  Rules  of  Construction.  Unless  the  context
otherwise requires:

                  (a)  a term has the meaning assigned to it;

                  (b) an accounting  term not otherwise  defined has the meaning
         assigned to it in accordance with GAAP consistently applied;

                  (c)  "or" is not exclusive;

                  (d) words in the singular include the plural, and words in the
         plural include the singular; and

                  (e) provisions apply to successive events and transactions.

                                   ARTICLE II

                                 The Securities

                  SECTION  2.01.  Form  and  Dating.   The  Securities  and  the
Trustee's  certificate of  authentication  shall be substantially in the form of
Exhibit  A which is hereby  incorporated  in and  expressly  made a part of this
Indenture.



                                       7
<PAGE>

                  The Securities  may have  notations,  legends or  endorsements
required  by law,  stock  exchange  rule,  agreements  to which the  Company  is
subject,  if  any,  or  usage  (provided  that  any  such  notation,  legend  or
endorsement is in a form  acceptable to the Company).  The Company shall furnish
any such  legend not  contained  in Exhibit A to the  Trustee in  writing.  Each
Security shall be dated the date of its authentication. The terms and provisions
of the Securities set forth in Exhibit A are part of the terms of this Indenture
and to the extent  applicable,  the Company and the Trustee,  by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.

                  (a) Global  Securities.  The  Securities are being offered and
sold by the Company pursuant to a Purchase Agreement relating to the Securities,
dated  December  5, 1997,  among the Company  and the  Initial  Purchasers  (the
"Purchase Agreement").

                  Securities  offered and sold (i) in reliance on  Regulation  S
under the Securities Act  ("Regulation S") shall be issued in the form of one or
more permanent  global  Securities in definitive,  fully registered form without
interest coupons with the Global Securities Legend set forth in Exhibit A hereto
or (ii) to  Qualified  Institutional  Buyers  ("QIBs")  in reliance on Rule 144A
under the  Securities  Act  ("Rule  144A"),  each as  provided  in the  Purchase
Agreement,  shall  be  issued  in  the  form  of one or  more  permanent  global
Securities in definitive,  fully  registered form without  interest coupons with
the Global  Securities  Legend  and  Restricted  Securities  Legend set forth in
Exhibit A hereto (together, the "Global Securities"). Each Global Security shall
be deposited on behalf of the purchasers of the Securities  represented  thereby
with the Trustee,  at its New York office, as custodian for the Depositary,  and
registered in the name of the Depositary or a nominee of the Depositary (and, in
the case of  Regulation  S, for the  accounts of  designated  agents  holding on
behalf of the Euroclear  System  ("Euroclear")  or Cedel Bank,  societe  anonyme
("Cedel Bank")),  duly executed by the Company and  authenticated by the Trustee
as hereinafter  provided.  The aggregate principal amount of the Global Security
may from time to time be  increased  or  decreased  by  adjustments  made on the
records  of the  Trustee  and  the  Depositary  or its  nominee  as  hereinafter
provided.

                  (b) Book-Entry  Provisions.  This Section  2.01(b) shall apply
only to a Global Security deposited with or on behalf of the Depositary.

                  The Company shall execute and the Trustee shall, in accordance
with this Section 2.01(b) and the written order of the Company, authenticate and
deliver  initially one or more Global Securities that (i) shall be registered in
the name of Cede & Co. or other  nominee  of such  Depositary  and (ii) shall be
delivered  by the Trustee to such  Depositary  or pursuant to such  Depositary's
instructions or held by the Trustee as custodian for the Depositary  pursuant to
a FAST Balance Certificate Agreement between the Depositary and the Trustee.

                  Members  of,  or  participants  in,  the  Depositary   ("Agent
Members")  shall have no rights under this  Indenture with respect to any Global
Security  held on  their  behalf  by the  Depositary  or by the  Trustee  as the
custodian of the  Depositary or under such Global  Security,  and the Depositary
may be treated by the  Company,  the Trustee and any agent of the Company or the
Trustee  as the  absolute  owner  of  such  Global  Security  for  all  purposes
whatsoever.



                                       8
<PAGE>

Notwithstanding  the foregoing,  nothing  herein shall prevent the Company,  the
Trustee or any agent of the  Company or the Trustee  from  giving  effect to any
written certification,  proxy or other authorization furnished by the Depositary
or impair,  as between the Depositary  and its Agent  Members,  the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.

                  (c)  Certificated  Securities.  Except as  provided in Section
2.10,  owners of beneficial  interests in Global Securities will not be entitled
to  receive  physical  delivery  of  certificated   Securities.   Purchasers  of
Securities who are not QIBs and did not purchase  Securities sold in reliance on
Regulation S under the  Securities  Act  (referred to herein as the  "Non-Global
Purchasers")  will  receive  certificated   Securities  bearing  the  Restricted
Securities  Legend  set  forth in  Exhibit A hereto  ("Restricted  Securities").
Restricted  Securities will bear the Restricted  Securities  Legend set forth on
Exhibit A unless removed in accordance  with Section  2.06(b) hereof and may not
be exchanged for a Global Security, or interest therein, at any time.

                  After a transfer  of any  Securities  during the period of the
effectiveness of a Shelf Registration  Statement with respect to the Securities,
all requirements pertaining to legends on such Security will cease to apply, the
requirements  requiring any such Security issued to certain holders to be issued
in global form will cease to apply, and a certificated  Security without legends
will be available to the holder of such Securities.

                  SECTION 2.02.  Execution,  Authentication  and  Delivery.  Two
Officers  shall  sign the  Securities  for the  Company  by manual or  facsimile
signature. The Company's seal shall be reproduced on the Securities.

                  If an Officer whose signature is on a Security no longer holds
that  office at the time the  Security  is  authenticated,  the  Security  shall
nevertheless be valid.

                  A  Security  shall  not be valid  until  authenticated  by the
manual signature of an authorized officer of the Trustee. The signature shall be
conclusive  evidence  that  the  Security  has  been  authenticated  under  this
Indenture.

                  Upon a written  order of the Company  signed by two  Officers,
the Trustee  shall  authenticate  the  Securities  for  original  issue up to an
aggregate  principal  amount of  $240,000,000  and  deliver  such  authenticated
securities  as  directed  in such  order.  The  aggregate  principal  amount  of
Securities  outstanding  at any time  shall not  exceed  such  amount  except as
provided in Section 2.07.

                  The  Trustee may  appoint  one or more  authenticating  agents
acceptable to the Company to authenticate  Securities.  An authenticating  agent
may  authenticate  Securities  whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes  authentication by such
agent. An authenticating  agent has the same rights as an Agent to deal with the
Company or an Affiliate.



                                       9
<PAGE>

                  SECTION 2.03.  Registrar,  Paying Agent and Conversion  Agent.
The Company shall maintain in the Borough of Manhattan,  City of New York, State
of New York (i) an  office or  agency  where  Securities  may be  presented  for
registration  of transfer or for exchange (the  "Registrar"),  (ii) an office or
agency where  Securities  may be presented for payment (the "Paying  Agent") and
(iii) an office or agency where  Securities may be presented for conversion (the
"Conversion  Agent").  The Registrar shall keep a register of the Securities and
of their transfer and exchange.  The Company has initially appointed the Trustee
as its Registrar, Paying Agent and Conversion Agent in New York. The Company may
appoint one or more co-registrars,  one or more additional paying agents and one
or more  additional  conversion  agents  in such  other  locations  as it  shall
determine.  The term  "Registrar"  includes any  co-registrar,  the term "Paying
Agent"  includes any  additional  paying agent and the term  "Conversion  Agent"
includes  any  additional  conversion  agent.  The Company may change any Paying
Agent, Registrar or Conversion Agent without prior notice to any Noteholder. The
Company shall notify the Trustee of the name and address of any  newly-appointed
Agent not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall
act as such.

                  SECTION 2.04. Paying Agent to Hold Money in Trust. The Company
shall  require each Paying Agent other than the Trustee to agree in writing that
the  Paying  Agent  will hold in trust for the  benefit  of  Noteholders  or the
Trustee  all money held by the Paying  Agent for the  payment  of  principal  or
interest  on the  Securities,  and will notify the Trustee of any default by the
Company  in making  any such  payment.  While any such  default  continues,  the
Trustee may require a Paying  Agent to pay all money held by it to the  Trustee.
The Company at any time may  require a Paying  Agent to pay all money held by it
to the Trustee and to account for any money  disbursed  by it. Upon payment over
to the  Trustee,  the Paying Agent (if other than the Company or an Affiliate of
the Company) shall have no further liability for the money. If the Company or an
Affiliate of the Company acts as Paying Agent,  it shall segregate and hold in a
separate trust fund for the benefit of the  Noteholders  all money held by it as
Paying Agent.

                  SECTION 2.05.  Noteholder Lists. The Trustee shall preserve in
as current a form as is reasonably practicable the most recent list available to
it of the  names  and  addresses  of  Noteholders.  If the  Trustee  is not  the
Registrar,  the Company  shall furnish to the Trustee on or before each interest
payment  date and at such other  times as the  Trustee  may request in writing a
list in such form and as of such date as the Trustee may  reasonably  require of
the names and addresses of Noteholders.

                  SECTION 2.06.  Transfer and  Exchange.  Where  Securities  are
presented to the Registrar  with a request to register a transfer or to exchange
them for an equal principal  amount of Securities of other  denominations,  such
Registrar  shall register the transfer or make the exchange if its  requirements
for  such  transactions  are met.  To  permit  registrations  of  transfers  and
exchanges, the Company shall issue and the Trustee shall authenticate Securities
at the Registrar's request. No service charge shall be made for any registration
of transfer or exchange (except as otherwise  expressly  permitted herein),  but
the Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection



                                       10
<PAGE>

therewith  (other  than any such  transfer  tax or similar  governmental  charge
payable upon exchanges  pursuant to Sections  2.10,  3.06,  3.08,  5.02 or 11.05
hereof).

                  The Company  shall not be required (i) to issue,  register the
transfer of, or exchange  Securities during a period beginning at the opening of
business 15 days before the day of any  selection of Securities  for  redemption
under  Section  3.02  hereof and ending at the close of  business  on the day of
selection,  or (ii) to  exchange  or register  the  transfer of any  Security so
selected for redemption in whole or in part,  except the  unredeemed  portion of
any Security being redeemed in part.

                  (a)  Notwithstanding  any provision to the contrary herein, so
long as a Global Security remains outstanding and is held by or on behalf of the
Depositary,  transfers  of a Global  Security,  in  whole or in part,  or of any
beneficial  interest  therein,  shall only be made in  accordance  with  Section
2.01(b) and this Section 2.06(a);  provided,  however, that beneficial interests
in a Global Security may be transferred to persons who take delivery  thereof in
the form of a beneficial interest in the same Global Security in accordance with
the transfer  restrictions  set forth under the heading "Notice to Investors" in
the Offering Memorandum and, if applicable, in the Restricted Securities Legend.

                  (i) Except for transfers or exchanges made in accordance  with
         any of clauses (ii) through (iv) of this Section 2.06(a),  transfers of
         a Global Security shall be limited to transfers of such Global Security
         in  whole,  but not in part,  to  nominees  of the  Depositary  or to a
         successor of the Depositary or such successor's nominee.

                   (ii) Global Security to Restricted Security. If an owner of a
         beneficial  interest in a Global Security deposited with the Depositary
         or with the Trustee as custodian for the Depositary  wishes at any time
         to transfer  its  interest  in such Global  Security to a person who is
         required to take delivery thereof in the form of a Restricted Security,
         such owner may,  subject to the rules and  procedures  of  Euroclear or
         Cedel Bank, if applicable,  and the  Depositary,  cause the exchange of
         such interest for one or more  Restricted  Securities of any authorized
         denomination  or  denominations  and of the  same  aggregate  principal
         amount at maturity.  Upon receipt by the Registrar of (1)  instructions
         from  Euroclear  or  Cedel  Bank,  if  applicable,  and the  Depositary
         directing  the  Trustee  to  authenticate   and  deliver  one  or  more
         Restricted  Securities  of  the  same  aggregate  principal  amount  at
         maturity  as the  beneficial  interest  in the  Global  Security  to be
         exchanged,  such  instructions  to  contain  the  name or  names of the
         designated  transferee or transferees,  the authorized  denomination or
         denominations  of  the  Restricted  Securities  to  be  so  issued  and
         appropriate delivery instructions,  (2) a certificate  substantially in
         the form of  Exhibit  B  attached  hereto  given  by the  owner of such
         beneficial  interest  and  stating  that the person  transferring  such
         interest in such Global  Security  reasonably  believes that the person
         acquiring the  Restricted  Securities  for which such interest is being
         exchanged is an institutional "accredited investor" (as defined in Rule
         501(a)(1),  (2), (3) or (7) of Regulation D under the  Securities  Act)
         and  is  acquiring  such  Restricted  Securities  having  an  aggregate
         principal  amount of not less than  $250,000 for its own account or for
         one  or  more  accounts  as to  which  the  transferee  exercises  sole
         investment discretion, (3) a



                                       11
<PAGE>

         certificate  in the form of  Exhibit  C  attached  hereto  given by the
         person  acquiring the Restricted  Securities for which such interest is
         being  exchanged,  to the effect set forth therein,  and (4) such other
         certifications,  legal opinions or other information as the Company may
         reasonably require to confirm that such transfer is being made pursuant
         to  an  exemption  from,  or  in a  transaction  not  subject  to,  the
         registration  requirements  of the  Securities  Act, then  Euroclear or
         Cedel Bank, if applicable,  or the Registrar,  as the case may be, will
         instruct  the  Depositary  to reduce or cause to be reduced such Global
         Security  by  the  aggregate   principal  amount  at  maturity  of  the
         beneficial interest therein to be exchanged and to debit or cause to be
         debited  from the  account  of the  person  making  such  transfer  the
         beneficial  interest in the Global Security that is being  transferred,
         and  concurrently  with such  reduction  and debit  the  Company  shall
         execute,  and the Trustee shall  authenticate and deliver,  one or more
         Restricted  Securities  of  the  same  aggregate  principal  amount  at
         maturity in accordance with the instructions referred to above.

                  (iii) Restricted Security to Restricted Security.  If a holder
         of a Restricted Security wishes at any time to transfer such Restricted
         Security to a person who is required  to take  delivery  thereof in the
         form  of a  Restricted  Security,  such  holder  may,  subject  to  the
         restrictions  on  transfer  set  forth  herein  and in such  Restricted
         Security,  cause the  exchange of such  Restricted  Security for one or
         more   Restricted   Securities  of  any  authorized   denomination   or
         denominations  and of the same aggregate  principal amount at maturity.
         Upon receipt by the  Registrar of (1) such  Restricted  Security,  duly
         endorsed  as  provided  herein,   (2)  instructions  from  such  holder
         directing  the  Trustee  to  authenticate   and  deliver  one  or  more
         Restricted  Securities  of  the  same  aggregate  principal  amount  at
         maturity as the Restricted Security to be exchanged,  such instructions
         to  contain  the  name  or  names  of  the  designated   transferee  or
         transferees,  the  authorized  denomination  or  denominations  of  the
         Restricted   Securities  to  be  so  issued  and  appropriate  delivery
         instructions,  (3) a  certificate  from the  holder  of the  Restricted
         Security to be exchanged in the form of Exhibit B attached hereto,  (4)
         a  certificate  in the form of Exhibit C attached  hereto  given by the
         person  acquiring the Restricted  Securities for which such interest is
         being  exchanged,  to the effect set forth therein,  and (5) such other
         certifications,  legal opinions or other information as the Company may
         reasonably require to confirm that such transfer is being made pursuant
         to  an  exemption  from,  or  in a  transaction  not  subject  to,  the
         registration  requirements  of the Securities  Act, then the Registrar,
         shall  cancel or cause to be  canceled  such  Restricted  Security  and
         concurrently  therewith,  the Company  shall  execute,  and the Trustee
         shall  authenticate and deliver,  one or more Restricted  Securities of
         the same aggregate principal amount at maturity, in accordance with the
         instructions referred to above.

                  (iv) Other  Exchanges.  In the event that a Global Security is
         exchanged  for  Securities in  definitive  registered  form pursuant to
         Section  2.10,  prior  to the  effectiveness  of a  Shelf  Registration
         Statement  with  respect to such  Securities,  such  Securities  may be
         exchanged only in accordance with such procedures as are  substantially
         consistent  with  the  provisions  of  clauses  (ii)  and  (iii)  above
         (including the certification  requirements intended to ensure that such
         transfers  comply with Rule 144A or  Regulation S under the



                                       12
<PAGE>

         Securities  Act, as the case may be) and such other  procedures  as may
         from time to time be adopted by the Company.

                  (b) Except in connection with a Shelf  Registration  Statement
contemplated by and in accordance with the terms of the Registration  Agreement,
if  Securities  are  issued  upon the  registration  of  transfer,  exchange  or
replacement of Securities bearing the Restricted  Securities Legend set forth in
Exhibit A hereto,  or if a request is made to remove such Restricted  Securities
Legend on  Securities,  the  Securities  so  issued  shall  bear the  Restricted
Securities Legend, or the Restricted  Securities Legend shall not be removed, as
the case may be,  unless there is  delivered  to the Company  such  satisfactory
evidence,  which may include an opinion of counsel  licensed to practice  law in
the  State of New York,  as may be  reasonably  required  by the  Company,  that
neither  the legend nor the  restrictions  on  transfer  set forth  therein  are
required to ensure that  transfers  thereof  comply with the  provisions of Rule
144A,  Rule 144 or  Regulation  S under the  Securities  Act or, with respect to
Restricted  Securities,  that such  Securities are not  "restricted"  within the
meaning of Rule 144 under the  Securities  Act. Upon provision to the Company of
such  satisfactory  evidence,  the  Trustee,  at the  written  direction  of the
Company, shall authenticate and deliver Securities that do not bear the legend.

                  (c)   Neither  the  Trustee  nor  any  Agent  shall  have  any
responsibility for any actions taken or not taken by the Depositary.

                  SECTION  2.07.  Replacement  Securities.  If the  holder  of a
Security claims that the Security has been lost,  destroyed or wrongfully  taken
or if such  Security is  mutilated  and is  surrendered  to the  Registrar,  the
Company shall issue and the Trustee shall authenticate a replacement Security if
the  Trustee's  and the Company's  requirements  (as shall have been  previously
communicated  to the Trustee in a written  letter of standing  instruction)  are
met. If required by the Trustee, the Registrar or the Company, an indemnity bond
must be  sufficient  in the  judgment  of each of the  foregoing  to protect the
Company,  the Trustee, any Agent or any authenticating agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge for its
expenses in replacing a Security.

                  In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable,  or is about to be redeemed or
purchased by the Company pursuant to Article III hereof or converted into shares
of Common Stock pursuant to Article V hereof, the Company in its discretion may,
instead of issuing a new Security,  pay, redeem or convert such Security, as the
case may be.

                  Every replacement Security is an additional  obligation of the
Company.

                  SECTION   2.08.   Outstanding   Securities.   The   Securities
outstanding  at any time are all the  Securities  authenticated  by the  Trustee
except for those  canceled by it, those  delivered to it for  cancellation,  and
those described in this Section as not outstanding.



                                       13
<PAGE>

                  If  a  Security  is  replaced,  paid,  redeemed  or  converted
pursuant to Section 2.07 hereof, it ceases to be outstanding unless, in the case
of a replaced  Security,  the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.

                  If Securities are  considered  paid under Section 4.01 hereof,
they cease to be outstanding and interest on them ceases to accrue.

                  A  Security  does not  cease  to be  outstanding  because  the
Company or an Affiliate of the Company holds the Security.

                  SECTION 2.09. Treasury Securities.  In determining whether the
Noteholders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or an Affiliate of
the Company shall be considered as though they are not outstanding,  except that
for the  purposes  of  determining  whether the Trustee  shall be  protected  in
relying on any such direction,  waiver or consent, only Securities which a Trust
Officer knows are so owned shall be so disregarded.

                  SECTION  2.10.  Temporary   Securities;   Exchange  of  Global
Security for Certificated Securities.  (a) Until definitive Securities are ready
for  delivery,  the  Company may  prepare  and the  Trustee  shall  authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive  Securities  but may  have  variations  that  the  Company  considers
appropriate for temporary  Securities.  Without  unreasonable delay, the Company
shall  prepare and the  Trustee  shall  authenticate  definitive  Securities  in
exchange for temporary Securities.

                  (b) A Global  Security  deposited  with the Depositary or with
the Trustee as custodian  for the  Depositary  pursuant to Section 2.01 shall be
transferred  to the  beneficial  owners  thereof  in the  form  of  certificated
securities  only  if  such  transfer  complies  with  Section  2.06  and (i) the
Depositary  notifies  the Company  that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time such Depositary  ceases to
be a  "clearing  agency"  registered  under  the  Exchange  Act and a  successor
Depositary  is not  appointed by the Company  within 90 days of such notice,  or
(ii) an Event of Default has occurred and is continuing.

                  (c) Any Global Security that is transferable to the beneficial
owners thereof in the form of certificated  Securities  pursuant to this Section
2.10  shall be  surrendered  by the  Depositary  to the  Trustee  located in the
Borough of Manhattan,  The City of New York, to be so  transferred,  in whole or
from time to time in part,  without charge,  and the Trustee shall  authenticate
and  deliver,  upon such  transfer of each portion of such Global  Security,  an
equal  aggregate  principal  amount at  maturity  of  Securities  of  authorized
denominations  in the form of certificated  Securities.  Any portion of a Global
Security transferred  pursuant to this Section shall be executed,  authenticated
and delivered only in denominations of $1,000 and any integral  multiple thereof
and registered in such names as the Depositary  shall direct.  Any Securities in
the form of certificated Securities delivered in exchange for an interest in the
Global Security



                                       14
<PAGE>

shall,  except as otherwise  provided by Section  2.06(b),  bear the  Restricted
Securities Legend set forth in Exhibit A hereto.

                  (d) Prior to any  transfer  pursuant to Section  2.10(b),  the
registered holder of a Global Security may grant proxies and otherwise authorize
any person,  including Agent Members and persons that may hold interests through
Agent Members,  to take any action which a holder is entitled to take under this
Indenture or the Securities.

                  (e) In the event of the  occurrence  of  either of the  events
specified in Section  2.10(b),  the Company will promptly make  available to the
Trustee a  reasonable  supply of  certificated  Securities  in  definitive  form
without interest coupons.

                  SECTION  2.11.  Cancellation.  The  Company  at any  time  may
deliver  Securities to the Registrar for  cancellation.  The  Registrar,  Paying
Agent  and  Conversion  Agent  shall  forward  to  the  Trustee  any  Securities
surrendered  to them  for  registration  of  transfer,  redemption,  conversion,
exchange  or  payment.   The  Trustee  shall  promptly   cancel  all  Securities
surrendered for  registration  of transfer,  redemption,  conversion,  exchange,
payment,  replacement or cancellation and shall destroy all canceled  Securities
unless the Company otherwise  directs.  The Company may not issue new Securities
to  replace  Securities  that it has paid or that  have  been  delivered  to the
Registrar for cancellation or that any holder has converted.

                  SECTION 2.12. Defaulted Interest. If the Company fails to make
a payment of interest on the  Securities,  it shall pay such defaulted  interest
plus any interest payable on the defaulted  interest,  in any lawful manner.  It
may pay such defaulted  interest,  plus any such interest  payable on it, to the
persons who are  Noteholders  on a subsequent  special  record date. The Company
shall fix any such  record date and  payment  date.  At least 15 days before any
such record date, the Company shall mail to Noteholders a notice that states the
record date, payment date, and amount of such interest to be paid.

                                   ARTICLE III

                                   Redemption

                  SECTION  3.01.  Notices to Trustee.  If the Company  elects to
redeem  Securities  pursuant to Section 3.07 hereof, it shall notify the Trustee
of the  redemption  date and the principal  amount of Securities to be redeemed.
The Company shall give each notice provided for in this Section 3.01 at least 45
days  before  the  redemption  date  (unless a shorter  notice  period  shall be
satisfactory to the Trustee).

                  SECTION 3.02. Selection of Securities to be Redeemed.  If less
than all the  Securities  are to be  redeemed,  the  Trustee  shall  select  the
Securities to be redeemed by a method that complies with the requirements of the
principal  national  securities  exchange,  if any, on which the  Securities are
listed,  or, if the Securities are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee considers fair and appropriate.  The Trustee
shall make the  selection not more than 60 days and not less than 30 days before
the redemption date from



                                       15
<PAGE>

Securities  outstanding not previously  called for  redemption.  The Trustee may
select  for  redemption  portions  of the  principal  of  Securities  that  have
denominations  larger than  $1,000.  Securities  and portions of them it selects
shall be in amounts of $1,000 or integral  multiples  of $1,000.  Provisions  of
this  Indenture  that apply to Securities  called for  redemption  also apply to
portions of  Securities  called for  redemption.  The Trustee  shall  notify the
Company  promptly of the  Securities  or portions of Securities to be called for
redemption.

                  If any Security  selected for partial  redemption is converted
in part after such  selection,  the converted  portion of such Security shall be
deemed (so far as may be) to be the portion to be selected for  redemption.  The
Securities  (or portions  thereof) so selected shall be deemed duly selected for
redemption for all purposes  hereof,  notwithstanding  that any such Security is
converted  in whole or in part before the  mailing of the notice of  redemption.
Upon any redemption of less than all the Securities, the Company and the Trustee
may treat as outstanding any Securities  surrendered  for conversion  during the
period 15 days next preceding the mailing of a notice of redemption and need not
treat as outstanding any Security authenticated and delivered during such period
in exchange for the unconverted portion of any Security converted in part during
such period.

                  SECTION 3.03.  Notice of Redemption.  At least 30 days but not
more than 60 days before a redemption  date,  the Company shall mail a notice of
redemption to each holder whose  Securities  are to be redeemed at such holder's
registered address.

                  The notice shall  identify the  Securities  to be redeemed and
shall state:

                  (a)  the redemption date;

                  (b)  the redemption price;

                  (c) if any Security is being  redeemed in part, the portion of
         the principal  amount of such  Security to be redeemed and that,  after
         the redemption date, upon cancellation of such Security, a new Security
         or Securities in principal amount equal to the unredeemed  portion will
         be issued in the name of the holder thereof;

                  (d)  the name and address of the Paying Agent;

                  (e) that Securities  called for redemption must be surrendered
         to the  Paying  Agent to collect  the  redemption  price  plus  accrued
         interest;

                  (f)  that,   unless  the  Company   defaults  in  making  such
         redemption  payment or the Paying Agent is prohibited  from making such
         payment  pursuant to the terms of this Indenture,  by law or otherwise,
         interest on Securities  called for  redemption  ceases to accrue on and
         after the redemption date; and

                  (g) the  paragraph  of the  Securities  pursuant  to which the
         Securities called for redemption are being redeemed.



                                       16
<PAGE>

                  Such notice shall also state the current  Conversion Price and
the date on which the right to convert such Securities or portions  thereof into
Common Stock of the Company will expire.

                  At the  Company's  request,  the Trustee  shall give notice of
redemption in the Company's name and at its expense.

                  SECTION 3.04.  Effect of Notice of Redemption.  Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date at the price set forth in the Security.

                  SECTION 3.05.  Deposit of Redemption  Price.  On or before the
redemption  date, the Company shall deposit with the Trustee or the Paying Agent
money  sufficient to pay the redemption  price of and accrued interest up to but
not including the redemption  date on all Securities to be redeemed on that date
(subject  to the  right of  holders  of record on the  relevant  record  date to
receive interest due on an interest payment date) unless  theretofore  converted
into Common Stock pursuant to the provisions  hereof. The Trustee or such Paying
Agent shall return to the Company any money not required for that purpose.

                  SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall issue and the Trustee shall
authenticate  for the holder at the expense of the Company a new Security  equal
in principal amount to the unredeemed portion of the Security surrendered.

                  SECTION 3.07. Optional Redemption.  The Company may redeem all
or any portion of the  Securities,  upon the terms and at the redemption  prices
set forth in each of the  Securities.  Any  redemption  pursuant to this Section
3.07 shall be made  pursuant to the  provisions  of Section  3.01  through  3.06
hereof.

                  SECTION 3.08.  Designated  Event Offer. (a) In the event that,
pursuant to Section 4.07 hereof,  the Company shall commence a Designated  Event
Offer, the Company shall follow the procedures in this Section 3.08.

                  (b) The Designated  Event Offer shall remain open for a period
specified  by the Company  which  shall be no less than 30 calendar  days and no
more than 40 calendar days following its commencement on the date of the mailing
of notice in accordance with Section 4.07(b) hereof (the  "Commencement  Date"),
except to the extent that a longer  period is required  by  applicable  law (the
"Tender  Period").  Upon the  expiration of the Tender  Period (the  "Designated
Event  Payment  Date"),  the Company  shall  purchase  the  principal  amount of
Securities  required to be purchased pursuant to Section 4.07 hereof (the "Offer
Amount").

                  (c) If the  Designated  Event  Payment  Date is on or after an
interest payment record date and on or before the related interest payment date,
any accrued  interest to the related  interest  payment date will be paid to the
person in whose name a Security is registered at the



                                       17
<PAGE>

close of  business on such  record  date,  and no  additional  interest  will be
payable to Noteholders who tender  Securities  pursuant to the Designated  Event
Offer.

                  (d) The Company shall provide the Trustee with written  notice
of the Designated  Event Offer at least 10 Business Days before the Commencement
Date.

                  (e) Subject to Section 4.07(b),  on or before the Commencement
Date,  the Company or the  Trustee  (at the request and expense of the  Company)
shall  send,  by first class mail,  a notice to each of the  Noteholders,  which
shall govern the terms of the Designated Event Offer and shall state:

                  (i) that the Designated  Event Offer is being made pursuant to
         this  Section  3.08 and  Section  4.07  hereof and that all  Securities
         tendered will be accepted for payment;

                  (ii) the Offer Amount,  the purchase  price (as  determined in
         accordance with Section 4.07 hereof), the length of time the Designated
         Event Offer will remain open and the Designated Event Payment Date;

                  (iii) that any  Security or portion  thereof  not  tendered or
         accepted for payment will continue to accrue interest;

                  (iv) that,  unless the Company  defaults in the payment of the
         Designated Event Payment,  any Security or portion thereof accepted for
         payment  pursuant to the  Designated  Event Offer shall cease to accrue
         interest after the Designated Event Payment Date;

                  (v) that  Noteholders  electing  to have a Security or portion
         thereof  purchased  pursuant  to any  Designated  Event  Offer  will be
         required to surrender the Security,  with the form entitled  "Option of
         Noteholder To Elect Purchase" on the reverse of the Security completed,
         to the Paying Agent at the address specified in the notice prior to the
         close of business on the third  Business Day preceding  the  Designated
         Event Payment Date;

                  (vi) that  Noteholders  will be  entitled  to  withdraw  their
         election  if the  Paying  Agent  receives,  not later than the close of
         business on the second  Business Day  preceding  the  Designated  Event
         Payment Date, or such longer period as may be required by law, a letter
         or a  telegram,  telex,  facsimile  transmission  (receipt  of which is
         confirmed and promptly  followed by a letter) setting forth the name of
         the Noteholder, the principal amount of the Security or portion thereof
         the  Noteholder  delivered  for  purchase  and a  statement  that  such
         Noteholder is withdrawing  his election to have the Security or portion
         thereof purchased; and

                  (vii) that  Noteholders  whose  Securities are being purchased
         only in part will be issued new Securities equal in principal amount to
         the   unpurchased   portion  of  the  Securities   surrendered,   which
         unpurchased  portion must be equal to $1,000 in principal  amount or an
         integral multiple thereof.



                                       18
<PAGE>

                  In addition,  the notice shall  contain all  instructions  and
materials  that the  Company  shall  reasonably  deem  necessary  to enable such
Noteholders to tender Securities pursuant to the Designated Event Offer.

                  (f) At least one  Business Day prior to the  Designated  Event
Payment  Date,  the Company  shall  irrevocably  deposit with the Trustee or the
Paying Agent in immediately  available funds an amount equal to the Offer Amount
to be held for payment in accordance with the terms of this Section 3.08. On the
Designated  Event Payment Date,  the Company shall,  to the extent  lawful,  (i)
accept for payment the Securities or portions thereof  tendered  pursuant to the
Designated  Event  Offer,  (ii)  deliver or cause to be delivered to the Trustee
Securities so accepted and (iii) deliver to the Trustee an Officers' Certificate
stating such  Securities  or portions  thereof have been accepted for payment by
the Company in accordance  with the terms of this Section 3.08. The Paying Agent
shall  promptly  (but in any case not later  than five  calendar  days after the
Designated  Event Payment Date) mail or deliver to each tendering  Noteholder an
amount  equal  to  the  purchase  price  of  the  Securities  tendered  by  such
Noteholder,  and the Trustee shall promptly  authenticate and mail or deliver to
such  Noteholders a new Security  equal in principal  amount to any  unpurchased
portion of the Security  surrendered,  if any; provided,  that each new Security
shall be in a principal amount of $1,000 or an integral  multiple  thereof.  Any
Securities not so accepted shall be promptly mailed or delivered by or on behalf
of the Company to the holder  thereof.  The Company will  publicly  announce the
results of the Designated  Event Offer on, or as soon as practicable  after, the
Designated Event Payment Date.

                  (g) The Designated Event Offer shall be made by the Company in
compliance  with  all  applicable  provisions  of  the  Exchange  Act,  and  all
applicable  tender offer rules  promulgated  thereunder,  and shall  include all
instructions  and materials that the Company shall  reasonably deem necessary to
enable such Noteholders to tender their Securities.

                                   ARTICLE IV

                                    Covenants

                  SECTION 4.01. Payment of Securities. The Company shall pay the
principal  of and  interest  on the  Securities  on the dates and in the  manner
provided in the  Securities.  Principal and interest shall be considered paid on
the date due if the Paying  Agent (other than the Company or an Affiliate of the
Company)  holds on that date  money  designated  for and  sufficient  to pay all
principal  and interest  then due and such Paying Agent is not  prohibited  from
paying such money to the  Noteholders on that date pursuant to the terms of this
Indenture.  To the extent  lawful,  the Company  shall pay  interest  (including
post-petition  interest in any proceeding  under any Bankruptcy  Law) on overdue
installments of interest  (without regard to any applicable grace period) at the
rate borne by the Securities, compounded semiannually.

                  SECTION  4.02.  SEC  Reports.  Whether or not  required by the
rules and regulations of the SEC, so long as any Securities are outstanding, the
Company  will file with the SEC and furnish to the Trustee and to the holders of
Securities  all  quarterly  and  annual  financial



                                       19
<PAGE>

information  required to be contained in a filing with the SEC on Forms 10-Q and
10-K, including a "Management's  Discussion and Analysis of Financial Conditions
and Results of  Operations"  and,  with  respect to annual  information  only, a
report thereon by the Company's certified independent accountants.

                  SECTION  4.03.  Compliance  Certificate.   The  Company  shall
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company, an Officers' Certificate stating that a review of the activities of the
Company  and its  subsidiaries  during the  preceding  fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
the Company has kept,  observed,  performed and fulfilled its obligations under,
and complied with the covenants and conditions contained in, this Indenture, and
further stating,  as to each such Officer signing such certificate,  that to the
best of such Officer's knowledge the Company has kept,  observed,  performed and
fulfilled  each  and  every  covenant,  and  complied  with  the  covenants  and
conditions  contained in this Indenture and is not in default in the performance
or observance of any of the terms,  provisions and  conditions  hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which such Officer may have knowledge) and that to the best
of such  Officer's  knowledge  no event has occurred and remains in existence by
reason of which payments on account of the principal or of interest,  if any, on
the Securities are prohibited.

                  One of the Officers signing such Officers'  Certificate  shall
be either the Company's principal executive officer, principal financial officer
or principal accounting officer.

                  The  Company  will,  so  long  as any of  the  Securities  are
outstanding, deliver to the Trustee, forthwith upon becoming aware of:

                  (a)  any   Default,   Event  of  Default  or  default  in  the
         performance of any covenant,  agreement or condition  contained in this
         Indenture; or

                  (b) any event of default under any other  mortgage,  indenture
         or instrument as that term is used in Section 8.01(e),

an Officers' Certificate specifying such Default, Event of Default or default.

                  Immediately upon the occurrence of any event giving rise to an
increase in the interest rate on the Securities in accordance  with paragraph 11
of the form thereof or the  termination of any such increase,  the Company shall
give the Trustee  notice of such increase or  termination,  of the interest rate
borne by the Securities  after giving effect to such increase or termination and
of the event  giving rise to such  increase or  termination  (such  notice to be
contained in an Officers'  Certificate),  and prior to receipt of such Officers'
Certificate  the Trustee  shall be  entitled to assume that no such  increase or
termination has occurred, as the case may be.

                  SECTION  4.04.  Stay,  Extension  and Usury Law.  The  Company
covenants  (to the extent  that it may  lawfully  do so) that it will not at any
time insist upon, plead, or in any



                                       20
<PAGE>

manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted,  now or at any time hereafter in force, which may
affect the covenants or the performance of this  Indenture;  and the Company (to
the  extent it may  lawfully  do so)  hereby  expressly  waives  all  benefit or
advantage of any such law, and covenants that it will not, by resort to any such
law,  hinder,  delay or impede the execution of any power herein  granted to the
Trustee,  but will suffer and permit the execution of every such power as though
no such law has been enacted.

                  SECTION  4.05.  Corporate  Existence.  Except as  provided  in
Article VII hereof, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its  corporate  existence  and the
corporate,  partnership or other  existence of each Subsidiary of the Company in
accordance with the respective  organizational  documents of each Subsidiary and
the rights (charter and  statutory),  licenses and franchises of the Company and
its Subsidiaries;  provided,  however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate,  partnership or
other  existence of any  Subsidiary,  if the Board of Directors  shall determine
that the  preservation  thereof  is no longer  desirable  in the  conduct of the
business of the Company and its Subsidiaries  taken as a whole and that the loss
thereof is not adverse in any material respect to the Noteholders.

                  SECTION 4.06.  Taxes.  The Company shall, and shall cause each
of its  Subsidiaries  to, pay prior to delinquency  all taxes,  assessments  and
governmental  levies,  except as  contested  in good  faith  and by  appropriate
proceedings.

                  SECTION 4.07.  Designated  Event. (a) Upon the occurrence of a
Designated  Event, each holder of Securities shall have the right, in accordance
with this  Section  4.07 and  Section  3.08  hereof,  to require  the Company to
repurchase all or any part (equal to $1,000 or an integral  multiple thereof) of
such holder's  Securities pursuant to the terms of Section 3.08 (the "Designated
Event Offer") at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid  interest  thereon to the Designated  Event Payment Date
(the "Designated Event Payment").

                  (b) Within 30 days following any Designated Event, the Company
shall mail to each holder the notice provided by Section 3.08(e).

                  SECTION 4.08. Investment Company Act. As long as any Notes are
outstanding,  the Company will conduct its business and  operations so as not to
become an "investment  company" within the meaning of the Investment Company Act
of 1940,  as amended (the  "Investment  Company  Act"),  and will take all steps
required in order for it to continue not to be an  "investment  company" and not
to be required to be registered under the Investment Company Act, including,  if
necessary, redeployment of the assets of the Company.



                                       21
<PAGE>

                                    ARTICLE V

                                   Conversion

                  SECTION 5.01. Conversion Privilege. A holder of a Security may
convert the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into fully paid and nonassessable  shares of Common Stock of
the Company at any time after 90 days  following  the Issuance Date and prior to
the close of business on the Business  Day  immediately  preceding  the maturity
date of the Security at the Conversion  Price then in effect,  except that, with
respect to any  Security  called for  redemption,  such  conversion  right shall
terminate at the close of business on the Business Day immediately preceding the
redemption  date  (unless the  Company  shall  default in making the  redemption
payment when it becomes due, in which case the conversion  right shall terminate
on the date such  default  is  cured).  The  number  of  shares of Common  Stock
issuable  upon  conversion of a Security is determined by dividing the principal
amount  of the  Security  converted  by the  conversion  price in  effect on the
Conversion Date (the "Conversion Price").

                  The initial  Conversion Price is stated in paragraph 10 of the
Securities and is subject to adjustment as provided in this Article V.

                  Provisions of this  Indenture  that apply to conversion of all
of a  Security  also  apply to  conversion  of a  portion  of it.  A  holder  of
Securities  is not entitled to any rights of a holder of Common Stock until such
holder of Securities has converted such Securities  into Common Stock,  and only
to the extent that such Securities are deemed to have been converted into Common
Stock under this Article 5.

                  SECTION 5.02. Conversion  Procedure.  To convert a Security, a
holder must satisfy the requirements in paragraph 10 of the Securities. The date
on which the holder  satisfies all of those  requirements is the conversion date
(the "Conversion  Date").  As soon as practicable after the Conversion Date, the
Company shall deliver to the holder through the  Conversion  Agent a certificate
for the number of whole shares of Common Stock  issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.03. The person
in whose name the  certificate  is registered  shall become the  stockholder  of
record on the Conversion  Date and, as of such date,  such person's  rights as a
Noteholder  with  respect  to the  converted  Security  shall  cease;  provided,
however,  that no  surrender  of a Security on any date when the stock  transfer
books of the Company shall be closed shall be effective to constitute the person
entitled  to receive  the shares of Common  Stock  upon such  conversion  as the
stockholder  of record of such  shares of Common  Stock on such  date,  but such
surrender  shall be effective to constitute the person  entitled to receive such
shares of Common Stock as the  stockholder of record thereof for all purposes at
the close of business on the next  succeeding  day on which such stock  transfer
books are open; provided further,  however, that such conversion shall be at the
Conversion  Price in  effect  on the date that  such  Security  shall  have been
surrendered  for  conversion,  as if the stock transfer books of the Company had
not been closed.



                                       22
<PAGE>

                  No payment or  adjustment  will be made for accrued and unpaid
interest on a converted  Security or for dividends or distributions on shares of
Common Stock issued upon conversion of a Security,  but if any holder surrenders
a Security for conversion after the close of business on the record date for the
payment of an  installment  of interest  and prior to the opening of business on
the next interest  payment date,  then,  notwithstanding  such  conversion,  the
interest  payable on such  interest  payment date shall be paid to the holder of
such Security on such record date. In such event,  unless such Security has been
called for redemption on or prior to such interest  payment date, such Security,
when  surrendered  for  conversion,  must be  accompanied  by  payment  in funds
acceptable  to the Company of an amount  equal to the  interest  payable on such
interest payment date on the portion so converted.

                  If a holder  converts more than one Security at the same time,
the number of whole shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of Securities converted.

                  Upon  surrender of a Security  that is converted in part,  the
Trustee  shall  authenticate  for the holder a new  Security  equal in principal
amount to the unconverted portion of the Security surrendered.

                  SECTION 5.03.  Fractional  Shares.  The Company will not issue
fractional  shares  of Common  Stock  upon  conversion  of a  Security.  In lieu
thereof,  the  Company  will pay an amount in cash based  upon the Daily  Market
Price of the Common Stock on the trading day prior to the date of conversion.

                  SECTION   5.04.   Taxes  on   Conversion.   The   issuance  of
certificates  for shares of Common  Stock upon the  conversion  of any  Security
shall be made without charge to the converting  Noteholder for such certificates
or for  any tax in  respect  of the  issuance  of such  certificates,  and  such
certificates shall be issued in the respective names of, or in such names as may
be  directed  by, the holder or holders  of the  converted  Security;  provided,
however,  that in the event that  certificates for shares of Common Stock are to
be issued in a name other than the name of the holder of the Security converted,
such  Security,  when  surrendered  for  conversion,  shall be accompanied by an
instrument of assignment or transfer,  in form satisfactory to the Company, duly
executed by the registered holder thereof or his duly authorized  attorney;  and
provided further, however, that the Company shall not be required to pay any tax
which may be payable in respect of any  transfer  involved in the  issuance  and
delivery of any such certificates in a name other than that of the holder of the
converted  Security,  and the Company  shall not be required to issue or deliver
such certificates  unless or until the person or persons requesting the issuance
thereof  shall  have paid to the  Company  the  amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.

                  SECTION 5.05.  Company to Provide Stock.  The Company shall at
all times reserve and keep available,  free from preemptive  rights,  out of its
authorized  but unissued  Common Stock,  solely for the purpose of issuance upon
conversion of Securities as herein  provided,  a sufficient  number of shares of
Common Stock to permit the conversion of all  outstanding  Securities for shares
of Common Stock.



                                       23
<PAGE>

                  All shares of Common Stock which may be issued upon conversion
of the  Securities  shall be duly  authorized,  validly  issued,  fully paid and
nonassessable when so issued.

                  SECTION 5.06.  Adjustment of Conversion  Price. The Conversion
Price shall be subject to adjustment from time to time as follows:

                  (a) In case the Company  shall (1) pay a dividend in shares of
Common Stock to holders of Common Stock,  (2) make a  distribution  in shares of
Common Stock to holders of Common Stock, (3) subdivide its outstanding shares of
Common Stock into a greater  number of shares of Common Stock or (4) combine its
outstanding  shares of Common  Stock  into a smaller  number of shares of Common
Stock, the Conversion Price in effect  immediately prior to such action shall be
adjusted  so  that  the  holder  of  any  Security  thereafter  surrendered  for
conversion  shall be entitled  to receive  the number of shares of Common  Stock
which he would have owned immediately  following such action had such Securities
been converted  immediately prior thereto.  Any adjustment made pursuant to this
subsection (a) shall become effective  immediately  after the record date in the
case of a dividend or distribution and shall become effective  immediately after
the effective date in the case of a subdivision or combination.

                  (b) In case the  Company  shall  issue  rights or  warrants to
substantially  all  holders  of  Common  Stock  entitling  them  (for  a  period
commencing no earlier than the record date for the  determination  of holders of
Common  Stock  entitled to receive such rights or warrants and expiring not more
than 45 days after such record  date) to  subscribe  for or  purchase  shares of
Common Stock (or securities  convertible into Common Stock) at a price per share
less than the Current  Market Price (as  determined  pursuant to subsection  (f)
below) of the Common Stock on such record date,  the  Conversion  Price shall be
adjusted so that the same shall equal the price  determined by  multiplying  the
Conversion Price in effect  immediately  prior to such record date by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
on such  record  date,  plus the  number of shares  of  Common  Stock  which the
aggregate offering price of the offered shares of Common Stock (or the aggregate
conversion  price of the  convertible  securities so offered)  would purchase at
such Current Market Price,  and of which the denominator  shall be the number of
shares  of Common  Stock  outstanding  on such  record  date plus the  number of
additional  shares of  Common  Stock  offered  (or into  which  the  convertible
securities so offered are convertible).  Such adjustments shall become effective
immediately after such record date.

                  (c) In case the  Company  shall  distribute  to all holders of
Common  Stock  shares of any class of Capital  Stock of the  Company  other than
Common  Stock,  evidences  of  indebtedness  or other  assets  (other  than cash
dividends  out  of  current  or  retained  earnings),  or  shall  distribute  to
substantially  all holders of Common Stock  rights or warrants to subscribe  for
securities  (other than those  Securities  referred to in subsection (b) above),
then in each such case the  Conversion  Price shall be adjusted so that the same
shall equal the price  determined by multiplying the Conversion  Price in effect
immediately  prior to the date of such  distribution  by a fraction of which the
numerator  shall  be  the  Current  Market  Price  (determined  as  provided  in
subsection  (f) below) of the Common  Stock on the record date  mentioned  below
less the then fair market value (as determined by the Board of Directors,  whose
determination shall be conclusive



                                       24
<PAGE>

evidence of such fair market value and described in a Board  Resolution)  of the
portion of the assets so distributed or of such subscription  rights or warrants
applicable to one share of Common Stock,  and of which the denominator  shall be
such Current  Market Price of the Common  Stock.  Such  adjustment  shall become
effective immediately after the record date for the determination of the holders
of Common  Stock  entitled to receive  such  distribution.  Notwithstanding  the
foregoing,  in case the Company  shall issue rights or warrants to subscribe for
additional  shares of the Company's  capital stock (other than those referred to
in  subsection  (b) above)  ("Rights")  to  substantially  all holders of Common
Stock,  the  Company  may,  in lieu of making any  adjustment  pursuant  to this
Section  5.06,  make  proper  provision  so that each  holder of a Security  who
converts such Security (or any portion  thereof)  after the record date for such
distribution  and prior to the  expiration  or redemption of the Rights shall be
entitled to receive  upon such  conversion,  in addition to the shares of Common
Stock  issuable upon such  conversion  (the  "Conversion  Shares"),  a number of
Rights to be determined as follows: (i) if such conversion occurs on or prior to
the date for the distribution to the holders of Rights of separate  certificates
evidencing such Rights (the  "Distribution  Date"), the same number of Rights to
which a holder of a number of shares  of  Common  Stock  equal to the  number of
Conversion  Shares is entitled at the time of such conversion in accordance with
the terms and  provisions  of and  applicable  to the  Rights;  and (ii) if such
conversion  occurs  after the  Distribution  Date,  the same number of Rights to
which a holder of the number of shares of Common Stock into which the  principal
amount of the Security so converted  was  convertible  immediately  prior to the
Distribution  Date  would  have  been  entitled  on  the  Distribution  Date  in
accordance with the terms and provisions of and applicable to the Rights.

                  (d) In case the Company  shall,  by dividend or otherwise,  at
any time  distribute  to all  holders of its Common  Stock cash  (including  any
distributions  of cash out of current or  retained  earnings  of the Company but
excluding any cash that is  distributed  as part of a  distribution  requiring a
Conversion  Price  adjustment  pursuant to paragraph  (c) of this Section) in an
aggregate amount that,  together with the sum of (x) the aggregate amount of any
other distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for   determining  the   stockholders   entitled  to  such   distribution   (the
"Distribution  Record  Date")  and in  respect  of  which  no  Conversion  Price
adjustment  pursuant to paragraphs  (c) or (e) of this Section or this paragraph
(d) has been made,  exceeds 15% of the product of the Current  Market  Price per
share  (determined  as provided in paragraph  (f) of this Section) of the Common
Stock on the  Distribution  Record  Date  multiplied  by the number of shares of
Common Stock outstanding on the Distribution  Record Date (excluding shares held
in the treasury of the Company),  the Conversion  Price shall be reduced so that
the same shall equal the price  determined by multiplying  such Conversion Price
in  effect  immediately  prior  to the  effectiveness  of the  Conversion  Price
reduction  contemplated  by  this  paragraph  (d) by a  fraction  of  which  the
numerator shall be the Current Market Price per share (determined as provided in
paragraph  (f) of this Section) of the Common Stock on the  Distribution  Record
Date less the amount of such cash and other consideration  (including any Excess
Payments) so  distributed  applicable to one share of Common Stock (equal to the
aggregate  amount of such cash and other  consideration  (including  any  Excess
Payments) divided by the number of shares of Common Stock outstanding



                                       25
<PAGE>

on the  Distribution  Record  Date) and the  denominator  shall be such  Current
Market Price per share (determined as provided in paragraph (f) of this Section)
of the Common Stock on the  Distribution  Record Date,  such reduction to become
effective  immediately prior to the opening of business on the day following the
Distribution Record Date.

                  (e) In case a tender  offer or  other  negotiated  transaction
made by the Company or any  Subsidiary  of the Company for all or any portion of
the Common Stock shall be  consummated,  if an Excess Payment is made in respect
of such  tender  offer or other  negotiated  transaction  and the amount of such
Excess Payment,  together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate  amount of all  distributions  to all holders of
the  Common  Stock  made in cash  (including  any  distributions  of cash out of
current or retained  earnings of the  Company),  in each case made within the 12
months  preceding  the date of payment of such  current  negotiated  transaction
consideration  or  expiration of such current  tender offer,  as the case may be
(the "Purchase Date"),  and as to which no adjustment  pursuant to paragraph (c)
or paragraph (d) of this Section or this  paragraph  (e) has been made,  exceeds
15% of the product of the Current Market Price per share (determined as provided
in  paragraph  (f) of this  Section) of the Common  Stock on the  Purchase  Date
multiplied by the number of shares of Common Stock  outstanding  (including  any
tendered  shares but excluding any shares held in the treasury of the Company or
any Subsidiary of the Company) on the Purchase Date, the Conversion  Price shall
be reduced so that the same shall equal the price determined by multiplying such
Conversion  Price  in  effect  immediately  prior  to the  effectiveness  of the
Conversion  Price reduction  contemplated by this paragraph (e) by a fraction of
which the numerator  shall be the Current Market Price per share  (determined as
provided in paragraph  (f) of this  Section) of the Common Stock on the Purchase
Date less the amount of such Excess  Payments  and such cash  distributions,  if
any,  applicable to one share of Common Stock (equal to the aggregate  amount of
such Excess Payments and such cash distributions divided by the number of shares
of Common Stock  outstanding on the Purchase Date) and the denominator  shall be
such Current Market Price per share  (determined as provided in paragraph (f) of
this Section) of the Common Stock on the Purchase Date, such reduction to become
effective  immediately prior to the opening of business on the day following the
Purchase Date.

                  (f) The  "Current  Market  Price" per share of Common Stock on
any date shall be deemed to be the  average of the Daily  Market  Prices for the
shorter of (i) 30 consecutive  Business Days ending on the last full Trading Day
on the exchange or market  referred to in  determining  such Daily Market Prices
prior to the time of  determination  or (ii) the period  commencing  on the date
next succeeding the first public  announcement of the issuance of such rights or
such warrants or such other distribution or such negotiated  transaction through
such last full trading day on the exchange or market  referred to in determining
such Daily Market Prices prior to the time of determination.

                  (g) "Excess  Payment" means the excess of (A) the aggregate of
the cash and fair market value of other consideration paid by the Company or any
of its  Subsidiaries  with  respect to the shares  acquired in a tender offer or
other negotiated transaction over (B) the Daily Market



                                       26
<PAGE>

Price on the Trading Day  immediately  following  the  completion of such tender
offer or other  negotiated  transaction  multiplied  by the  number of  acquired
shares.

                  (h) In any case in which this Section 5.06 shall  require that
an  adjustment  be made  immediately  following a record date for an event,  the
Company  may elect to defer,  until  such  event,  issuing  to the holder of any
Security  converted  after such record date the shares of Common Stock and other
Capital Stock of the Company  issuable upon such  conversion  over and above the
shares of Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion  Price prior to adjustment;  and,
in lieu of the shares the  issuance of which is so deferred,  the Company  shall
issue or cause its  transfer  agents  to issue  due  bills or other  appropriate
evidence of the right to receive such shares.

                  SECTION 5.07. No  Adjustment.  No adjustment in the Conversion
Price shall be required until cumulative adjustments amount to 1% or more of the
Conversion Price as last adjusted; provided, however, that any adjustments which
by reason of this  Section  5.07 are not  required  to be made  shall be carried
forward and taken into account in any subsequent  adjustment.  All  calculations
under  this  Article  V  shall  be made to the  nearest  cent or to the  nearest
one-hundredth  of a share,  as the case may be. No  adjustment  need be made for
rights to purchase  Common Stock pursuant to a Company plan for  reinvestment of
dividends or interest.  No adjustment need be made for a change in the par value
or no par value of the Common Stock.

                  SECTION 5.08. Other  Adjustments.  (a) In the event that, as a
result of an adjustment  made pursuant to Section 5.06 above,  the holder of any
Security thereafter  surrendered for conversion shall become entitled to receive
any  shares of Capital  Stock of the  Company  other  than  shares of its Common
Stock,  thereafter the Conversion  Price of such other shares so receivable upon
conversion of any Securities shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article V.

                  (b) In the event that shares of Common Stock are not delivered
after the  expiration  of any of the rights or  warrants  referred to in Section
5.06(b) and Section 5.06(c) hereof,  the Conversion Price shall be readjusted to
the Conversion  Price which would otherwise be in effect had the adjustment made
upon the issuance of such rights or warrants  been made on the basis of delivery
of only the number of shares of Common Stock actually delivered.

                  SECTION 5.09.  Adjustments for Tax Purposes.  The Company may,
at its option,  make such  reductions in the  Conversion  Price,  in addition to
those required by Section 5.06 above,  as it determines to be advisable in order
that any  stock  dividend,  subdivision  of  shares,  distribution  of rights to
purchase stock or securities or distribution of securities  convertible  into or
exchangeable  for stock  made by the  Company  to its  stockholders  will not be
taxable to the recipients thereof.

                  SECTION  5.10.  Adjustments  by the Company.  The Company from
time to time may, to the extent permitted by law, reduce the Conversion Price by
any amount for any period of at least 20 days,  in which case the Company  shall
give at least 15 days' notice of such

                                       27

<PAGE>

reduction in accordance  with Section 5.11, if the Board of Directors has made a
determination that such reduction would be in the best interests of the Company,
which determination shall be conclusive.

                  SECTION 5.11.  Notice of  Adjustment.  Whenever the Conversion
Price is  adjusted,  the  Company  shall  promptly  mail to  Noteholders  at the
addresses appearing on the Registrar's books a notice of the adjustment and file
with the Trustee an Officers'  Certificate  briefly  stating the facts requiring
the  adjustment  and the  manner  of  computing  it.  The  certificate  shall be
conclusive evidence of the correctness of such adjustment.

                  SECTION  5.12.  Notice of Certain  Transactions.  In the event
that:

                  (1) the  Company  takes any  action  which  would  require  an
adjustment in the Conversion Price;

                  (2)  the  Company  takes  any  action  that  would  require  a
supplemental indenture pursuant to Section 5.13; or

                  (3)  there is a dissolution or liquidation of the Company;

a holder of a Security may wish to convert such  Security  into shares of Common
Stock prior to the record date for or the effective  date of the  transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive.  Therefore,  the Company  shall
mail to Noteholders at the addresses  appearing on the Registrar's books and the
Trustee a notice stating the proposed  record or effective date, as the case may
be.  The  Company  shall  mail the  notice at least 15 days  before  such  date;
however,  failure to mail such notice or any defect therein shall not affect the
validity  of any  transaction  referred  to in  clause  (1),  (2) or (3) of this
Section 5.12.

                  SECTION  5.13.  Effect of  Reclassifications,  Consolidations,
Mergers or Sales on Conversion  Privilege.  If any of the following shall occur,
namely: (i) any reclassification or change of outstanding shares of Common Stock
issuable upon  conversion of  Securities  (other than a change in par value,  or
from par  value to no par  value,  or from no par  value to par  value,  or as a
result of a subdivision or  combination),  (ii) any  consolidation  or merger to
which the  Company is a party  other  than a merger in which the  Company is the
continuing  corporation and which does not result in any reclassification of, or
change (other than a change in name,  or par value,  or from par value to no par
value,  or from no par  value to par value or as a result  of a  subdivision  or
combination)  in,  outstanding  shares  of  Common  Stock or  (iii)  any sale or
conveyance  of all or  substantially  all of the  property  or  business  of the
Company as an  entirety,  then the  Company,  or such  successor  or  purchasing
corporation,  as the  case  may be,  shall,  as a  condition  precedent  to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a  supplemental  indenture  in form  satisfactory  to the
Trustee  providing that the holder of each Security then outstanding  shall have
the right to convert such  Security  into the kind and amount of shares of stock
and  other  securities  and  property  (including  cash)  receivable  upon  such
reclassification, change, consolidation, merger, sale or conveyance



                                       28
<PAGE>

by a holder of the number of shares of Common Stock  deliverable upon conversion
of  such  Security   immediately   prior  to  such   reclassification,   change,
consolidation,  merger,  sale or conveyance.  Such supplemental  indenture shall
provide  for  adjustments  of the  Conversion  Price  which  shall be as  nearly
equivalent as may be  practicable to the  adjustments  of the  Conversion  Price
provided for in this  Article V. The  foregoing,  however,  shall not in any way
affect the right a holder of a Security may otherwise  have,  pursuant to clause
(ii) of the last sentence of subsection  (c) of Section 5.06, to receive  Rights
upon  conversion  of a  Security.  If,  in the case of any  such  consolidation,
merger,  sale  or  conveyance,  the  stock  or  other  securities  and  property
(including  cash)  receivable  thereupon  by a holder of Common  Stock  includes
shares of stock or other securities and property of a corporation other than the
successor or purchasing corporation,  as the case may be, in such consolidation,
merger,  sale or  conveyance,  then such  supplemental  indenture  shall also be
executed by such other corporation and shall contain such additional  provisions
to  protect  the  interests  of the  holders of the  Securities  as the Board of
Directors of the Company shall  reasonably  consider  necessary by reason of the
foregoing.  The  provision  of  this  Section  5.13  shall  similarly  apply  to
successive consolidations, mergers, sales or conveyances.

                  In  the  event  the  Company  shall  execute  a   supplemental
indenture  pursuant to this Section 5.13,  the Company shall  promptly file with
the Trustee an Officers'  Certificate briefly stating the reasons therefor,  the
kind or amount of shares of stock or  securities  or property  (including  cash)
receivable by holders of the Securities upon the conversion of their  Securities
after  any  such  reclassification,   change,  consolidation,  merger,  sale  or
conveyance and any adjustment to be made with respect thereto.

                  SECTION 5.14. Trustee's Disclaimer. The Trustee has no duty to
determine when an adjustment  under this Article V should be made, how it should
be made or what such adjustment should be, but may accept as conclusive evidence
of the  correctness  of any such  adjustment,  and shall be protected in relying
upon the  Officers'  Certificate  with  respect  thereto  which the  Company  is
obligated to file with the Trustee  pursuant to Section 5.11.  The Trustee makes
no representation as to the validity or value of any securities or assets issued
upon conversion of Securities,  and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article V.

                  The Trustee shall not be under any responsibility to determine
the  correctness  of any  provisions  contained  in any  supplemental  indenture
executed pursuant to Section 5.13, but may accept as conclusive  evidence of the
correctness  thereof,  and shall be protected  in relying  upon,  the  Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.13.

                                   ARTICLE VI

                                  Subordination

                  SECTION  6.01.  Agreement to  Subordinate.  The  Company,  for
itself and its successors, and each Noteholder, by his acceptance of Securities,
agree that the payment of the  principal of or interest on or any other  amounts
due on the Securities is subordinated in right of



                                       29
<PAGE>

payment, to the extent and in the manner stated in this Article VI, to the prior
payment in full of all existing and future  Senior Debt.  The  Securities  shall
rank pari passu with the  Company's 4 1/2%  Convertible  Subordinated  Notes due
2002.

                  SECTION  6.02.  No Payment  on  Securities  if Senior  Debt in
Default. Anything in this Indenture to the contrary notwithstanding,  no payment
on account of principal of or redemption of, interest on or other amounts due on
the Securities (including the making of a deposit pursuant to Section 3.05), and
no redemption,  purchase, or other acquisition of the Securities,  shall be made
by or on behalf of the Company (i) unless full  payment of amounts  then due for
principal  and interest and of all other amounts then due on all Senior Debt has
been made or duly provided for pursuant to the terms of the instrument governing
such Senior Debt, (ii) if, at the time of such payment, redemption,  purchase or
other acquisition, or immediately after giving effect thereto, there shall exist
under any Senior  Debt,  or any  agreement  pursuant to which any Senior Debt is
issued, any default, which default shall not have been cured or waived and which
default  shall  have  resulted  in the full  amount of such  Senior  Debt  being
declared due and payable or (iii) if, at the time of such  payment,  redemption,
purchase or other  acquisition,  the Trustee shall have received  written notice
from the  Representative  of the holders of  Designated  Senior Debt (a "Payment
Blockage  Notice") that there exists under such  Designated  Senior Debt, or any
agreement  pursuant to which such Designated Senior Debt is issued, any default,
which  default  shall not have been  cured or  waived,  permitting  the  holders
thereof to declare any amounts of such  Designated  Senior Debt due and payable,
but only for the period (the "Payment Blockage  Period")  commencing on the date
of receipt of the Payment Blockage Notice and ending (unless earlier  terminated
by notice  given to the  Trustee by the  Representative  of the  holders of such
Designated  Senior  Debt) on the  earlier of (a) the date on which such event of
default  shall have been cured or waived or (b) 180 days from the receipt of the
Payment  Blockage  Notice.  Notwithstanding  the  provisions  described  in  the
immediately  preceding sentence (other than in clauses (i) and (ii)), unless the
holders of such  Designated  Senior Debt or the  Representative  of such holders
shall have accelerated the maturity of such Designated  Senior Debt, the Company
may resume  payments on the  Securities  after the end of such Payment  Blockage
Period.  Not  more  than  one  Payment  Blockage  Notice  may  be  given  in any
consecutive 365-day period,  irrespective of the number of defaults with respect
to Senior Debt during such period.

                  In the event  that,  notwithstanding  the  provisions  of this
Section 6.02,  payments are made by or on behalf of the Company in contravention
of the  provisions  of this Section  6.02,  such  payments  shall be held by the
Trustee,  any  Paying  Agent or the  holders,  as  applicable,  in trust for the
benefit of, and shall be paid over to and  delivered to, the  Representative  of
the holders of Senior Debt or the trustee under the indenture or other agreement
(if any), pursuant to which any instruments  evidencing any Senior Debt may have
been issued for application to the payment of all Senior Debt ratably  according
to the aggregate  amounts  remaining  unpaid to the extent  necessary to pay all
Senior  Debt in full in  accordance  with the terms of such Senior  Debt,  after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt.



                                       30
<PAGE>

                  The Company  shall give prompt  written  notice to the Trustee
and any Paying Agent of any default or event of default under any Senior Debt or
under any agreement pursuant to which any Senior Debt may have been issued.

                  SECTION 6.03.  Distribution  on  Acceleration  of  Securities;
Dissolution and Reorganization; Subrogation of Securities. (a) If the Securities
are declared due and payable  because of the  occurrence of an Event of Default,
the Company shall give prompt  written  notice to the holders of all Senior Debt
or to the trustee(s) for such Senior Debt of such acceleration.  The Company may
not  pay  the  principal  of or  interest  on or any  other  amounts  due on the
Securities  until five  Business Days after such holders or trustee(s) of Senior
Debt receive such notice and,  thereafter,  the Company may pay the principal of
or interest on or any other amounts due on the Securities only if the provisions
of this Article VI permit such payment.

                  (b) Upon (i) any  acceleration of the principal  amount due on
the  Securities  because of an Event of  Default or (ii) any direct or  indirect
distribution  of  assets  of the  Company  upon  any  dissolution,  winding  up,
liquidation or reorganization of the Company (whether in bankruptcy,  insolvency
or  receivership  proceedings or upon an assignment for the benefit of creditors
or any other  dissolution,  winding up,  liquidation  or  reorganization  of the
Company):

                  (1) the  holders of all Senior Debt shall first be entitled to
receive payment in full of the principal  thereof,  the interest thereon and any
other amounts due thereon before the holders are entitled to receive  payment on
account of the  principal  of or  interest  on or any other  amounts  due on the
Securities;

                  (2) any  payment or  distribution  of assets of the Company of
any kind or  character,  whether in cash,  property  or  securities  (other than
securities  of the Company as  reorganized  or  readjusted  or securities of the
Company or any other  corporation  provided for by a plan of  reorganization  or
readjustment  the  payment  of which  is  subordinate,  at  least to the  extent
provided in this Article with respect to the Securities,  to the payment in full
without  diminution or  modification  by such plan of all Senior Debt), to which
the holders or the Trustee  would be entitled  (other than in respect of amounts
payable to the Trustee  pursuant to Section  9.07) except for the  provisions of
this Article,  shall be paid by the liquidating trustee or agent or other person
making  such a payment or  distribution,  directly to the holders of Senior Debt
(or their  representative(s)  or  trustee(s)  acting on their  behalf),  ratably
according to the aggregate  amounts remaining unpaid on account of the principal
of or interest on and other  amounts due on the Senior Debt held or  represented
by each,  to the extent  necessary  to make  payment in full of all Senior  Debt
remaining unpaid,  after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt; and

                  (3) in the event  that,  notwithstanding  the  foregoing,  any
payment  or  distribution  of assets of the  Company  of any kind or  character,
whether in cash, property or securities (other than securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article with respect to the
Securities,  to the payment in full without  diminution or  modification by such
plan of Senior



                                       31
<PAGE>

Debt),  shall be  received  by the  Trustee  (other  than in  respect of amounts
payable to the  Trustee  pursuant  to Section  9.07) or the  holders  before all
Senior Debt is paid in full, such payment or distribution shall be held in trust
for the benefit  of, and be paid over to upon  request by a holder of the Senior
Debt, the holders of the Senior Debt remaining unpaid (or their representatives)
or trustee(s) acting on their behalf,  ratably as aforesaid,  for application to
the  payment of such Senior Debt until all such Senior Debt shall have been paid
in full,  after giving effect to any concurrent  payment or  distribution to the
holders of such Senior Debt.

                  Subject to the payment in full of all Senior Debt, the holders
shall be  subrogated  to the  rights of the  holders  of Senior  Debt to receive
payments  or  distributions  of cash,  property  or  securities  of the  Company
applicable  to the  Senior  Debt  until the  principal  of and  interest  on the
Securities shall be paid in full and, for purposes of such subrogation,  no such
payments or  distributions  to the  holders of Senior Debt of cash,  property or
securities  which otherwise would have been payable or  distributable to holders
shall,  as between the Company,  its creditors  other than the holders of Senior
Debt, and the holders, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being  understood that the provisions of this Article are
and are intended  solely for the purpose of defining the relative  rights of the
holders, on the one hand, and the holders of Senior Debt, on the other hand.

                  Nothing  contained  in  this  Article  or  elsewhere  in  this
Indenture or in the  Securities  is intended to or shall (i) impair,  as between
the  Company  and its  creditors  other  than the  holders of Senior  Debt,  the
obligation of the Company,  which is absolute and  unconditional,  to pay to the
holders the  principal  of and interest on the  Securities  as and when the same
shall  become due and payable in  accordance  with the terms of the  Securities,
(ii) affect the  relative  rights of the holders  and  creditors  of the Company
other than  holders of Senior Debt or, as between  the Company and the  Trustee,
the  obligations of the Company to the Trustee,  or (iii) prevent the Trustee or
the holders from exercising all remedies  otherwise  permitted by applicable law
upon default under this  Indenture,  subject to the rights,  if any,  under this
Article  of the  holders  of  Senior  Debt in  respect  of  cash,  property  and
securities of the Company received upon the exercise of any such remedy.

                  Upon distribution of assets of the Company referred to in this
Article, the Trustee,  subject to the provisions of Section 9.01 hereof, and the
holders shall be entitled to rely upon a certificate of the liquidating  trustee
or agent or other  person  making  any  distribution  to the  Trustee  or to the
holders for the purpose of ascertaining  the persons  entitled to participate in
such distribution,  the holders of the Senior Debt and other indebtedness of the
Company,  the amount thereof or payable  thereon,  the amount or amounts paid or
distributed  thereon and all other facts  pertinent  thereto or to this Article.
The  Trustee,  however,  shall not be deemed  to owe any  fiduciary  duty to the
holders of Senior Debt.  Nothing  contained in this Article or elsewhere in this
Indenture, or in any of the Securities, shall prevent the good faith application
by the Trustee of any moneys which were  deposited  with it hereunder,  prior to
its receipt of written  notice of facts which would  prohibit such  application,
for the purpose of the payment of or on account of the  principal of or interest
on, the Securities  unless,  prior to the date on which such application is



                                       32
<PAGE>

made by the  Trustee,  the Trustee  shall be charged  with actual  notice  under
Section  6.03(d)  hereof of the facts  which would  prohibit  the making of such
application.

                  (c) The  provisions of this Article shall not be applicable to
any cash, properties or securities received by the Trustee or by any holder when
received  as a holder of Senior  Debt and  nothing  in  Section  9.11  hereof or
elsewhere in this  Indenture  shall deprive the Trustee or such holder of any of
its rights as such holder.

                  (d) The  Company  shall  give  prompt  written  notice  to the
Trustee of any fact known to the Company which would  prohibit the making of any
payment of money to or by the Trustee in respect of the  Securities  pursuant to
the  provisions  of this  Article.  The Trustee,  subject to the  provisions  of
Section 9.01 hereof, shall be entitled to assume that no such fact exists unless
the  Company  or any holder of Senior  Debt or any  trustee  therefor  has given
notice thereof to the Trustee. Notwithstanding the provisions of this Article or
any other  provisions of this  Indenture,  the Trustee shall not be charged with
knowledge of the  existence  of any fact which would  prohibit the making of any
payment of moneys to or by the Trustee in respect of the Securities  pursuant to
the provisions in this Article, unless, and until three Business Days after, the
Trustee  shall have  received  written  notice  thereof  from the Company or any
holder or holders of Senior Debt or from any trustee therefor; and, prior to the
receipt of any such written  notice,  the Trustee,  subject to the provisions of
Section 9.01 hereof,  shall be entitled in all respects  conclusively  to assume
that no such  facts  exist;  provided  that if on a date  not  less  than  three
Business Days  immediately  preceding the date upon which,  by the terms hereof,
any  such  moneys  may  become  payable  for  any  purpose  (including,  without
limitation, the principal of or interest on any Security), the Trustee shall not
have  received  with  respect to such  moneys the  notice  provided  for in this
Section 6.03(d), then anything herein contained to the contrary notwithstanding,
the Trustee  shall have full power and  authority  to receive such moneys and to
apply the same to the  purpose  for which they were  received,  and shall not be
affected by any notice to the  contrary  which may be received by it on or after
such prior date.

                  The  Trustee  shall be entitled  to rely  conclusively  on the
delivery  to it of a written  notice by a person  representing  himself  to be a
holder of Senior Debt (or a trustee on behalf of such holder) to establish  that
such notice has been given by a holder of Senior Debt (or a trustee on behalf of
any such holder or holders).  In the event that the Trustee  determines  in good
faith that further  evidence is required with respect to the right of any person
as a holder  of  Senior  Debt to  participate  in any  payment  or  distribution
pursuant  to this  Article,  the  Trustee  may  request  such  person to furnish
evidence  to the  reasonable  satisfaction  of the  Trustee  as to the amount of
Senior Debt held by such person,  the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights  of  such  person  under  this  Article,  and,  if such  evidence  is not
furnished,  the Trustee may defer any  payment to such person  pending  judicial
determination as to the right of such person to receive such payment;  nor shall
the Trustee be charged with knowledge or the curing or waiving of any default of
the  character  specified  in  Section  6.02  hereof  or that  any  event or any
condition  preventing any payment in respect of the Securities shall have ceased
to exist,  unless and until the Trustee  shall have received  written  notice to
such effect.



                                       33
<PAGE>

                  (e) The  provisions  of this  Section 6.03  applicable  to the
Trustee shall (unless the context  requires  otherwise) also apply to any Paying
Agent for the Company.

                  SECTION  6.04.   Reliance  by  Senior  Debt  on  Subordination
Provisions.  Each holder of any Security by his acceptance thereof  acknowledges
and agrees that the foregoing subordination  provisions are, and are intended to
be, an  inducement  and a  consideration  for each  holder of any  Senior  Debt,
whether such Senior Debt was created or acquired before or after the issuance of
the  Securities,  to acquire and continue to hold, or to continue to hold,  such
Senior Debt, and such holder of Senior Debt shall be deemed conclusively to have
relied on such subordination  provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Debt. Notice of any default in the payment of
any Senior  Debt,  except as  expressly  stated in this  Article,  and notice of
acceptance  of the  provisions  hereof are hereby  expressly  waived.  Except as
otherwise  expressly  provided herein, no waiver,  forbearance or release by any
holder of Senior  Debt  under  such  Senior  Debt or under  this  Article  shall
constitute a release of any of the  obligations or liabilities of the Trustee or
holders of the Securities provided in this Article.

                  SECTION 6.05. No Waiver of Subordination Provisions. Except as
otherwise expressly provided herein, no right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time in
any way be  prejudiced  or  impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith,  by any such holder,
or by any noncompliance by the Company with the terms,  provisions and covenants
of this Indenture,  regardless of any knowledge thereof any such holder may have
or be otherwise charged with.

                  Without in any way limiting the  generality  of the  foregoing
paragraph,  the  holders of Senior  Debt may, at any time and from time to time,
without  the  consent  of, or notice  to,  the  Trustee  or the  holders  of the
Securities,  without  incurring  responsibility to the holders of the Securities
and without impairing or releasing the subordination provided in this Article VI
or the obligations  hereunder of the holders of the Securities to the holders of
Senior Debt, do any one or more of the following:  (i) change the manner,  place
or terms of payment of, or renew or alter,  Senior Debt,  or otherwise  amend or
supplement in any manner Senior Debt or any  instrument  evidencing  the same or
any  agreement  under which  Senior Debt is  outstanding;  (ii) sell,  exchange,
release or  otherwise  dispose of any property  pledged,  mortgaged or otherwise
securing  Senior  Debt;  (iii)  release any person  liable in any manner for the
collection  of Senior Debt;  and (iv)  exercise or refrain from  exercising  any
rights against the Company or any other person.

                  SECTION 6.06.  Trustee's  Relation to Senior Debt. The Trustee
in its individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this  Indenture  shall  deprive the Trustee of any of its rights as such holder.
Anything in this Indenture to the contrary  notwithstanding,  amounts payable to
the  Trustee  from time to time  pursuant  to Section  9.07 shall be treated for
purposes of this Article as if such amounts constituted Senior Debt hereunder.



                                       34
<PAGE>

                  With  respect  to the  holders  of Senior  Debt,  the  Trustee
undertakes to perform or to observe only such of its covenants and  obligations,
as are  specifically  set forth in this  Article,  and no implied  covenants  or
obligations  with  respect to the holders of Senior Debt shall be read into this
Indenture  against the Trustee.  The Trustee shall not owe any fiduciary duty to
the holders of Senior Debt but shall have only such  obligations to such holders
as are expressly set forth in this Article.

                  Each holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate  to  effectuate  the  subordination  provided  in this  Article  and
appoints  the  Trustee  his  attorney-in-fact  for any and  all  such  purposes,
including,  in the  event  of any  dissolution,  winding  up or  liquidation  or
reorganization  under any applicable  bankruptcy law of the Company  (whether in
bankruptcy,  insolvency or  receivership  proceedings or otherwise),  the timely
filing of a claim for the unpaid balance of such holder's Securities in the form
required in such  proceedings  and the causing of such claim to be approved.  If
the Trustee does not file a claim or proof of debt in the form  required in such
proceedings  prior to 30 days  before  the  expiration  of the time to file such
claims  or  proofs,  then  any  holder  or  holders  of  Senior  Debt  or  their
representative  or  representatives  shall  have the right to  demand,  sue for,
collect,  receive and receipt for the payments and  distributions  in respect of
the  Securities  which are  required to be paid or  delivered  to the holders of
Senior  Debt as  provided  in this  Article  and to file and  prove  all  claims
therefor  and to take all  such  other  action  in the  name of the  holders  or
otherwise,  as such  holders  of  Senior  Debt  or  representative  thereof  may
determine to be necessary or appropriate  for the  enforcement of the provisions
of this  Article.  Anything in this  Indenture to the contrary  notwithstanding,
amounts  payable to the Trustee from time to time pursuant to Section 9.07 shall
be treated for purposes of this Article as if such  amounts  constituted  Senior
Debt hereunder.

                  SECTION  6.07.  Other  Provisions  Subject  Hereto.  Except as
expressly  stated in this Article,  notwithstanding  anything  contained in this
Indenture  to the  contrary,  all  the  provisions  of  this  Indenture  and the
Securities  are subject to the provisions of this Article.  However,  nothing in
this Article  shall apply to or  adversely  affect the claims of, or payment to,
the Trustee pursuant to Section 9.07. Notwithstanding the foregoing, the failure
to make a payment on account of  principal of or interest on the  Securities  by
reason of any  provision of this Article VI shall not be construed as preventing
the occurrence of an Event of Default under Section 8.01.

                                   ARTICLE VII

                                   Successors

                  SECTION 7.01.  Merger,  Consolidation  or Sale of Assets.  The
Company may not consolidate or merge with or into any person (whether or not the
Company is the surviving corporation),  or sell, assign, transfer, lease, convey
or otherwise  dispose of all or  substantially  all of its  properties or assets
unless:



                                       35
<PAGE>

                  (a) the  Company is the  surviving  corporation  or the Person
         formed by or surviving any such  consolidation or merger (if other than
         the  Company)  or to which  such  sale,  assignment,  transfer,  lease,
         conveyance or other  disposition  shall have been made is a corporation
         organized or existing  under the laws of the United  States,  any state
         thereof or the District of Columbia;

                  (b)  the   corporation   formed  by  or  surviving   any  such
         consolidation  or merger (if other than the Company) or the corporation
         to which such sale, assignment,  transfer,  lease,  conveyance or other
         disposition  will have been made  assumes  all the  Obligations  of the
         Company,  pursuant to a  supplemental  indenture  in a form  reasonably
         satisfactory to the Trustee, under the Securities and the Indenture;

                  (c) any such sale, assignment,  transfer, lease, conveyance or
         other  disposition  of  all  or  substantially  all  of  the  Company's
         properties  or  assets  shall  be as an  entirety  or  virtually  as an
         entirety to one corporation;

                  (d) immediately  after such transaction no Default or Event of
Default exists; and

                  (e) the Company or such  corporation  shall have  delivered to
         the Trustee an Officers'  Certificate  and an Opinion of Counsel,  each
         stating that such  transaction and the  supplemental  indenture  comply
         with the Indenture and that all  conditions  precedent in the Indenture
         relating to such transaction have been satisfied.

                  SECTION  7.02.  Successor  Corporation  Substituted.  Upon any
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other  disposition of all or  substantially  all of the assets of the Company in
accordance with Section 7.01 hereof,  the successor  corporation  formed by such
consolidation  or into or with which the Company is merged or the corporation to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be  substituted  for and may exercise every right and
power of, the  Company  under  this  Indenture  with the same  effect as if such
successor person has been named as the Company herein;  provided,  however, that
the  predecessor  Company in the case of a sale,  assignment,  transfer,  lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Securities.

                                  ARTICLE VIII

                              Defaults and Remedies

                  SECTION 8.01. Events of Default.  An "Event of Default" occurs
if:

                  (a) the  Company  defaults  in the  payment of interest on any
         Security  when  the  same  becomes  due and  payable,  and the  Default
         continues for a period of 30 days after the date due and payable;



                                       36
<PAGE>

                  (b) the Company  defaults in the payment of the  principal  of
         any Security  when the same  becomes due and payable at maturity,  upon
         redemption or otherwise;

                  (c) the Company  fails to observe or perform  any  covenant or
         agreement contained in Section 4.07 hereof;

                  (d) the Company fails to observe or perform any other covenant
         or agreement  contained in this Indenture or the Securities required by
         it to be performed  and the Default  continues  for a period of 60 days
         after the receipt of written  notice from the Trustee to the Company or
         from the  holders  of 25% in  aggregate  principal  amount  of the then
         outstanding Securities to the Company and the Trustee stating that such
         notice is a "Notice of Default";

                  (e)  there is a  default  under  any  mortgage,  indenture  or
         instrument  under  which  there may be issued or by which  there may be
         secured or evidenced any Indebtedness for money borrowed by the Company
         or any Material  Subsidiary  of the Company (or the payment of which is
         guaranteed  by the Company or any Material  Subsidiary of the Company),
         whether such  Indebtedness  or guarantee now exists or is created after
         the Issuance Date, which default (i) is caused by a failure to pay when
         due  principal  of or  interest on such  Indebtedness  within the grace
         period  provided  for in such  Indebtedness  (which  failure  continues
         beyond any  applicable  grace  period) (a  "Payment  Default")  or (ii)
         results in the acceleration of such  Indebtedness  prior to its express
         maturity (without such  acceleration  being rescinded or annulled) and,
         in each case, the principal amount of any such  Indebtedness,  together
         with the principal  amount of any other such  Indebtedness  under which
         there  is a  Payment  Default  or the  maturity  of  which  has been so
         accelerated, aggregates $10 million or more;

                  (f) a final,  non-appealable  judgment or final non-appealable
         judgments  (other than any  judgment as to which a reputable  insurance
         company  has  accepted  full  liability)  for the  payment of money are
         entered  by a court or courts of  competent  jurisdiction  against  the
         Company  or  any  Material   Subsidiary   of  the  Company  and  remain
         undischarged  for  a  period  (during  which  execution  shall  not  be
         effectively stayed) of 60 days, provided that the aggregate of all such
         judgments exceeds $5 million;

                  (g) the  Company or any  Material  Subsidiary  pursuant  to or
         within the meaning of any  Bankruptcy  Law:  (i)  commences a voluntary
         case,  (ii) consents to the entry of an order for relief  against it in
         an  involuntary  case in which it is the debtor,  (iii) consents to the
         appointment of a Custodian of it or for all or substantially all of its
         property,  (iv)  makes a  general  assignment  for the  benefit  of its
         creditors,  or (v) makes the  admission in writing that it generally is
         unable to pay its debts as the same become due; or

                  (h) a court  of  competent  jurisdiction  enters  an  order or
         decree under any  Bankruptcy  Law that:  (i) is for relief  against the
         Company or any  Material  Subsidiary  of the Company in an  involuntary
         case,  (ii)  appoints  a  Custodian  of the  Company  or  any  Material
         Subsidiary  of the  Company  or for  all  or  substantially  all of its
         property, and the



                                       37
<PAGE>

         order or decree  remains  unstayed  and in effect  for 60 days or (iii)
         orders the liquidation of the Company or any Material Subsidiary of the
         Company,  and the order or decree remains unstayed and in effect for 60
         days.

                  The term  "Bankruptcy  Law" means Title 11,  U.S.  Code or any
similar  Federal or state law for the relief of  debtors.  The term  "Custodian"
means any receiver, trustee, assignee,  liquidator or similar official under any
Bankruptcy Law.

                  SECTION 8.02. Acceleration. If an Event of Default (other than
an Event of Default  specified  in clauses (g) and (h) of Section  8.01  hereof)
occurs  and  is  continuing,  the  Trustee  by  notice  to the  Company,  or the
Noteholders  of at  least  25%  in  principal  amount  of  the  then-outstanding
Securities  by  notice to the  Company  and the  Trustee,  may  declare  all the
Securities  to be due and payable.  Upon such  declaration,  the  principal  of,
premium,  if any, and accrued and unpaid interest on the Securities shall be due
and payable  immediately.  If an Event of Default specified in clause (g) or (h)
of Section  8.01 hereof  occurs,  such an amount  shall ipso facto become and be
immediately  due and payable without any declaration or other act on the part of
the  Trustee or any  Noteholder.  The  Noteholders  of a majority  in  aggregate
principal amount of the then-outstanding Securities by notice to the Trustee may
rescind  an  acceleration  and its  consequences  if the  rescission  would  not
conflict  with any  judgment or decree,  if all  amounts  payable to the Trustee
pursuant to Section  9.07 hereof  have been paid and if all  existing  Events of
Default  have been cured or waived  except  nonpayment  of principal or interest
that has become due solely because of the acceleration.

                  SECTION 8.03.  Other  Remedies.  If an Event of Default occurs
and is  continuing,  the Trustee may pursue any available  remedy to collect the
payment of principal or interest on the Securities or to enforce the performance
of any provision of the Securities or this Indenture.

                  The  Trustee  may  maintain a  proceeding  even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any  Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.

                  SECTION 8.04.  Waiver of Past Defaults.  The  Noteholders of a
majority in aggregate  principal  amount of the  then-outstanding  Securities by
notice to the Trustee may waive an existing  Default or Event of Default and its
consequences  except a continuing  Default or Event of Default in the payment of
the Designated  Event Payment or the principal of, or interest on, any Security.
When a Default or Event of Default is  waived,  it is cured and  ceases;  but no
such waiver shall extend to any  subsequent or other Default or impair any right
consequent thereon.

                  SECTION  8.05.  Control  by  Majority.  The  Noteholders  of a
majority in principal amount of the  then-outstanding  Securities may direct the
time,  method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power



                                       38
<PAGE>

conferred on it.  However,  the Trustee may refuse to follow any direction  that
conflicts  with law or this  Indenture,  is unduly  prejudicial to the rights of
other Noteholders, or would involve the Trustee in personal liability.

                  SECTION 8.06.  Limitation on Suits.  A Noteholder may pursue a
remedy with respect to this Indenture or the Securities only if:

                  (a) the Noteholder gives to the Trustee notice of a continuing
         Event of Default;

                  (b) the Noteholders of at least 25% in principal amount of the
         then-outstanding Securities make a request to the Trustee to pursue the
         remedy;

                  (c)  such  Noteholder  or  Noteholders  offer  to the  Trustee
         indemnity  satisfactory to the Trustee  against any loss,  liability or
         expense;

                  (d) the Trustee  does not comply  with the  request  within 60
         days after receipt of the request and the offer of indemnity; and

                  (e) during such 60-day period the Noteholders of a majority in
         principal  amount of the  then-outstanding  Securities  do not give the
         Trustee a direction inconsistent with the request.

                  A  Noteholder  may not use this  Indenture  to  prejudice  the
rights of another  Noteholder or to obtain a preference or priority over another
Noteholder.

                  SECTION  8.07.  Rights  of  Noteholders  to  Receive  Payment.
Notwithstanding  any  other  provision  of  this  Indenture,  the  right  of any
Noteholder  of a Security to receive  payment of  principal  and interest on the
Security,  on or after the respective due dates expressed in the Security, or to
bring suit for the  enforcement of any such payment on or after such  respective
dates,  shall not be impaired or affected  without the consent of the Noteholder
made pursuant to this Section.

                  SECTION  8.08.  Collection  Suit by  Trustee.  If an  Event of
Default  specified  in Section  8.01(a) or (b)  occurs  and is  continuing,  the
Trustee may recover  judgment in its own name and as trustee of an express trust
against the Company for the whole  amount of principal  and  interest  remaining
unpaid on the Securities and interest on overdue principal and interest and such
further  amount as shall be  sufficient  to cover the costs  and,  to the extent
lawful, expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

                  SECTION  8.09.  Trustee May File Proofs of Claim.  The Trustee
may file such proofs of claim and other  papers or documents as may be necessary
or  advisable  in order to have the claims of the  Trustee  and the  Noteholders
allowed in any judicial  proceedings  relative to the Company,  its creditors or
its property.  Nothing contained herein shall be deemed to authorize the Trustee
to  authorize or consent to or accept or adopt on behalf of any  Noteholder  any
plan of



                                       39
<PAGE>

reorganization,  arrangement, adjustment or composition affecting the Securities
or the rights of any Noteholder  thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceeding.

                  SECTION 8.10.  Priorities.  If the Trustee  collects any money
pursuant to this Article, it shall pay out the money in the following order:

                  First:  to the  Trustee for  amounts  due under  Section  9.07
         hereof;

                  Second:  to the holders of Senior Debt to the extent  required
         by Article VI;

                  Third: to the  Noteholders,  for amounts due and unpaid on the
         Securities  for  principal  and  interest,  ratably,  according  to the
         amounts due and payable on the  Securities  for principal and interest,
         respectively; and

                  Fourth:  to the Company.

                  Except as  otherwise  provided  in Section  2.12  hereof,  the
Trustee may fix a record date and  payment  date for any payment to  Noteholders
made pursuant to this Section.

                  SECTION  8.11.  Undertaking  for  Costs.  In any  suit for the
enforcement  of any right or remedy under this  Indenture or in any suit against
the Trustee for any action  taken or omitted by it as a Trustee,  a court in its
discretion  may  require  the  filing  by any party  litigant  in the suit of an
undertaking  to pay the costs of the suit,  and the court in its  discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant  in the suit,  having  due  regard to the  merits and good faith of the
claims or defenses made by the party litigant.  This Section does not apply to a
suit by the Trustee,  a suit by a holder  pursuant to Section 8.07 hereof,  or a
suit by Noteholders of more than 10% in principal amount of the then-outstanding
Securities.

                                   ARTICLE IX

                                     Trustee

                  SECTION  9.01.  Duties of Trustee.  (a) If an Event of Default
has occurred and is  continuing,  the Trustee shall  exercise such of the rights
and powers vested in it by this  Indenture,  and use the same degree of care and
skill in their  exercise,  as a prudent  person would  exercise or use under the
circumstances in the conduct of his or her own affairs.

                  (b) Except during the continuance of an Event of Default:  (i)
the Trustee need perform  only those duties that are  specifically  set forth in
this  Indenture  and no others and (ii) in the absence of bad faith on its part,
the Trustee may  conclusively  rely, as to the truth of the  statements  and the
correctness of the opinions  expressed  therein,  upon  certificates or opinions
furnished to the Trustee and, if required by the terms hereof, conforming to the
requirements  of  this  Indenture.   However,  the  Trustee  shall  examine  the
certificates  and  opinions  to  determine  whether  or not they  conform to the
requirements of this  Indenture.  During the continuance of an



                                       40
<PAGE>

event of Default,  the Trustee may consult with its legal  counsel and rely upon
advice from such counsel with respect to legal matters.

                  (c) The Trustee may not be relieved from liability for its own
negligent  action,  its  own  negligent  failure  to  act,  or its  own  willful
misconduct,  except  that:  (i) this  paragraph  does not  limit  the  effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any
error of  judgment  made in good faith by a Trust  Officer,  unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction  received by it pursuant to Section
8.05 hereof.

                  (d) Every  provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01.

                  (e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.

                  (f) The Trustee  shall not be liable for interest on any money
received  by it except as the  Trustee  may agree in writing  with the  Company.
Money held in trust by the  Trustee  need not be  segregated  from  other  funds
except to the extent required by law.

                  SECTION 9.02.  Rights of Trustee.  (a) The Trustee may rely on
any  document  believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document.

                  (b) Before the Trustee acts or refrains  from  acting,  it may
require an Officers'  Certificate or an Opinion of Counsel, or both. The Trustee
shall not be liable  for any  action it takes or omits to take in good  faith in
reliance on such Officers' Certificate or Opinion of Counsel.

                  (c) The  Trustee  may act  through  agents  and  shall  not be
responsible  for the  misconduct or negligence of any agent  appointed  with due
care.

                  (d) The Trustee shall not be liable for any action it takes or
omits to take in good faith  which it believes  to be  authorized  or within its
rights or powers.

                  (e) The Trustee  shall not be charged  with  knowledge  of any
Event of Default under subsection (c), (d), (e), (f), (g) or (h) of Section 8.01
unless either (1) a Trust Officer  assigned to its  corporate  trust  department
shall have actual  knowledge  thereof,  or (2) the Trustee  shall have  received
notice  thereof in accordance  with Section 12.02 hereof from the Company or any
holder.

                  SECTION 9.03. Individual Rights of Trustee. The Trustee in its
individual  or any other  capacity may become the owner or pledgee of Securities
and may otherwise  deal with the Company or an Affiliate with the same rights it
would have if it were not  Trustee.  Any



                                       41
<PAGE>

Agent may do the same with like  rights.  However,  the  Trustee  is  subject to
Sections 9.10 and 9.11 hereof.

                  SECTION  9.04.  Trustee's  Disclaimer.  The  Trustee  makes no
representation  as to  the  validity  or  adequacy  of  this  Indenture  or  the
Securities,  it shall not be  accountable  for the Company's use of the proceeds
from the  Securities,  and it shall not be responsible  for any statement of the
Company in the  Indenture  or any  statement in the  Securities  (other than its
authentication)   or  for  compliance  by  the  Company  with  the  Registration
Agreement.

                  SECTION  9.05.  Notice of  Defaults.  If a Default or Event of
Default occurs and is continuing and if it is known to the Trustee,  the Trustee
shall mail to  Noteholders a notice of the Default or Event of Default within 90
days  after it  occurs.  Except in the case of a Default  or Event of Default in
payment on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith  determines  that  withholding the
notice is in the interests of Noteholders.

                  SECTION  9.06.  Reports by Trustee to  Noteholders.  Within 60
days after the reporting date stated in Section 12.10, the Trustee shall mail to
Noteholders  a brief report dated as of such  reporting  date that complies with
TIA ss.  313(a) if and to the extent  required by such ss.  313(a).  The Trustee
also shall comply with TIA ss.  313(b)(2).  The Trustee  shall also  transmit by
mail all reports as required by TIA ss. 313(c).

                  A  copy  of  each  report  at  the  time  of  its  mailing  to
Noteholders  shall be filed  with the SEC and each stock  exchange  on which the
Securities are listed.  The Company shall notify the Trustee when the Securities
are listed on any stock exchange.

                  SECTION 9.07.  Compensation  and Indemnity.  The Company shall
pay to the Trustee from time to time  reasonable  compensation  for its services
hereunder.  The  Trustee's  compensation  shall  not be  limited  by any  law on
compensation  of a trustee of an express trust.  The Company shall reimburse the
Trustee upon  request for all  reasonable  disbursements,  expenses and advances
incurred  or made  by it.  Such  disbursements  and  expenses  may  include  the
reasonable disbursements,  compensation and expenses of the Trustee's agents and
counsel.

                  The Company shall  indemnify  the Trustee  against any loss or
liability incurred by it except as set forth in the next paragraph.  The Trustee
shall notify the Company  promptly of any claim for which it may seek indemnity.
The  Company  shall  defend the claim and the  Trustee  shall  cooperate  in the
defense.  The Trustee may have  separate  counsel and the Company  shall pay the
reasonable fees,  disbursements  and expenses of such counsel.  The Company need
not pay for any settlement made without its consent,  which consent shall not be
unreasonably withheld.

                  The  Company  need not  reimburse  any  expense  or  indemnify
against any loss or  liability  incurred by the  Trustee  through the  Trustee's
negligence or bad faith.



                                       42
<PAGE>

                  To secure the Company's  payment  obligations in this Section,
the Trustee shall have a lien equivalent to that of Senior Debt and prior to the
Securities  on all money or property  held or collected  by the Trustee,  except
money or property  held in trust to pay  principal  and  interest on  particular
Securities.

                  When the Trustee incurs expenses or renders  services after an
Event of Default  specified in Section  8.01(g) or (h) occurs,  the expenses and
the  compensation  for the  services  are  intended  to  constitute  expenses of
administration under any Bankruptcy Law.

                  SECTION 9.08. Replacement of Trustee. A resignation or removal
of the Trustee and  appointment  of a successor  Trustee shall become  effective
only upon the successor Trustee's  acceptance of appointment as provided in this
Section.

                  The  Trustee  may  resign by so  notifying  the  Company.  The
Noteholders of a majority in principal amount of the then-outstanding Securities
may remove the Trustee by so notifying the Trustee and the Company.

The Company may remove the Trustee if:

                  (a) the Trustee  fails to comply  with  Section  9.10  hereof,
         unless the  Trustee's  duty to resign is stayed as  provided in TIA ss.
         310(b);

                  (b) the Trustee is adjudged a bankrupt or an  insolvent  or an
         order for  relief is entered  with  respect  to the  Trustee  under any
         Bankruptcy Law;

                  (c) a Custodian or public  officer takes charge of the Trustee
or its property; or

                  (d) the Trustee becomes incapable of acting.

                  If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee  for any  reason,  the Company  shall  promptly  appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then-outstanding Securities
may appoint a successor  Trustee to replace the successor  Trustee  appointed by
the Company.

                  If a successor  Trustee  does not take  office  within 60 days
after the retiring  Trustee  resigns or is removed,  the retiring  Trustee,  the
Company  or  the  Noteholders  of at  least  10%  in  principal  amount  of  the
then-outstanding Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.

                  If the  Trustee  fails to comply  with  Section  9.10  hereof,
unless the Trustee's duty to resign is stayed as provided in TIA ss. 310(b), any
Noteholder who has been a bona fide holder of a Security for at least six months
may petition any court of competent  jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

                  A successor Trustee shall deliver a written  acceptance of its
appointment  to  the  retiring  Trustee  and  to  the  Company.   Thereupon  the
resignation or removal of the retiring Trustee shall become  effective,  and the
successor  Trustee  shall have all the rights,  powers and



                                       43
<PAGE>

duties of the Trustee under this Indenture.  The successor  Trustee shall mail a
notice of its  succession to  Noteholders.  The retiring  Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject to
the lien provided for in Section 9.07 hereof. Notwithstanding the resignation or
replacement  of the  Trustee  pursuant  to  this  Section  9.08,  the  Company's
obligations  under  Section  9.07 hereof  shall  continue for the benefit of the
retiring  trustee with respect to expenses and liabilities  incurred by it prior
to such resignation or replacement.

                  SECTION 9.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates,  merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation,  the successor corporation
without any further act shall be the successor Trustee.

                  SECTION 9.10.  Eligibility;  Disqualification.  This Indenture
shall always have a Trustee who satisfies the  requirements of TIA ss. 310(a)(1)
and (5). The Trustee shall always have a combined  capital and surplus as stated
in Section 12.10 hereof. The Trustee is subject to TIA ss. 310(b).

                  SECTION  9.11.   Preferential  Collection  of  Claims  Against
Company.  The  Trustee is  subject to TIA ss.  311(a),  excluding  any  creditor
relationship  listed in TIA ss.  311(b).  A  Trustee  who has  resigned  or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.

                                    ARTICLE X

                             Discharge of Indenture

                  SECTION  10.01.  Termination  of Company's  Obligations.  This
Indenture  shall  cease to be of  further  effect  (except  that  the  Company's
obligations  under  Sections  9.07 and  10.02  hereof  shall  survive)  when all
outstanding Securities theretofore  authenticated and issued have been delivered
to the  Trustee  for  cancellation  and the  Company  has paid all sums  payable
hereunder.

                  Thereupon,  the Trustee  upon  request of the  Company,  shall
acknowledge  in writing the  discharge of the Company's  obligations  under this
Indenture, except for those surviving obligations specified above.

                  SECTION  10.02.  Repayment  to  Company.  The  Trustee and the
Paying Agent shall  promptly pay to the Company upon request any excess money or
securities held by them at any time.

                  The Trustee and the Paying Agent shall pay to the Company upon
written  request any money held by them for the payment of principal or interest
that  remains  unclaimed  for two years  after the date upon which such  payment
shall have  become due;  provided,  however,  that the Company  shall have first
caused notice of such payment to the Company to be mailed to each



                                       44
<PAGE>

Noteholder  entitled  thereto no less than 30 days prior to such payment.  After
payment to the  Company,  the Trustee and the Paying Agent shall have no further
liability with respect to such money and Noteholders  entitled to the money must
look to the  Company  for  payment as general  creditors  unless any  applicable
abandoned property law designates another person.

                                   ARTICLE XI

                       Amendments, Supplements and Waivers

                  SECTION 11.01. Without Consent of Noteholders. The Company and
the Trustee may amend or supplement this Indenture or the Securities without the
consent of any Noteholder:

                  (a)  to cure any ambiguity, defect or inconsistency;

                  (b) to comply with Sections 5.13 and 7.01 hereof;

                  (c) to provide for  uncertificated  Securities  in addition to
         certificated Securities;

                  (d) to make any  change  that does not  adversely  affect  the
         legal rights hereunder of any Noteholder;

                  (e) to qualify this Indenture  under the TIA or to comply with
         the  requirements of the SEC in order to maintain the  qualification of
         the Indenture under the TIA; or

                  (f) to make any change that provides any additional  rights or
         benefits to the holders of Securities.

                  An  amendment  under this Section may not make any change that
adversely  affects the rights under Article VI of any holder of Senior Debt then
outstanding   unless  the   holders  of  such  Senior  Debt  (or  any  group  or
representative thereof authorized to give a consent) consent to such change.

                  SECTION 11.02. With Consent of Noteholders. Subject to Section
8.07 hereof,  the Company and the Trustee may amend or supplement this Indenture
or the  Securities  with the written  consent  (including  consents  obtained in
connection  with any tender or exchange offer for Securities) of the Noteholders
of at least a majority in principal amount of the  then-outstanding  Securities.
Subject to  Sections  8.04 and 8.07  hereof,  the  Noteholders  of a majority in
principal  amount of the Securities  then  outstanding may also by their written
consent  (including  consents  obtained in  connection  with any tender offer or
exchange offer for Securities) waive any existing Default as provided in Section
8.04 or waive  compliance  in a  particular  instance  by the  Company  with any
provision of this Indenture or the Securities.  However,  without the consent of
each Noteholder affected, an amendment,  supplement or waiver under this Section
may not (with respect to any Securities held by a nonconsenting Noteholder):



                                       45
<PAGE>

                  (a) reduce the amount of  Securities  whose  Noteholders  must
         consent to an amendment, supplement or waiver;

                  (b)  reduce  the rate of or  change  the time for  payment  of
         interest on any Security;

                  (c) reduce the  principal  of or change the fixed  maturity of
         any Security or alter the redemption provisions with respect thereto;

                  (d) make any Security  payable in money other than that stated
         in the Security;

                  (e) make any  change in  Section  8.04,  8.07 or 11.02  hereof
         (this sentence);

                  (f) waive a default  in the  payment of the  Designated  Event
         Payment or principal  of, or interest  on, any Security  (other than as
         provided in Section 8.04);

                  (g)  waive a redemption payment payable on any Security; or

                  (h)  make any  change  that  adversely  affects  the  right of
         Noteholders to convert Securities into Common Stock of the Company.

                  To secure a consent  of the  Noteholders  under  this  Section
11.02,  it shall not be necessary for the  Noteholders to approve the particular
form of any proposed amendment, supplement or waiver, but it shall be sufficient
if such consent approves the substance thereof.

                  After an  amendment,  supplement  or waiver under this Section
becomes  effective,  the  Company  shall mail to  Noteholders  a notice  briefly
describing the amendment or waiver.

                  SECTION  11.03.  Compliance  with Trust  Indenture  Act. Every
amendment  to  this  Indenture  or  the  Securities  shall  be  set  forth  in a
supplemental indenture that complies with the TIA as then in effect.

                  SECTION  11.04.  Revocation  and Effect of Consents.  Until an
amendment,  supplement  or  waiver  becomes  effective,  a  consent  to  it by a
Noteholder  of a Security is a continuing  consent by the  Noteholder  and every
subsequent  Noteholder of a Security or portion of a Security that evidences the
same debt as the  consenting  Noteholder's  Security,  even if  notation  of the
consent is not made on any Security.  However, any such Noteholder or subsequent
Noteholder may revoke the consent as to such Noteholder's Security or portion of
a Security if the Trustee  receives the notice of revocation  before the date on
which  the  Trustee  receives  an  Officers'  Certificate  certifying  that  the
Noteholders of the requisite  principal  amount of Securities  have consented to
the amendment, supplement or waiver.

                  The Company may,  but shall not be obligated  to, fix a record
date for the purpose of determining the  Noteholders  entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then notwithstanding
the provisions of the immediately  preceding  paragraph,  those persons who were
Noteholders  at such record date (or their duly  designated  proxies),  and only
those  persons,  shall be entitled to consent to such  amendment,  supplement or



                                       46
<PAGE>

waiver or to revoke any consent  previously  given,  whether or not such persons
continue to be Noteholders  after such record date. No consent shall be valid or
effective  for more than 90 days after such  record date  unless  consents  from
Noteholders of the principal  amount of Securities  required  hereunder for such
amendment or waiver to be  effective  shall have also been given and not revoked
within such 90-day period.

                  After an amendment,  supplement or waiver becomes effective it
shall  bind  every  Noteholder,  unless  it is of the type  described  in any of
clauses (a) through (h) of Section 11.02 hereof.  In such case, the amendment or
waiver shall bind each  Noteholder who has consented to it and every  subsequent
Noteholder that evidences the same debt as the consenting Noteholder's Security.

                  SECTION  11.05.  Notation on or Exchange  of  Securities.  The
Trustee may place an  appropriate  notation  about an amendment or waiver on any
Security  thereafter  authenticated.  The Company in exchange for all Securities
may issue and the Trustee shall  authenticate  new  Securities  that reflect the
amendment or waiver.

                  SECTION 11.06.  Trustee Protected.  The Trustee shall sign all
supplemental  indentures,  except that the Trustee may,  but need not,  sign any
supplemental  indenture  that  adversely  affects its rights.  As a condition to
executing,  or accepting  the  additional  trusts  created by, any  supplemental
indenture  permitted by this Article or the  modifications  thereby of the trust
created by this Indenture, the Trustee shall be entitled to receive (in addition
to those documents  required by Section  12.04),  and (subject to Section 315 of
the TIA) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental  indenture is authorized or permitted by
this Indenture.

                                   ARTICLE XII

                                  Miscellaneous

                  SECTION 12.01. Trust Indenture Act Controls.  If any provision
of this Indenture limits,  qualifies,  or conflicts with another provision which
is  automatically  deemed to be  incorporated  in this Indenture by the TIA, the
incorporated provision shall control.

                  SECTION 12.02.  Notices.  Any notice or  communication  by the
Company or the Trustee to the other is duly given if in writing and delivered in
person or mailed by  first-class  mail to the other's  address stated in Section
12.10  hereof.  The Company or the Trustee by notice to the other may  designate
additional or different addresses for subsequent notices or communications.

                  Any notice or communication to a Noteholder shall be mailed by
first-class  mail to his address  shown on the register  kept by the  Registrar.
Failure to mail a notice or  communication  to a Noteholder  or any defect in it
shall not affect its sufficiency with respect to other Noteholders.



                                       47
<PAGE>

                  If a notice or  communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.

                  If the Company mails a notice or communication to Noteholders,
it shall mail a copy to the Trustee and each Agent at the same time.

                  All other notices or communications shall be in writing.

                  In case by reason of the  suspension  of regular mail service,
or by reason of any other cause,  it shall be  impossible  to mail any notice as
required by the  Indenture,  then such method of  notification  as shall be made
with the approval of the Trustee shall  constitute a sufficient  mailing of such
notice.

                  SECTION  12.03.   Communication   by  Noteholders  with  Other
Noteholders.  Noteholders may communicate  pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or the Securities.
The  Company,  the  Trustee,  the  Registrar  and  anyone  else  shall  have the
protection of TIA ss. 312(c).

                  SECTION  12.04.  Certificate  and  Opinion  as  to  Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:

                  (a) an Officers'  Certificate  stating that, in the opinion of
         the signers,  all conditions  precedent,  if any,  provided for in this
         Indenture relating to the proposed action have been complied with; and

                  (b) an Opinion of Counsel stating that, in the opinion of such
         counsel, all such conditions precedent have been complied with.

                  SECTION 12.05.  Statements Required in Certificate or Opinion.
Each  certificate  or opinion  with  respect to  compliance  with a condition or
covenant  provided for in this  Indenture  (other than pursuant to Section 4.03)
shall include:

                  (a) a statement  that the person  signing such  certificate or
         rendering such opinion has read such covenant or condition;

                  (b) a  brief  statement  as to the  nature  and  scope  of the
         examination  or  investigation  upon which the  statements  or opinions
         contained in such certificate or opinion are based;

                  (c) a  statement  that,  in the opinion of such  person,  such
         person has made such  examination or  investigation  as is necessary to
         enable such person to express an informed  opinion as to whether or not
         such covenant or condition has been complied with; and

                  (d) a  statement  as to whether or not, in the opinion of such
         person, such condition or covenant has been complied with.



                                       48
<PAGE>

                  SECTION  12.06.  Rules by Trustee and Agents.  The Trustee may
make reasonable rules for action by, or a meeting of, Noteholders. The Registrar
or Paying Agent may make reasonable  rules and set reasonable  requirements  for
its functions.

                  SECTION  12.07.  Legal  Holidays.   A  "Legal  Holiday"  is  a
Saturday,  a Sunday or a day on which banking  institutions  in the State of New
York are not  required  to be open.  If a payment  date is a Legal  Holiday at a
place of payment,  payment may be made at that place on the next  succeeding day
that is not a Legal Holiday,  and no interest  shall accrue for the  intervening
period.  If any other  operative date for purposes of this Indenture shall occur
on a Legal Holiday then for all purposes the next  succeeding  day that is not a
Legal Holiday shall be such operative date.

                  SECTION  12.08.  No  Recourse   Against  Others.  A  director,
Officer,  employee or  stockholder,  as such,  of the Company shall not have any
liability  for any  obligations  of the  Company  under  the  Securities  or the
Indenture  or for any  claim  based  on,  in  respect  of or by  reason  of such
obligations or their  creation.  Each  Noteholder by accepting a Security waives
and  releases  all  such  liability.  The  waiver  and  release  are part of the
consideration for the issue of the Securities.

                  SECTION 12.09. Counterparts. This Indenture may be executed in
any number of counterparts  and by the parties hereto in separate  counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which taken together shall constitute one and the same agreement.

                  SECTION  12.10.  Variable  Provisions.   "Officer"  means  the
Chairman  of  the  Board,  the  Chief  Executive  Officer,  the  President,  any
Vice-President,  the Chief Financial Officer, the Treasurer,  the Secretary, any
Assistant Treasurer, any Assistant Secretary or the Controller of the Company.

                  The Company  initially  appoints the Trustee as Paying  Agent,
Registrar  and   Conversion   Agent,   and  the  Trustee   hereby  accepts  such
appointments.

                  The first certificate pursuant to Section 4.03 hereof shall be
for the fiscal year ending on December 31, 1997.

                  The reporting date for Section 9.06 hereof is April 15 of each
year. The first reporting date is April 15, 1998.

                  The Trustee  shall always have a combined  capital and surplus
of at least  $50,000,000 as set forth in its most recent published annual report
of condition.



                                       49
<PAGE>

                  The Company's address for purposes of the Indenture is:

                  Tel-Save Holdings, Inc.
                  6805 Route 202
                  New Hope, Pennsylvania  18938

                  The Trustee's address is:

                  First Trust of New York, National Association
                  100 Wall Street

                  New York, New York  10005

                  The Company or the Trustee may change its address for purposes
of this Indenture by written notice to the other.

                  SECTION  12.11.  GOVERNING LAW. THE INTERNAL LAWS OF THE STATE
OF NEW YORK SHALL GOVERN THIS  INDENTURE AND THE  SECURITIES,  WITHOUT REGARD TO
THE CONFLICT OF LAWS PROVISIONS THEREOF.

                  SECTION 12.12. No Adverse  Interpretation of Other Agreements.
This  Indenture  may not be used to interpret  another  indenture,  loan or debt
agreement  of the  Company or an  Affiliate.  Any such  indenture,  loan or debt
agreement may not be used to interpret this Indenture.

                  SECTION  12.13.  Successors.  All agreements of the Company in
this  Indenture and the Securities  shall bind its successor.  All agreements of
the Trustee in this Indenture shall bind its successor.

                  SECTION  12.14.  Severability.  In case any  provision in this
Indenture or in the Securities shall be invalid,  illegal or unenforceable,  the
validity,  legality and enforceability of the remaining  provisions shall not in
any way be affected or impaired thereby.

                  SECTION 12.15. Table of Contents,  Headings, Etc. The Table of
Contents and headings of the Articles and Sections of this  Indenture  have been
inserted for  convenience  of reference  only,  are not to be  considered a part
hereof,  and shall in no way modify or restrict  any of the terms or  provisions
hereof.




                                       50
<PAGE>


                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Indenture to be duly executed, all as of the date first written above.

                               Tel-Save Holdings, Inc., as Company,

                               by
                                 -----------------------------------------------
                               Name:
                               Title:

                               First Trust of New York, National Association, as
                                  Trustee,

                               by
                                 -----------------------------------------------
                               Name:
                               Title:

                                       51

<PAGE>


STATE OF NEW YORK   )
                    )  ss.:
COUNTY OF NEW YORK  )

                  Personally  appeared before me, the  undersigned  authority in
and for the said  county and state,  on this day of  December,  1997,  within my
jurisdiction, the within named ____________________, who acknowledged that he is
a __________________ of  ___________________,  and that for and on behalf of the
said  corporation,  and as its act and deed he executed the above and  foregoing
instrument,  after first having been duly  authorized by said  corporation so to
do.

                                                   -----------------------------
                                                   NOTARY PUBLIC

[Notarial Seal]


<PAGE>

                                                                      EXHIBIT A

                      FORM OF CONVERTIBLE SUBORDINATED NOTE

                             [FORM OF FACE OF NOTE]

                           [Global Securities Legend]

                  UNLESS  THIS   CERTIFICATE   IS  PRESENTED  BY  AN  AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"),
NEW YORK,  NEW YORK, TO THE COMPANY OR ITS AGENT FOR  REGISTRATION  OF TRANSFER,
EXCHANGE OR PAYMENT,  AND ANY  CERTIFICATE  ISSUED IS  REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY  PAYMENT IS MADE TO CEDE & CO.,  OR TO SUCH  OTHER  ENTITY AS IS
REQUESTED BY AN AUTHORIZED  REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR  OTHERWISE  BY OR TO ANY PERSON IS WRONGFUL  INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                  TRANSFERS  OF  THIS  GLOBAL   SECURITY  SHALL  BE  LIMITED  TO
TRANSFERS  IN  WHOLE,  BUT NOT IN PART,  TO  NOMINEES  OF DTC OR TO A  SUCCESSOR
THEREOF OR SUCH  SUCCESSOR'S  NOMINEE AND  TRANSFERS  OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE  RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

                         [Restricted Securities Legend]

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE  "SECURITIES  ACT").  THE HOLDER HEREOF,  BY PURCHASING
THIS SECURITY,  AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD,  PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN  AFFILIATE  OF THE  COMPANY  AT ANY TIME  DURING  THE  THREE  MONTHS
PRECEDING  THE DATE OF SUCH  TRANSFER,  IN EITHER  CASE,  OTHER  THAN (1) TO THE
COMPANY,  (2) SO LONG AS THIS  SECURITY IS ELIGIBLE FOR RESALE  PURSUANT TO RULE
144A  UNDER THE  SECURITIES  ACT  ("RULE  144A"),  TO A PERSON  WHOM THE  SELLER
REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL  BUYER  WITHIN THE MEANING OF
RULE 144A,  PURCHASING  FOR ITS OWN  ACCOUNT OR FOR THE  ACCOUNT OF A  QUALIFIED
INSTITUTIONAL  BUYER TO WHOM  NOTICE IS GIVEN THAT THE  RESALE,  PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE  TRANSFEROR  ON THE  CERTIFICATE  OF  TRANSFER  ON THE  REVERSE  OF  THIS
SECURITY),  (3) IN AN OFFSHORE TRANSACTION IN



                                       A-1
<PAGE>

ACCORDANCE  WITH  REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE  CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY),  (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE  501(a)(1),  (2), (3) OR (7) UNDER THE  SECURITIES ACT (AS INDICATED BY THE
BOX CHECKED BY THE  TRANSFEROR ON THE  CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY)  THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT  PURPOSES AND NOT
FOR  DISTRIBUTION,  AND A  CERTIFICATE  IN THE FORM ATTACHED TO THIS SECURITY IS
DELIVERED BY THE  TRANSFEREE TO THE COMPANY AND THE TRUSTEE,  (5) PURSUANT TO AN
EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE)   UNDER  THE  SECURITIES  ACT,  OR  (6)  PURSUANT  TO  AN  EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ANY  APPLICABLE   SECURITIES  LAWS  OF  ANY  STATE  OF  THE  UNITED  STATES.  AN
INSTITUTIONAL  ACCREDITED  INVESTOR  HOLDING THIS  SECURITY  AGREES THAT IT WILL
FURNISH TO THE COMPANY AND THE TRUSTEE SUCH  CERTIFICATES AND OTHER  INFORMATION
AS THEY MAY  REASONABLY  REQUIRE  TO  CONFIRM  THAT ANY  TRANSFER  BY IT OF THIS
SECURITY  COMPLIES  WITH THE  FOREGOING  RESTRICTIONS.  THE  HOLDER  HEREOF,  BY
PURCHASING  THIS SECURITY,  REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY
THAT IT IS (1) A QUALIFIED  INSTITUTIONAL  BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN  INSTITUTION  THAT IS AN  "ACCREDITED  INVESTOR"  AS  DEFINED  IN RULE
501(a)(1),  (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY  FOR  INVESTMENT  PURPOSES AND NOT FOR  DISTRIBUTION  OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH  (o)(2) OF RULE 902 UNDER)  REGULATION S UNDER THE
SECURITIES ACT.

                                      A-2

<PAGE>




No.  _________

                                                                       Cusip No.

                             TEL-SAVE HOLDINGS, INC.
                        5% CONVERTIBLE SUBORDINATED NOTE
                                    DUE 2004
                             TEL-SAVE HOLDINGS, INC.

                  Tel-Save   Holdings,   Inc.,  a  Delaware   corporation   (the
"Company"),              promises              to             pay             to
_________________________________________________________________  or registered
assigns,  the  principal  sum  [indicated  on Schedule A hereof]* [of  _________
Dollars]** on __________, ____.

Interest Payment Dates: June 15 and December 15, commencing June 15, 1998.

Record Dates: June 1 and December 1.

                  Reference  is hereby  made to the further  provisions  of this
Convertible Note set forth on the reverse hereof which further  provisions shall
for all purposes have the same effect as if set forth at this place.




---------------
*    Applicable to Global Securities only.

**   Applicable to certificated Securities only.



                                      A-3

<PAGE>



                  IN WITNESS WHEREOF,  Tel-Save  Holdings,  Inc. has caused this
Convertible  Note to be signed  manually or by facsimile by its duly  authorized
Officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.

Dated:
      -------------------------------

                                               TEL-SAVE HOLDINGS, INC.,

                                                   by

                                                   by

[Seal]

TRUSTEE'S CERTIFICATE OF

AUTHENTICATION

This is one of the

5% Convertible Subordinated Notes Due 2004
described in the within-
mentioned Indenture.
_____________, as Trustee,

by

Authorized Officer




                                      A-4

<PAGE>



                             TEL-SAVE HOLDINGS, INC.

                    5% Convertible Subordinated Note Due 2004

                  1. Interest.  TEL-SAVE HOLDINGS,  INC., a Delaware corporation
(the "Company"), is the issuer of the 5% Convertible Subordinated Notes Due 2004
(the "Convertible Notes"), of which this Convertible Note is a part. The Company
promises to pay interest on the Convertible  Notes in cash  semiannually on each
June 15 and December 15,  commencing  on June 15, 1998,  to holders of record on
the immediately preceding June 1 and December 1.

                  Interest  on the  Convertible  Notes will accrue from the most
recent date to which  interest  has been paid,  or if no interest has been paid,
from December 10, 1997. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.  To the extent  lawful,  the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.

                  2. Method of Payment.  The  Company  will pay  interest on the
Convertible Notes (except defaulted  interest) to the persons who are registered
holders of the Convertible Notes at the close of business on the record date for
the next interest payment date even though  Convertible Notes are canceled after
the record  date and on or before the  interest  payment  date.  The  Noteholder
hereof must surrender  Convertible  Notes to a Paying Agent to collect principal
payments.  The Company  will pay  principal  and interest in money of the United
States  that at the time of  payment is legal  tender for  payment of public and
private  debts.  However,  the Company may pay  principal  and interest by check
payable in such money.  It may mail an interest  check to a holders'  registered
address.

                  3. Paying Agent and Registrar.  The Trustee will act as Paying
Agent,  Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, or Conversion Agent without prior notice.

                  4. Indenture.  The Company issued the Convertible  Notes under
an  indenture,  dated as of  December  10, 1997 (the  "Indenture"),  between the
Company and First Trust of New York, National Association, as Trustee. The terms
of the  Convertible  Notes  include those stated in the Indenture and those made
part of the  Indenture by the Trust  Indenture  Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture.  The Convertible  Notes
are  subject  to,  and  qualified  by,  all such  terms,  certain  of which  are
summarized  hereon,  and  Noteholders are referred to the Indenture and such Act
for a  statement  of such terms.  The  Convertible  Notes are general  unsecured
obligations  of  the  Company  limited  to  an  aggregate  principal  amount  of
$240,000,000.  The Indenture does not limit the ability of the Company or any of
its Subsidiaries to incur  indebtedness or to grant security  interests or liens
in respect of their assets.

                  5.  Optional   Redemption.   The  Convertible  Notes  are  not
redeemable at the Company's option prior to December 18, 2002.  Thereafter,  the
Convertible Notes will be subject to redemption at the option of the Company, in
whole or in part (in any integral multiple


                                      A-5

<PAGE>

of $1,000), at the following  redemption prices (expressed as percentages of the
principal amount),  if redeemed during the 12-month period beginning December 15
of the years indicated:

                                                                  Redemption
Year                                                                Price
----                                                                -----
2002........................................................       101.43%
2003........................................................       100.71%

and at 100% at December 15, 2004, in each case together with accrued interest to
the  redemption  date (subject to the right of holders of record on the relevant
record date to receive  interest due on an interest  payment date).  On or after
the redemption date,  interest will cease to accrue on the Convertible Notes, or
portion thereof, called for redemption.

                  6. Notice of Redemption.  Notice of redemption  will be mailed
at least 30 days but not more than 60 days  before the  redemption  date to each
holder of the  Convertible  Notes to be redeemed  at his address of record.  The
Convertible  Notes in  denominations  larger than $1,000 may be redeemed in part
but only in integral  multiples of $1,000.  In the event of a redemption of less
than all of the  Convertible  Notes,  the  Convertible  Notes will be chosen for
redemption by the Trustee in accordance  with the Indenture.  Unless the Company
defaults in making such redemption payment, or a Paying Agent is prohibited from
making such payment  pursuant to the  Indenture,  by law or otherwise,  interest
ceases  to  accrue on the  Convertible  Notes or  portions  of them  called  for
redemption on and after the redemption date.

                  If this  Convertible  Note is redeemed  subsequent to a record
date with respect to any interest  payment date specified  above and on or prior
to such  interest  payment date,  then any accrued  interest will be paid to the
person  in whose  name  this  Convertible  Note is  registered  at the  close of
business on such record date.

                  7. Mandatory  Redemption.  The Company will not be required to
make mandatory  redemption payments with respect to the Convertible Notes. There
are no sinking fund payments with respect to the Convertible Notes.

                  8.  Repurchase  at Option of Holder.  If there is a Designated
Event,  the Company  shall be  required  to offer to purchase on the  Designated
Event Payment Date all outstanding  Convertible  Notes at a purchase price equal
to 101% of the principal  amount  thereof on the date of purchase,  plus accrued
and unpaid interest to the Designated Event Payment Date. Holders of Convertible
Notes that are subject to an offer to purchase  will receive a Designated  Event
Offer from the Company  prior to any related  Designated  Event Payment Date and
may elect to have such  Convertible  Notes or  portions  thereof  in  authorized
denominations purchased by completing the form entitled "Option of Noteholder To
Elect Purchase"  appearing  below.  Noteholders have the right to withdraw their
election by  delivering  a written  notice of  withdrawal  to the Company or the
Paying Agent in accordance with the terms of the Indenture.

                  9. Subordination. The payment of the principal of, interest on
or any other amounts due on the  Convertible  Notes is  subordinated in right of
payment to all existing and future  Senior Debt of the Company,  as described in
the Indenture.  Each Noteholder, by


                                      A-6

<PAGE>

accepting a Convertible  Note,  agrees to such  subordination and authorizes and
directs  the Trustee on its behalf to take such  action as may be  necessary  or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its  attorney-in-fact  for such purpose. The Securities shall rank pari passu
with the Company's 4 1/2% Convertible Subordinated Notes due 2002.

                  10.  Conversion.  The holder of any  Convertible  Note has the
right,  exercisable  at any time after 90 days  following  the Issuance Date and
prior to the  close of  business  (New  York  City  time)  on the  Business  Day
immediately  preceding the date of the Convertible  Note's maturity,  to convert
the  principal  amount  thereof  (or any  portion  thereof  that is an  integral
multiple of $1,000) into shares of Common Stock at the initial  Conversion Price
of $25.47 per share, subject to adjustment under certain  circumstances,  except
that if a Convertible  Note is called for redemption,  the conversion right will
terminate  at the close of  business  (New York City time) on the  Business  Day
immediately preceding the date fixed for redemption.

                  To convert a Convertible  Note, a holder must (1) complete and
sign a notice of election to convert  substantially in the form set forth below,
(2)  surrender  the  Convertible  Note  to  a  Conversion   Agent,  (3)  furnish
appropriate  endorsements or transfer  documents if required by the Registrar or
Conversion  Agent and (4) pay any  transfer or similar  tax, if  required.  Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any Noteholder  surrenders a Convertible  Note for conversion after the close
of business on the record date for the payment of an installment of interest and
prior to the  opening of  business  on the next  interest  payment  date,  then,
notwithstanding  such conversion,  the interest payable on such interest payment
date  will be paid to the  registered  holder of such  Convertible  Note on such
record date. In such event,  unless such Security has been called for redemption
on or  prior  to  such  interest  payment  date,  such  Convertible  Note,  when
surrendered for conversion,  must be accompanied by payment in funds  acceptable
to the  Company of an amount  equal to the  interest  payable  on such  interest
payment date on the portion so  converted.  The number of shares of Common Stock
issuable upon  conversion  of a  Convertible  Note is determined by dividing the
principal  amount of the Convertible  Note converted by the Conversion  Price in
effect  on the  Conversion  Date.  No  fractional  shares  will be  issued  upon
conversion but a cash adjustment will be made for any fractional interest.

                  A Convertible  Note in respect of which a holder has delivered
an "Option of Noteholder to Elect Purchase" form appearing below  exercising the
option of such holder to require the Company to purchase such  Convertible  Note
may be converted  only if the notice of exercise is withdrawn as provided  above
and in accordance  with the terms of the  Indenture.  The above  description  of
conversion of the Convertible Notes is qualified by reference to, and is subject
in its  entirety  by, the more  complete  description  thereof  contained in the
Indenture.

                  11.  Registration  Agreement.  The holder of this  Convertible
Note is entitled to the benefits of a Registration Agreement, dated December 10,
1997,  between  the  Company  and  the  Initial  Purchasers  (the  "Registration
Agreement").  Pursuant to the Registration  Agreement the Company has agreed for
the benefit of the holders of the  Convertible  Notes,  that (i) it will, at its
cost,  within 120 days after the  closing of the sale of the  Convertible  Notes
(the "Closing"),  file a shelf registration  statement (the "Shelf  Registration
Statement") with the Securities and

                                      A-7

<PAGE>

Exchange   Commission  (the   "Commission")  with  respect  to  resales  of  the
Convertible  Notes and the Common Stock issuable upon conversion  thereof,  (ii)
the Company  will use its best  efforts to ensure that within 180 days after the
Closing,  such Shelf  Registration  Statement shall be declared effective by the
Commission  and (iii) the Company  will use its best  efforts to keep such Shelf
Registration Statement continuously effective under the Securities Act until the
earliest of (a) the second anniversary of the date of the Closing,  (b) the date
on which the  Convertible  Notes or the Common Stock  issuable  upon  conversion
thereof may be sold  pursuant  to  paragraph  (k) of Rule 144 (or any  successor
provision)  promulgated by the  Commission  under the Securities Act and (c) the
date as of which all the  Convertible  Notes or the Common Stock  issuable  upon
conversion thereof have been sold pursuant to such Shelf Registration  Statement
(the "Shelf  Registration  Period").  If the Company fails to comply with clause
(i) above then, at such time,  the per annum  interest  rate on the  Convertible
Notes will  increase by 25 basis  points.  Such  increase  will remain in effect
until the date on which such Shelf  Registration  Statement  is filed,  on which
date the interest rate on the Convertible Notes will revert to the interest rate
originally  borne by the  Convertible  Notes plus any increase in such  interest
rate pursuant to the following sentence. If the Shelf Registration  Statement is
not declared  effective as provided in clause (ii) above, then, at such time and
on each date that would have been the  successive  30th day following such time,
the per annum interest rate on the  Convertible  Notes (which interest rate will
be the  original  interest  rate on the  Convertible  Notes plus any increase or
increases in such  interest  rate  pursuant to the  preceding  sentence and this
sentence)  will increase by an  additional  25 basis  points;  provided that the
interest  rate will not increase by more than 50 basis  points  pursuant to this
sentence  and will not  increase by more than 75 basis  points  pursuant to this
sentence and the preceding  sentence.  Such increase or increases will remain in
effect  until the date on which such Shelf  Registration  Statement  is declared
effective,  on which date the interest rate on the Convertible Notes will revert
to the interest rate  originally  borne by the  Convertible  Notes.  Pursuant to
clause (iii) above, however, if the Company fails to keep the Shelf Registration
Statement  continuously  effective for the period specified above,  then at such
time as the Shelf Registration Statement is no longer effective and on each date
thereafter that is the successive 30th day subsequent to such time and until the
earlier of (i) the date that the Shelf  Registration  Statement  is again deemed
effective or (ii) the  termination  of the Shelf  Registration  Period,  the per
annum interest rate on the  Convertible  Notes will increase by an additional 25
basis  points;  provided,  however,  that the interest rate will not increase by
more than 50 basis points pursuant to this sentence.

                  Pursuant  to  the  Registration  Agreement,  the  Company  may
suspend  the use of the  prospectus  which is a part of the  Shelf  Registration
Statement for a period not to exceed 30 days in any three-month  period or three
periods not to exceed an aggregate of 90 days in any  twelve-month  period under
certain circumstances.  The holders of Convertible Notes will not be entitled to
additional  interest as set forth in the preceding  paragraph  solely because of
such suspension.

                  12.  Denominations,  Transfer,  Exchange and Replacement.  The
Convertible Notes are in registered form,  without coupons,  in denominations of
$1,000 and integral  multiples of $1,000.  The transfer of Convertible Notes may
be  registered,  and  Convertible  Notes may be  exchanged,  as  provided in the
Indenture.  The  Registrar  may require a  Noteholder,  among other  things,  to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees

                                      A-8

<PAGE>

required by law or permitted by the  Indenture.  The Registrar need not exchange
or register the  transfer of any  Convertible  Note or portion of a  Convertible
Note selected for redemption  (except the unredeemed  portion of any Convertible
Note being  redeemed  in part).  Also,  it need not  exchange  or  register  the
transfer of any  Convertible  Note for a period of 15 days before a selection of
Convertible Notes to be redeemed. Replacement Convertible Notes for lost, stolen
or mutilated Convertible Notes may be issued in accordance with the terms of the
Indenture.

                  13.  Persons Deemed  Owners.  The  registered  Noteholder of a
Convertible Note may be treated as its owner for all purposes.

                  14.  Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its  request.  After that,  Noteholders  of
Convertible  Notes  entitled to the money must look to the Company for  payment,
unless an abandoned property law designates another person, and all liability of
the Trustee and such Paying Agent with respect to such money shall cease.

                  15. Defaults and Remedies.  The  Convertible  Notes shall have
the Events of Default as set forth in Section 8.01 of the Indenture.  Subject to
certain  limitations  in the  Indenture,  if an Event of  Default  occurs and is
continuing,  the Trustee by notice to the Company or the Noteholders of at least
25% in aggregate principal amount of the  then-outstanding  Convertible Notes by
notice to the Company and the Trustee may declare all the  Convertible  Notes to
be due and payable  immediately,  except that in the case of an Event of Default
arising from certain  events of bankruptcy or insolvency,  all unpaid  principal
and  interest  accrued on the  Convertible  Notes  shall  become due and payable
immediately  without further action or notice. Upon acceleration as described in
either of the preceding sentences, the subordination provisions of the Indenture
preclude  any payment  being made to  Noteholders  for at least 5 Business  Days
except as otherwise provided in the Indenture.

                  The  Noteholders  of a  majority  in  principal  amount of the
Convertible  Notes then outstanding by written notice to the Trustee may rescind
an acceleration  and its  consequences if the rescission would not conflict with
any judgment or decree and if all existing  Events of Default have been cured or
waived  except  nonpayment  of principal or interest  that has become due solely
because of the  acceleration.  Noteholders  may not enforce the Indenture or the
Convertible  Notes  except as  provided  in the  Indenture.  Subject  to certain
limitations,   Noteholders   of  a   majority   in   principal   amount  of  the
then-outstanding  Convertible  Notes issued under the  Indenture  may direct the
Trustee  in its  exercise  of any  trust or  power.  The  Company  must  furnish
compliance certificates to the Trustee annually. The above description of Events
of Default  and  remedies  is  qualified  by  reference  to, and  subject in its
entirety by, the more complete description thereof contained in the Indenture.

                  16.  Amendments,  Supplements and Waivers.  Subject to certain
exceptions,   the  Indenture  or  the  Convertible   Notes  may  be  amended  or
supplemented  with the  consent of the  Noteholders  of at least a  majority  in
principal amount of the  then-outstanding  Convertible Notes (including consents
obtained in

                                      A-9

<PAGE>

connection with a tender offer or exchange offer for Convertible Notes), and any
existing default may be waived with the consent of the Noteholders of a majority
in  principal  amount  of  the  then-outstanding  Convertible  Notes,  including
consents  obtained  in  connection  with a tender  offer or  exchange  offer for
Convertible Notes.  Without the consent of any Noteholder,  the Indenture or the
Convertible  Notes may be amended,  among other things,  to cure any  ambiguity,
defect or inconsistency,  to provide for assumption of the Company's obligations
to Noteholders,  to make any change that does not adversely affect the rights of
any  Noteholder,  to qualify the Indenture  under the TIA, or to comply with the
requirements of the SEC in order to maintain the  qualification of the Indenture
under the TIA.

                  17.  Trustee  Dealings with the Company.  The Trustee,  in its
individual  or any  other  capacity,  may  become  the owner or  pledgee  of the
Convertible  Notes and may otherwise  deal with the Company or an Affiliate with
the same rights it would  have,  as if it were not  Trustee,  subject to certain
limitations  provided for in the  Indenture and in the TIA. Any Agent may do the
same with like rights.

                  18. No Recourse Against others. A director,  Officer, employee
or  stockholder,  as such,  of the Company  shall not have any liability for any
obligations of the Company under the  Convertible  Notes or the Indenture or for
any claim  based on, in  respect  of or by reason of such  obligations  or their
creation. Each Noteholder,  by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.

                  19.  Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE CONVERTIBLE  NOTES WITHOUT REGARD TO CONFLICT
OF LAW PROVISIONS THEREOF.

                  20.  Authentication.  The Convertible Notes shall not be valid
until  authenticated  by the manual  signature of an  authorized  officer of the
Trustee or an authenticating agent.

                  21. Abbreviations.  Customary abbreviations may be used in the
name of a Noteholder  or an assignee,  such as: TEN COM (for tenants in common),
TEN ENT (for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common),  CUST (for  Custodian),  and U/G/M/A
(for Uniform Gifts to Minors Act).

                  22.  Definitions.   Capitalized  terms  not  defined  in  this
Convertible Note have the meaning given to them in the Indenture.

                  The Company will furnish to any Noteholder of the  Convertible
Notes upon written  request and without  charge a copy of the  Indenture and the
Registration Agreement. Request may be made to:

                  Tel-Save Holdings, Inc.
                  Attn:  General Counsel and Secretary
                  6805 Route 202
                  New Hope, Pennsylvania  18938
                  (215) 862-1500

                                      A-10

<PAGE>



                                 ASSIGNMENT FORM

            To assign this Convertible Note, fill in the form below:

            (I) or (we) assign and transfer this Convertible Note to

-----------------------------------------------------------------------------
               (Insert assignee's social security or tax I.D. no.)

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

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

-----------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

and  irrevocably  appoint   ________________________________________   agent  to
transfer  this  Convertible  Note on the  books of the  Company.  The  agent may
substitute another to act for him.

                  Your Signature:  _____________________________________________
                                   (Sign exactly as your name appears on the    
                                   other side of this Convertible Note)

                  Date:  ___________________

                  Medallion Signature Guarantee: _____________________________

                  In  connection  with any  transfer  of any of the  Convertible
Notes  evidenced  by this  certificate  occurring  prior to the date that is two
years after the later of the date of original issuance of such Convertible Notes
and the last date, if any, on which such

                                      A-11

<PAGE>



Convertible Notes were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Convertible Notes are being transferred:

CHECK ONE BOX BELOW

         (1)    [ ] to the Company; or

         (2)    [ ] pursuant  to and in  compliance  with  Rule  144A  under the
                    Securities Act of 1933; or

         (3)    [ ] pursuant to and in  compliance  with  Regulation S under the
                    Securities Act of 1933; or

         (4)    [ ] to an  institutional  "accredited  investor"  (as defined in
                    Rule 501(a)(1),  (2), (3) or (7) under the Securities Act of
                    1933)  that has  furnished  to the  Trustee a signed  letter
                    containing certain  representations and agreements (the form
                    of which letter can be obtained from the Trustee); or

         (5)    [ ] pursuant  to  an  exemption  from  registration   under  the
                    Securities Act of 1933 provided by Rule 144 thereunder.

         Unless  one of the  boxes is  checked,  the  Registrar  will  refuse to
         register any of the Convertible  Notes evidenced by this certificate in
         the name of any  person  other  than  the  registered  holder  thereof;
         provided,  however, that if box (3), (4) or (5) is checked, the Trustee
         may require,  prior to registering any such transfer of the Convertible
         Notes such legal opinions,  certifications and other information as the
         Company has reasonably requested in writing, by delivery to the Trustee
         of a standing letter of  instruction,  to confirm that such transfer is
         being made pursuant to an exemption from,


                                      A-12

<PAGE>


         or in a transaction  not subject to, the  registration  requirements of
         the Securities Act of 1933.

                                                     --------------------------
                                                              Signature

Medallion Signature Guarantee:

------------------------                             --------------------------
                                                              Signature

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

              TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

                  The undersigned  represents and warrants that it is purchasing
this Convertible Note for its own account or an account with respect to which it
exercises  sole  investment  discretion  and that it and any such  account  is a
"qualified  institutional  buyer"  within  the  meaning  of Rule 144A  under the
Securities  Act of  1933,  and is aware  that  the  sale to it is being  made in
reliance on Rule 144A and  acknowledges  that it has received  such  information
regarding the Company as the undersigned has requested  pursuant to Rule 144A or
has  determined  not to request such  information  and that it is aware that the
transferor is relying upon the undersigned's foregoing  representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:                                           ----------------------------
      --------------------                       NOTICE:  To be executed by
                                                          an executive officer

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



                                      A-13

<PAGE>

                      [TO BE ATTACHED TO GLOBAL SECURITIES]

                                   SCHEDULE A

                  The  initial  principal  amount  at  maturity  of this  Global
Security  shall be  $200,000,000.  The  following  increases or decreases in the
principal amount of this Global Security have been made:

<TABLE>
<CAPTION>

==============================================================================================================
                  Amount of increase
                  in Principal Amount
                  of this Global         Amount of decrease in   Principal Amount of     Signature of
                  Security including     Principal Amount of     this Global Security    authorized officer
Date Made         upon exercise of       this Global Security    following such          of Trustee or
                  over-allotment option                          decrease or increase    Securities Custodian

<S>                                                                                                          <C>
---------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

                                      A-14

<PAGE>



                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

                  If you  want to  elect  to  have  this  Convertible  Note or a
portion thereof  repurchased by the Company  pursuant to Section 3.08 or 4.07 of
the Indenture, check the box: |_|

                  If the purchase is in part,  indicate  the portion  ($1,000 or
any integral multiple thereof) to be purchased: ____________

                  Your Signature:  
                                   ---------------------------------------------
                                   (Sign exactly as your name appears on the
                                   other side of this Convertible Note)

                  Date:  ____________

                  Medallion Signature Guarantee: _______________________


                                      A-15

<PAGE>



                               ELECTION TO CONVERT

To Tel-Save Holdings, Inc.:

                  The  undersigned   owner  of  this   Convertible  Note  hereby
irrevocably  exercises  the  option to convert  this  Convertible  Note,  or the
portion  below  designated,  into  Common  Stock of TEL-SAVE  HOLDINGS,  INC. in
accordance with the terms of the Indenture referred to in this Convertible Note,
and directs that the shares issuable and deliverable upon  conversion,  together
with any check in payment for  fractional  shares,  be issued in the name of and
delivered to the undersigned,  unless a different name has been indicated in the
assignment  below. If shares are to be issued in the name of a person other than
the  undersigned,  the  undersigned  will pay all  transfer  taxes  payable with
respect thereto.

                  The  undersigned  agrees  to be  bound  by  the  terms  of the
Registration  Agreement relating to the Common Stock issuable upon conversion of
the Convertible Notes.

Date:

         In whole ____        or      Portion of Convertible Note to be
                                      converted ($1,000 or any integral multiple
                                      thereof):
                                      $
                                       --------------



                           Your Signature:
                                          --------------------------------------
                                         (Sign exactly as your name appears on
                                         the other side of this Convertible 
                                         Note.)

Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or other Identifying
Number

                                           Medallion Signature Guarantee:*

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

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

*      Signature  must be  guaranteed  by a commercial  bank,  trust  company or
member firm of the New York Stock Exchange.


                                      A-16

<PAGE>




                                                                       EXHIBIT B

                    FORM OF TRANSFER CERTIFICATE FOR TRANSFER

                   FROM GLOBAL SECURITY OR RESTRICTED SECURITY

                             TO RESTRICTED SECURITY

                  (Transfers  pursuant to ss. 2.06(a)(ii) or ss. 2.06(a)(iii) of
the Indenture)

__________, as Registrar

        Attn:  [      ] Department

                 Re:   Tel-Save Holdings, Inc. 5% Convertible Subordinated Notes
                       Due 2004 (the "Convertible Notes")
                       ---------------------------------------------------------

                  Reference is hereby made to the Indenture dated as of December
10, 1997 (the "Indenture") between Tel-Save Holdings, Inc., as Issuer, and First
Trust of New York, National Association, as Trustee.  Capitalized terms used but
not defined herein shall have the meanings given them in the Indenture.

                  This letter relates to U.S.  $200,000,000  aggregate principal
amount of  Convertible  Notes  which  are held [in the form of the  [Restricted]
[Global]  Security  (CUSIP No. ) with the  Depositary]*  in the name of [name of
transferor] (the "Transferor") to effect the transfer of the Securities.

                  In  connection  with  such  request,  and in  respect  of such
Convertible  Notes,  the Transferor  does hereby  certify that such  Convertible
Notes are being transferred in accordance with (i) the transfer restrictions set
forth in the  Convertible  Notes and (ii) to a  transferee  that the  Transferor
reasonably  believes is an  institutional  "accredited  investor" (as defined in
Rule  501(a)(1),  (2), (3) or (7) of  Regulation D under the  Securities  Act of
1933,  as  amended)  and is  acquiring  at least  $250,000  principal  amount of
Convertible  Notes for its own  account or for one or more  accounts as to which
the transferee exercises sole investment discretion and (iii) in accordance with
applicable securities laws of any state of the United States.

                                        [Name of Transferor],

                                        by
                                           -------------------------------------
                                                Name:
                                                Title:

Dated:

cc:  Tel-Save Holdings, Inc.

     Attn:  Secretary

------------------------
*    Insert, if appropriate

                                      B-1

<PAGE>

                                                                       EXHIBIT C

               FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
          (Transfers pursuant to ss. 2.06(a)(ii) and ss. 2.06(a)(iii))

__________, as Registrar

       Attn: [       ] Department

                  Re:   Tel-Save Holdings, Inc.
                        5% Convertible Subordinated Notes
                        Due 2004 (the "Convertible Notes")
                        ----------------------------------

                  Reference is hereby made to the Indenture dated as of December
10, 1997 (the "Indenture") between Tel-Save Holdings, Inc., as Issuer, and First
Trust of New York, National Association, as Trustee.  Capitalized terms used but
not defined herein shall have the meanings given them in the Indenture.

                  This letter relates to U.S.  $200,000,000  aggregate principal
amount  of  Convertible  Notes  which  are held in the form of the  [Restricted]
[Global] Security (CUSIP No. _________) with the Depositary in the name of [name
of  transferor]  (the  "Transferor")  to effect the transfer of the  Convertible
Notes to the undersigned.

                  In  connection  with  such  request,  and in  respect  of such
Convertible Notes we confirm that:

                  1. We understand that the Convertible  Notes have not been and
         will not be  registered  under  the U.S.  Securities  Act of 1933  (the
         "Securities  Act"),  and are being sold to us in a transaction  that is
         exempt from the registration requirements of the Securities Act.

                  2. We are a  corporation,  partnership  or other entity having
         such knowledge and  experience in financial and business  matters as to
         be capable of  evaluating  the merits and risks of an investment in the
         Convertible  Notes,  and  we are  (or  any  account  for  which  we are
         purchasing  under  paragraph  4 below is) an  institutional  accredited
         investor  as  defined  in Rule  501(a)(1),  (2),  (3) or (7)  under the
         Securities  Act,  able  to  bear  the  economic  risk  of our  proposed
         investment in the Convertible Notes.

                  3. We are acquiring the Convertible  Notes for our own account
         (or for accounts as to which we exercise sole investment discretion and
         have authority to make,  and do make, the statements  contained in this
         letter)  and not  with a view to any  distribution  of the  Convertible
         Notes, subject, nevertheless, to the understanding that the disposition
         of our property shall at all times be and remain within our control.

                                      C-1

<PAGE>

                  4.  We are,  and  each  account  (if  any)  for  which  we are
         purchasing Convertible Notes is, purchasing Convertible Notes having an
         aggregate principal amount of not less than $250,000.

                  5. We  understand  that  (a)  the  Convertible  Notes  will be
         delivered  to us in  registered  form  only and  that  the  certificate
         delivered  to us with  respect  to the  Convertible  Notes  will bear a
         legend substantially to the following effect:

                  "THIS  SECURITY HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY,  AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD,  PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY
OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN  AFFILIATE  OF THE  COMPANY  AT ANY TIME  DURING  THE  THREE  MONTHS
PRECEDING  THE DATE OF SUCH  TRANSFER,  IN EITHER  CASE,  OTHER  THAN (1) TO THE
COMPANY,  (2) SO LONG AS THIS  SECURITY IS ELIGIBLE FOR RESALE  PURSUANT TO RULE
144A  UNDER THE  SECURITIES  ACT  ("RULE  144A"),  TO A PERSON  WHOM THE  SELLER
REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL  BUYER  WITHIN THE MEANING OF
RULE 144A,  PURCHASING  FOR ITS OWN  ACCOUNT OR FOR THE  ACCOUNT OF A  QUALIFIED
INSTITUTIONAL  BUYER TO WHOM  NOTICE IS GIVEN THAT THE  RESALE,  PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE  TRANSFEROR  ON THE  CERTIFICATE  OF  TRANSFER  ON THE  REVERSE  OF  THIS
SECURITY),  (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE  SECURITIES  ACT (AS  INDICATED BY THE BOX CHECKED BY THE  TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY),  (4) TO AN INSTITUTION
THAT IS AN "ACCREDITED  INVESTOR" AS DEFINED IN RULE 501(a)(1),  (2), (3) OR (7)
UNDER THE  SECURITIES  ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE  CERTIFICATE  OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING
THIS  SECURITY  FOR  INVESTMENT  PURPOSES  AND  NOT  FOR  DISTRIBUTION,   AND  A
CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE
TO THE COMPANY AND THE TRUSTEE,  (5) PURSUANT TO AN EXEMPTION FROM  REGISTRATION
UNDER  THE  SECURITIES  ACT  PROVIDED  BY RULE  144 (IF  APPLICABLE)  UNDER  THE
SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE  WITH ANY APPLICABLE  SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL  ACCREDITED INVESTOR HOLDING
THIS  SECURITY  AGREES IT WILL  FURNISH  TO THE  COMPANY  AND THE  TRUSTEE  SUCH
CERTIFICATES  AND OTHER  INFORMATION AS THEY MAY  REASONABLY  REQUIRE TO CONFIRM
THAT ANY

                                      C-2

<PAGE>

TRANSFER BY IT OF THIS SECURITY  COMPLIES WITH THE FOREGOING  RESTRICTIONS.  THE
HOLDER  HEREOF,  BY  PURCHASING  THIS  SECURITY,  REPRESENTS  AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION  THAT IS AN "ACCREDITED  INVESTOR" AS
DEFINED IN RULE 501(a)(1),  (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT
IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3)
A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER)  REGULATION S
UNDER THE SECURITIES ACT."

         and (b) such certificates will be reissued without the foregoing legend
         only in accordance with the terms of the Indenture.

                  6. We agree that in the event that at some future time we wish
         to dispose of any of the  Convertible  Notes,  we will not do so unless
         the Convertible Notes are being transferred:

                          (a) to the Company or any Subsidiary thereof;

                          (b) pursuant to and in compliance with Rule 144A under
                 the Securities Act;

                          (c) pursuant to and in  compliance  with  Regulation S
                 under the Securities Act;

                          (d) to an institution that is an "accredited investor"
                 as  defined  in  Rule  501(a)(1),  (2),  (3) or (7)  under  the
                 Securities  Act, that is acquiring at least $250,000  principal
                 amount of the Convertible Notes for investment purposes and not
                 for distribution and that, prior to such transfer, furnishes to
                 the Trustee a signed letter containing certain  representations
                 and agreements  relating to the restrictions on transfer of the
                 Convertible  Notes (the form of which  letter  can be  obtained
                 from such Trustee);

                          (e) pursuant to an exemption from  registration  under
                 the  Securities  Act provided by Rule 144 under the  Securities
                 Act; or

                          (f)  pursuant to an effective  registration  statement
                 under the Securities Act.

                                          Very truly yours

                                          [PURCHASER]

                                            by 
                                               ---------------------------------

                                      C-3

<PAGE>

                                               Name:
                                               Title:

Dated:

cc:   Tel-Save Holdings, Inc.
      Attn:  General Counsel and Secretary

      6805 Route 202
      New Hope, Pennsylvania  18938

      Attn:  Secretary

                                      C-4


<PAGE>

                                                                       EXHIBIT D

                         FORM OF REGISTRATION AGREEMENT

--------
*     Applicable to Global Securities only.
**    Applicable to certificated Securities only.

* Signature  must be  guaranteed by a commercial  bank,  trust company or member
firm of the New York Stock Exchange.

*     Insert, if appropriate.