<PAGE>   1
                                                                EXHIBIT 10(c)

                                                                CREDIT AGREEMENT

______________________________________________________________________________
______________________________________________________________________________




                                CREDIT AGREEMENT

                            Dated as of July 1, 1996

                                    Between

                           Varsity Spirit Corporation
                                      and
                   Varsity Spirit Fashions and Supplies, Inc.
                                      and
                          Varsity/Intropa Tours, Inc.
                                       as

                                   Borrowers

                                      and

                               NATIONSBANK, N.A.

                                   as Lender

                                 U.S.$9,000,000




______________________________________________________________________________
______________________________________________________________________________



<PAGE>   2


                               TABLE OF CONTENTS

This Table of Contents is not part of the Agreement to which it is attached but
is for convenience of reference.

                                   ARTICLE I
                                  DEFINITIONS

    SECTION 1.01. Basic Definitions                                           1
    SECTION 1.02. Additional Definitions                                      2


                                   ARTICLE II
                                     LOANS

    SECTION 2.01. Committed Loans                                             7
    SECTION 2.02. Intentionally Left Blank                                    7
    SECTION 2.03. Note                                                        8
    SECTION 2.04. Repayment of Loans                                          8
    SECTION 2.05. Interest                                                    8
    SECTION 2.06. Borrowing Procedure                                         8
    SECTION 2.07. Prepayments, Conversions, and Continuations of Loans        8
    SECTION 2.08. Minimum Amounts                                             9
    SECTION 2.09. Certain Notices                                             9
    SECTION 2.10. Use of Proceeds                                            10
    SECTION 2.11. Fees                                                       10
    SECTION 2.12. Computations                                               10
    SECTION 2.13. Reduction or Termination of Commitment                     10
    SECTION 2.14. Payments                                                   10
    SECTION 2.15. Mandatory Prepayment                                       10


                                  ARTICLE III
                            CHANGE IN CIRCUMSTANCES

    SECTION 3.01. Increased Cost and Reduced Return                          11
    SECTION 3.02. Limitation on Types of Loans                               12
    SECTION 3.03. Illegality                                                 12
    SECTION 3.04. Compensation                                               12
    SECTION 3.05  Taxes                                                      13


                                   ARTICLE IV
                                   CONDITIONS

    SECTION 4.01. Initial Loan                                               13
    SECTION 4.02. Each Loan                                                  14


<PAGE>   3




                                   ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

    SECTION 5.01.  Existence                                                 14
    SECTION 5.02.  Financial Statements                                      14
    SECTION 5.03.  Authorization; No Breach                                  14
    SECTION 5.04.  Litigation                                                15
    SECTION 5.05.  Enforceability                                            15
    SECTION 5.06.  Approvals                                                 15
    SECTION 5.07.  Disclosure                                                15


                                   ARTICLE VI
                                   COVENANTS

    SECTION 6.01.  Information                                               15
    SECTION 6.02.  Current Ratio                                             16
    SECTION 6.03.  Minimum Tangible Net Worth                                16
    SECTION 6.04.  Maximum Funded Liabilities to Tangible Net Worth          17
    SECTION 6.05.  Maximum Funded Liabilities to Consolidated EBITDA Ratio   17
    SECTION 6.06.  Obligations                                               17


                                  ARTICLE VII
                                    DEFAULT

    SECTION 7.01.  Events of Default                                         17
    SECTION 7.02.  Remedies                                                  19


                                  ARTICLE VIII
                                 MISCELLANEOUS

    SECTION 8.01.  Expenses                                                  19
    SECTION 8.02.  Indemnification                                           19
    SECTION 8.03.  Right of Set-off.                                         20
    SECTION 8.04.  No Waiver; Cumulative Remedies                            20
    SECTION 8.05.  Successors and Assigns                                    20
    SECTION 8.06.  Amendments                                                20
    SECTION 8.07.  Notices                                                   21




<PAGE>   4



    SECTION 8.08.  Counterparts                                              21
    SECTION 8.09.  Severability                                              21
    SECTION 8.10.  Controlling Agreement                                     21
    SECTION 8.11.  Survival                                                  21
    SECTION 8.12.  Governing Law                                             21
    SECTION 8.13.  WAIVER OF JURY TRIAL                                      22
    SECTION 8.14.  ENTIRE AGREEMENT                                          22


Exhibit A - Note

Exhibit B - Opinion of Counsel for the Loan Parties




<PAGE>   5



                                CREDIT AGREEMENT


     CREDIT AGREEMENT (the "Agreement") dated as of July 1, 1996, between
VARSITY SPIRIT CORPORATION, a Tennessee Corporation and VARSITY SPIRIT FASHIONS
AND SUPPLIES, INC., a Tennessee Corporation and VARSITY/INTROPA TOURS, INC., a
Tennessee company(the "Borrowers"), and NATIONSBANK, N.A., a national banking
association (the "Bank").

     The parties hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.01. Basic Definitions.  As used in this Agreement, the following
terms have the following meanings:

           "Applicable Margin" means:                                           
                                                                                
           (i) with respect to Base Rate Loans, Zero percent (0%);              
                                                                                
           (ii) with respect to Eurodollar Loans, One percent (1%); and         

           "Commitment" means the obligation of the Bank to make Committed
      Loans in an aggregate principal amount at any time outstanding up to but
      not exceeding $9,000,000, as the same may be reduced or terminated
      pursuant to this Agreement.

            "Fees" means:

           (ii) a commitment fee on the daily average unused amount of the
      Commitment from and including the date of this Agreement to but excluding
      the Termination Date, at the rate of One Eighth percent (.125%) per
      annum, payable on each Quarterly Date

            "Principal Office" means the office of the Bank located at One
            NationsBank Plaza, Fifth Floor   Nashville, TN  37239.

            "Termination Date" means June 30, 1997.









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<PAGE>   6




     SECTION 1.02. Additional Definitions. As used in this Agreement, the
following terms have the following meanings.

           "Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
      Interest Period therefor, the rate per annum (rounded upwards, if
      necessary, to the nearest 1/100 of 1%) determined by the Bank to be equal
      to the quotient obtained by dividing (a) the Eurodollar Rate for such
      Eurodollar Loan for such Interest Period by (b) 1 minus the Reserve
      Requirement for such Eurodollar Loan for such Interest Period.

           "Assessment Rate" means, for any day, the annual assessment rate
      (rounded upwards, if necessary, to the nearest 1/100 of 1%) which is
      payable by the Bank to the Federal Deposit Insurance Corporation (or any
      successor) for deposit insurance for Dollar time deposits with the Bank
      at its Principal Office as determined by the Bank

           "Base Rate" means, for any day, the rate per annum equal to the
      higher of (a) the Federal Funds Rate for such day plus one-half of one
      percent (.5%) and (b) the Prime Rate for such day.  Any change in the
      Base Rate due to a change in the Prime Rate or the Federal Funds Rate
      shall be effective on the effective date of such change in the Prime Rate
      or Federal Funds Rate.

           "Base Rate Loans" means Loans that bear interest at rates based upon
      the Base Rate.

           "Business Day" means any day except a Saturday, Sunday, or other day
      on which banks in the State where the Principal Office is located are
      authorized by law to close and, if the applicable Business Day relates to
      Eurodollar Loans, on which commercial banks in London are open for
      international business (including dealings in Dollar deposits in the
      London interbank market).

           "Commitment" means the commitment by NationsBank, N.A. to make Loans
      to the Borrowers hereunder in the maximum principal amount of $9,000,000.

           "Committed Loans" has the meaning specified in Section 2.01.



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<PAGE>   7
           "Consolidated Depreciation and Amortization" means, for any period,
      the depreciation and amortization of the Borrowers and its Subsidiaries
      on a consolidated basis determined in conformity with GAAP.

      "Consolidated EBITDA" means, with respect to any Person, the
      Consolidated Net Income of such Person for such period adjusted to
      exclude (to the extent included therein) (i) Consolidated Total Income
      Tax Expense, (ii) Consolidated Depreciation and Amortization, (iii)
      Consolidated Total Net Interest Expense and (iv) other non-cash charges
      or credits which increased or decreased Consolidated Net Income, in each
      case determined for such period on a consolidated basis for such person
      and its Subsidiaries in accordance with GAAP, except as otherwise
      specifically provided herein, and to subtract therefrom the amount of all
      cash payments, and to add thereto the amount of all cash receipts
      relating to non-cash charges or credits, as the case may be, made in any
      period after the Closing Date that do not relate to events that occurred
      prior to the Closing Date and were either (A) excluded as losses or gains
      in the calculation of Consolidated Net Income in any period after the
      Closing Date or (B) which were or would have been adjustments to
      Consolidated EBITDA as a result of clause (iv) above in any period after
      the Closing Date.

           ""Consolidated Total Income Tax Expense" means, for any period, the
      total income tax expense of the Borrowers and its Subsidiaries for such
      period, on a consolidated basis determined in accordance with GAAP.

           "Consolidated Interest Income means, for any period, aggregate
      interest income for the Borrowers and its Subsidiaries for the period.

           "Consolidated Net Income" means, for any period, the net earnings
      (or loss) of the Borrowers and its Subsidiaries on a consolidated basis
      for such period taken as a single accounting period, but excluding
      extraordinary items of gain or loss, all as determined in conformity with
      GAAP.

           "Consolidated Total Interest Expense" means, for any period, the
      total interest expense of the Borrowers and its Subsidiaries, for such
      period, on a consolidated basis determined in accordance with GAAP.

           "Consolidated Net Interest Expense" means, for any period,
      Consolidated Total Interest Expense less Consolidated Interest Income.




3
<PAGE>   8
      "Continue", "Continuation", and "Continued" shall refer to a continuation
      pursuant to Section 2.07 of a Fixed Rate Loan as a Loan of the same Type
      from one Interest Period to the next Interest Period.

           "Convert", "Conversion", and "Converted" shall refer to the
      conversion pursuant to Section 2.07 or Article III of one Type of Loan
      into another Type of Loan.

           "Current Assets", shall mean all items which, in accordance with
      Generally Accepted Accounting Principles, would be classified as current
      assets on a consolidated balance sheet of the Borrowers and their
      subsidiaries.

           "Current Liabilities", shall mean all items which, in accordance
      with Generally Accepted Accounting Principles, would be classified as
      current liabilities on a consolidated balance sheet of the Borrowers and
      their subsidiaries.

           "Debtor Relief Laws" means the Bankruptcy Code of the United States
      of America and all other applicable liquidation, conservatorship,
      bankruptcy, moratorium, rearrangement, receivership, insolvency,
      reorganization, suspension of payments, or similar debtor relief laws 
      from time to time in effect affecting the rights of creditors generally.

           "Default" means an Event of Default or the occurrence of an event or
      condition that with notice or lapse of time or both would become an Event
      of Default.

           "Default Rate"  means, with respect to any principal of any Loan or
      any other amount payable by the Borrowers under this Agreement or any
      other Loan Document that is not paid when due (whether at stated
      maturity, by acceleration, or otherwise), a rate per annum during the
      period from and including the due date to but excluding the date on which
      such amount is paid in full equal to two percent (2%) plus the Base Rate
      as in effect from time to time plus the Applicable Margin for Base Rate
      Loans (provided that, if the amount in default is principal of a Fixed
      Rate Loan and the due date thereof is a day other than the last day of
      the Interest Period therefor, the "Default Rate" for such principal shall
      be, for the period from and including the due date and to but excluding
      the last day of the Interest Period therefor, two percent (2%) plus the
      interest rate for such Loan as provided in Section 2.05(b), as the case
      may be, and, thereafter, the rate provided for above in this definition).

           "Dollars" and "$" mean lawful money of the United States of America.

           "Eurodollar Loans" means Loans that bear interest at rates based
      upon the Adjusted Eurodollar Rate.



4
<PAGE>   9
           "Event of Default" has the meaning specified in Section 7.01.

           "Eurodollar Rate" means, for any Eurodollar Loan for any Interest
      Period therefor, the rate per annum appearing on Telerate Page 3750 (or
      any successor page) as the London interbank offered rate for deposits in
      Dollars at approximately 11:00 a.m. (London time) two Business Days prior
      to the first day of such Interest Period for a term comparable to such
      Interest Period. If for any reason such rate is not available, the term
      "Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
      Period therefor, the rate per annum appearing on Reuters Screen LIBO Page
      as the London interbank offered rate for deposits in Dollars at
      approximately 11:00 a.m. (London time) two Business Days prior to the
      first day of such Interest Period for a term comparable to such Interest
      Period; provided, however, if more than one rate is specified on Reuters
      Screen LIBO Page, the applicable rate shall be the arithmetic mean of all
      such rates.

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

           "Financial Statements" means the financial statements of the
      Borrowers and the Subsidiaries most recently furnished to the Bank prior
      to the date of this Agreement.

           "Fixed Rate Loans" means Eurodollar Loans.

           "Funded Liabilities" means, at any date of determination, all
      Indebtedness of any Person that has an original maturity date in excess
      of one year.

           "Governmental Authority" means any nation or government, any state
      or political subdivision thereof, any central bank (or similar monetary
      or regulatory authority), and any entity exercising executive,
      legislative, judicial, regulatory, or administrative functions of or
      pertaining to government.




5
<PAGE>   10


           "Indebtedness"  as applied to any Person, means (i) all indebtedness
      for borrowed money, (ii) that portion of obligations with respect to
      Capital Leases. which is capitalized on a balance sheet in conformity
      with GAAP, (iii) notes payable and drafts accepted representing
      extensions of credit whether of not representing obligations for borrowed
      money, including, without limitation, any indebtedness evidenced by notes
      issued pursuant to note agreements or indentures, (iv) any obligation
      owed for all or any part of the deferred purchase price of property of
      services which purchase price is (x) due more than six months from the
      date of incurrence of the obligation in respect thereof, or (y) evidenced
      by a note or similar written instrument, and (v) all indebtedness secured
      by any mortgage, pledge, Lien, security interest or vendor's interest
      under any conditional sale or other title retention agreement existing on
      any property of asset owned or held by that Person regardless of whether
      the indebtedness secured thereby shall have been assumed by that Person
      or is nonrecourse to the credit of that Person and, without duplication,
      all drafts drawn thereunder of (to the extent not theretofore
      reimbursed); provided, however, that Indebtedness shall not include (i)
      trade payables and accrued expenses, in each case arising in the
      ordinary course of business.

           "Intangible Assets" means:, as of the date of any determination
      thereof, the total amount of all assets of the Borrowers and their
      Subsidiaries consisting of goodwill, patents, trade names, trade marks,
      copyrights, franchises, experimental expense, organization expense,
      deferred assets other than prepaid insurance and prepaid taxes, the
      excess of cost of shares acquired over book value of related assets and
      such other assets as are properly classified as "intangible assets" in
      accordance with Generally Accepted Accounting Principles.

           "Interest Period" means:

           (i) with respect to any Eurodollar Loan, each period commencing on   
      the date such Loan is made or Converted from a Loan of another Type or the
      last day of the next preceding Interest Period with respect to such Loan,
      and ending on the numerically corresponding day in the first, second,
      third, or sixth calendar month thereafter, as the Borrowers may select as
      provided in Section 2.09, except that each such Interest Period which
      commences on the last Business Day of a calendar month (or on any day for
      which there is no numerically corresponding day in the appropriate
      subsequent calendar month) shall end on the last Business Day of the
      appropriate subsequent calendar month;

      Notwithstanding the foregoing: (a) each Interest Period which would
      otherwise end on a day which is not a Business Day shall end on the next
      succeeding Business Day (or, in the case of an Interest Period for
      Eurodollar Loans, if such succeeding Business Day falls in the next
      succeeding calendar month, on the next preceding Business Day); (b) any
      Interest Period which would otherwise extend beyond the Termination Date
      shall end on the Termination


6
<PAGE>   11

      Date; (c) no more than 5 Interest Periods for each Type of Fixed Rate 
      Loan shall be in effect at the same time; and (d) no Interest Period 
      for any Fixed Rate Loan shall have a duration of less than 1 month 
      (in the case of Eurodollar Loans) and if the Interest
      Period for any Fixed Rate Loan would otherwise be a shorter period, 
      such Loan shall not be available hereunder.

           "Lien" means any lien, mortgage, pledge, security interest, charge
      or encumbrance, of any kind to secure the payment, performance or
      discharge of any liability (as determined in accordance with GAAP)
      including any conditional sale or other title retention agreement, any
      lease in the nature thereof, and any agreement to give any security
      interest.

           "Loan Documents" means this Agreement, the Note, and all other
      documents, instruments, and agreements executed or delivered pursuant to
      or in connection with this Agreement, as the same may be amended,
      modified, renewed, extended, or supplemented.

           "Loan Party" means the Borrowers or any Person that guaranties or
      secures any or all of the Borrower's obligations under the Loan
      Documents.

           "Loans" means Committed Loans and Money Market Loans.

           "Material Adverse Effect" means a material adverse effect on (a) the
      properties, prospects, business, operations, financial condition,
      liabilities, or capitalization of the Borrowers and the Subsidiaries
      taken as a whole, (b) the ability of any Loan Party to pay and perform
      its obligations under any Loan Document, or (c) the validity or
      enforceability of any Loan Document or the rights and remedies of the
      Bank thereunder.

           "Note" has the meaning specified in Section 2.03.

           "Person" means any individual, corporation, company, joint venture,
      association, partnership, trust, unincorporated organization,
      Governmental Authority, or other entity.

           "Prime Rate" means the per annum rate of interest established from
      time to time by the Bank as its prime rate, which rate may not be the
      lowest rate of interest charged by the Bank to its customers.

           "Quarterly Date" means the last day of each March, June, September,
      and December of each year, the first of which shall be the first such day
      after the date of this Agreement.

           "Regulation D" means Regulation D of the Board of Governors of the
      Federal Reserve System, as in effect from time to time.



7
<PAGE>   12

           "Reserve Requirement" means, at any time, the maximum rate at which
      reserves (including any marginal, special, supplemental, or emergency
      reserves) are required to be maintained under regulations issued from
      time to time by the Board of Governors of the Federal Reserve System (or
      any successor) by member banks of the Federal Reserve System in New York
      City with deposits exceeding one billion Dollars against (a) in the case
      of Eurodollar Loans, "Eurocurrency liabilities" (as such term is used in
      Regulation D). Without limiting the effect of the foregoing, the Reserve
      Requirement shall reflect any other reserves required to be maintained by
      such member banks with respect to (i) any category of liabilities which
      includes deposits by reference to which the Adjusted Eurodollar or (ii)
      any category of extensions of credit or other assets which include
      Eurodollar Loans.  The Adjusted Eurodollar Rate  shall be adjusted
      automatically on and as of the effective date of any change in the
      Reserve Requirement.

           "Subsidiary" means, any corporation or other entity of which
      securities or other ownership interests having ordinary voting power to
      elect a majority of the board of directors or other Persons performing
      similar functions are at the time directly or indirectly owned by the
      Borrowers.

           "Tangible Net Worth" means, at any time, consolidated net
      shareholder's equity of the Borrowers  determined in accordance with
      Generally Accepted Accounting Principles applied on a consistent basis
      with no upward adjustments due to a revaluation of assets, minus all
      Intangible Assets of the Borrowers and their Subsidiaries and minus all
      amounts due from employees, officers, directors, shareholders and
      affiliates of the Borrowers and their Subsidiaries.

           "Type" means any type of Loan (i.e., Base Rate Loan, Eurodollar
      Loan, CD Loan, or Money Market Loan).

           "Unused Amount" means the Committed Amount minus the then
      outstanding principal amount of the Committed Loans.

                                   ARTICLE II

                                     LOANS

     SECTION 2.01. Committed Loans.  Subject to the terms and conditions of
this Agreement, the Bank agrees to make one or more loans ("Committed Loans")
to the Borrower from time to time from and including the date hereof to but
excluding the Termination Date, provided that 

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<PAGE>   13

the aggregate principal amount of the Loans at any time outstanding
shall not exceed the amount of the Commitment.  Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, the Borrower
may borrow, repay, and reborrow hereunder the amount of the Commitment by means
of Base Rate Loans and Eurodollar Loans.

     SECTION 2.02. [Intentionally Left Blank].

     SECTION 2.03. Note.  The Loans made by the Bank shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit A,
dated the date hereof, payable to the order of the Bank in a principal amount
equal to the Commitment as originally in effect and otherwise duly completed
(as from time to time amended, modified, renewed, or extended, the "Note").

     SECTION 2.04. Repayment of Loans.  The Borrower shall pay to the Bank the
outstanding principal amount of the Loans on or before the Termination Date.

     SECTION 2.05. Interest.  The Borrower shall pay to the Bank interest on
the unpaid principal amount of each Loan for the period commencing on the date
of such Loan to but excluding the date such Loan shall be paid in full, at the
following rates per annum:

           (a) during the periods such Loan is a Base Rate Loan, the Base Rate
      plus the Applicable Margin;

           (b) during the periods such Loan is a Eurodollar Loan, the Adjusted
      Eurodollar Rate plus the Applicable Margin;

Notwithstanding the foregoing, the Borrower shall pay to the Bank interest at
the Default Rate on any principal of any Loan and (to the fullest extent
permitted by law) on any other amount payable by the Borrower under this
Agreement or any other Loan Document which is not paid in full when due
(whether at stated maturity, by acceleration, or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full.  Accrued interest on the Loans shall be due and payable as
follows:  (i)  in the case of Base Rate Loans, on each Quarterly Date; (ii)  in
the case of each Eurodollar Loan, on the last day of the Interest Period with
respect thereto and, in the case of an Interest Period greater than three
months, at three-month intervals after the first day of such Interest Period;
(iii)  upon the payment or prepayment of any Loan or the Conversion of any Loan
to a Loan of another Type (but only on the principal amount so paid, prepaid,
or Converted); and (iv)  on the Termination Date; provided that interest
payable at the Default Rate shall be payable from time to time on demand.

     SECTION 2.06. Borrowing Procedure.  The Borrower shall give the Bank
notice of each borrowing hereunder in accordance with Section 2.09.  Not later
than 2:00 p.m. (local time at


9
<PAGE>   14

the Principal Office) on the date specified for each borrowing 
hereunder, the Bank will make available the amount of the Loan to be made by it
on such date to the Borrower by depositing the same, in immediately available
funds, in an account of the Borrower (designated by the Borrower) maintained
with the Bank at the Principal Office or as otherwise directed by the Borrower.

     SECTION 2.07. Prepayments, Conversions, and Continuations of Loans.
Subject to Section 2.08, the Borrower shall have the right from time to time to
prepay the Loans, or to Convert all or part of a Loan of one Type into a Loan
of another Type or to Continue Fixed Rate Loans of one Type as Fixed Rate Loans
of the same Type, provided that:  (a) the Borrower shall give the Bank notice
of each such prepayment, Conversion, or Continuation as provided in Section
2.09, (b) Fixed Rate Loans may only be Converted on the last day of the
Interest Period, and (c) except for Conversions into Base Rate Loans, no
Conversions or Continuations shall be made while a Default has occurred and is
continuing.

     SECTION 2.08. Minimum Amounts.  Except for Conversions and prepayments
pursuant to Section 2.15 and Article III, each borrowing, each Conversion, and
each prepayment of principal of the Loans shall be in an amount at least equal
to $100,000.  Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of Fixed Rate Loans of the same Type having the same
Interest Period shall be at least equal to $100,000.

     SECTION 2.09. Certain Notices.  Notices by the Borrower to the Bank of a
termination or reduction of the Commitment, of borrowings, Conversions,
Continuations and optional prepayments of Loans and of the duration of Interest
Periods shall be irrevocable and shall be effective only if received by the
Bank not later than 12:00 noon (Charlotte, North Carolina time ) on the number
of Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation, or prepayment or the first day of such
Interest Period specified below:


<TABLE>
<CAPTION>
                                      Number of Business  
            Notice                        Days Prior      
------------------------------        ------------------  
<S>                                        <C>            
Termination or reduction of                               
  Commitment                                  3           
                                                          
Borrowing or prepayment of,                               
  or Conversions into, Base                                 
  Rate Loans                               same day       
                                                          
</TABLE>

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<PAGE>   15

Borrowing or prepayment of,
  Conversions into,
  Continuations as, or
  duration of Interest Periods
  for, Eurodollar Loans                            3



Each such notice of termination or reduction shall specify the amount of the
Commitment to be terminated or reduced.  Each such notice of borrowing,
Conversion, Continuation, or optional prepayment shall specify (a) the amount
and Type of the Loan to be borrowed, Converted, Continued, or prepaid (and, in
the case of a Conversion, the Type of Loan to result from such Conversion), (b)
the date of borrowing, Conversion, Continuation, or prepayment (which shall be
a Business Day), and (c) in the case of a borrowing of a Fixed Rate Loan,
Conversion, or Continuation, the duration of the Interest Period.  In the event
the Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any Fixed Rate Loan, within the time period and otherwise as
provided in this Section 2.09, such Loan (if outstanding as a Fixed Rate Loan)
will be automatically Converted into a Base Rate Loan on the last day of the
preceding Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.

     SECTION 2.10. Use of Proceeds.  The proceeds of the Loans shall be used by
the Borrower for working capital in the ordinary course of business.  The
Borrower will not, directly or indirectly, use any part of such proceeds for
the purpose of purchasing or carrying any margin stock within the meaning of
Regulations G, U, T, or X of the Board of Governors of the Federal Reserve
System.

     SECTION 2.11. Fees.  The Borrower agrees to pay to the Bank the Fees as
specified herein.
     (a)  Commitment Fee  The Borrower shall pay to the Bank on the daily
average Unused Amount at a rate equal to .125% per annum of such Unused Amount.

     SECTION 2.12. Computations.  Interest and Fees payable by the Borrower
hereunder and under the other Loan Documents shall be computed on the basis of
a year of  360 days and the actual number of days elapsed (including the first
day but excluding the last day) occurring in the period for which payable.

     SECTION 2.13. Reduction or Termination of Commitment.  The Borrower shall
have the right to irrevocably terminate or reduce in part the unused portion of
the Commitment at any time 

11
<PAGE>   16

and from time to time, provided that: (a) the Borrower shall give notice
of each such termination or reduction as provided in Section 2.09; and (b) each
partial reduction shall be in an aggregate amount at least equal to $1,000,000

     SECTION 2.14. Payments.  All payments of principal, interest, and other
amounts to be made by the Borrower under this Agreement and other Loan
Documents shall be made to the Bank at the Principal Office in
Dollars and in immediately available funds, without setoff, deduction, or
counterclaim.  Whenever any payment under this Agreement or any other Loan
Document shall be stated to be due on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time in such case shall be included in the computation of interest and Fees, as
applicable and as the case may be.

     SECTION 2.15. Mandatory Prepayment.  If at any time the outstanding
principal amount of the Loans exceeds the Commitment, the Borrower shall
immediately make a prepayment of the Loans in an amount equal to the excess.

                                  ARTICLE III

                            CHANGE IN CIRCUMSTANCES




     SECTION 3.01. Increased Cost and Reduced Return.

     (a) If, after the date hereof, the adoption of any applicable law, rule,
or regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive (whether or not having the
force of law) of any such Governmental Authority:

           (i) shall subject the Bank to any tax, duty, or other charge with
      respect to any Fixed Rate Loans, the Note, or its obligation to make
      Fixed Rate Loans, or change the basis of taxation of any amounts payable
      to the Bank under this Agreement or the Note in respect of any Fixed Rate
      Loans (other than taxes imposed on the overall net income of the Bank by
      the jurisdiction in which the Bank has its Principal Office);

           (ii) shall impose or modify any reserve, special deposit, or similar
      requirement (other than the Reserve Requirement utilized in the
      determination of the Adjusted Eurodollar Rate ) relating to any


12
<PAGE>   17

      extensions of credit or other assets of, or any deposits with or other
      liabilities or commitments of, the Bank (including the Commitment); or

           (iii) shall impose on the Bank or on the United States market for
      certificates of deposit or the London interbank market any other
      condition affecting this Agreement or the Note or any of such extensions
      of credit or liabilities or commitments;

and the result of any of the foregoing is to increase the cost to the Bank of
making, Converting into, Continuing, or maintaining any Fixed Rate Loans        
or to reduce any sum received or receivable by the Bank under this Agreement or
the  Note with respect to any Fixed Rate Loans, then the Borrower shall pay to
the Bank on demand such amount or amounts as will compensate the Bank for such
increased cost or reduction.

     (b) If the Bank shall have determined that the adoption of any applicable
law, rule, or regulation regarding capital adequacy or any change therein or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority, has or would have the effect of reducing
the rate of return on the capital of the Bank or any corporation controlling
the Bank as a consequence of the Bank's obligations hereunder to a level below
that which the Bank or such corporation could have achieved but for such
adoption, change, request, or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by the Bank to be
material, then from time to time upon demand the Borrower shall pay to the Bank
such additional amount or amounts as will compensate the Bank for such
reduction.

     (c) A certificate of the Bank claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of clearly demonstrable error.  In determining
such amount, the Bank may use any reasonable averaging and attribution methods.

     SECTION 3.02. Limitation on Types of Loans.  If on or prior to the first
day of any Interest Period for any Eurodollar Loan :

           (a) the Bank determines (which determination shall be conclusive)
      that by reason of circumstances affecting the relevant market, adequate
      and reasonable means do not exist for ascertaining the Eurodollar Rate ,
      as the case may be, for such Interest Period; or




13
<PAGE>   18

           (b) the Bank determines (which determination shall be conclusive)
      that the Adjusted Eurodollar Rate will not adequately and fairly reflect
      the cost to the Bank of funding Eurodollar Loans or, as the case may be,
      for such Interest Period;

then the Bank shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Bank shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.

      SECTION 3.03. Illegality.  Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Bank to make, maintain,
or fund Eurodollar Loans hereunder, then the Bank shall promptly notify the
Borrower thereof and the Bank's obligation to make or Continue  Eurodollar Loans
and to Convert other Types of Loans into Eurodollar Loans shall be suspended
until such time as the Bank may again make, maintain, and fund Eurodollar Loans
and the Borrower shall, on the last day of the Interest Period for each
outstanding Eurodollar Loan (or earlier, if required by law), either prepay such
Loans or Convert such Loans into Base Rate Loans in accordance with the terms of
this Agreement.

      SECTION 3.04. Compensation.  Upon the request of the Bank, the Borrower
shall pay to the Bank such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost, or expense
incurred by it as a result of:

           (a) any payment, prepayment or Conversion of a Fixed Rate Loan for
      any reason (including, without limitation, the acceleration of the Loans
      pursuant to Section 7.02) on a date other than the last day of an
      Interest Period for such Loan; or

           (b) any failure by the Borrower for any reason (including, without
      limitation, the failure of any conditions precedent specified in Article
      IV to be satisfied) to borrow, Convert, Continue, or prepay a Fixed Rate
      Loan on the date for such borrowing, Conversion, Continuation, or
      prepayment specified in the relevant notice of borrowing, prepayment,
      Continuation, or Conversion under this Agreement.

Without limiting the effect of the preceding sentence, such compensation shall
include any loss, cost, or expense incurred in obtaining, liquidating, or
employing deposits from third parties (including loss of margin).


14
<PAGE>   19

     SECTION 3.05 Taxes.  (a)  Any and all payments by the Borrower to or for
the account of the Bank hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of the Bank, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which the Bank is organized or any political subdivision
thereof (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes").  If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any Loan Document to the Bank,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.05) the Bank receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law, and (iv) the Borrower shall furnish to the Bank, at its address referred
to in Section 8.06, the original or a certified copy of a receipt evidencing
payment thereof.

        (b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made hereunder or under
any other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").

     (c) The Borrower agrees to indemnify the Bank for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this Section
3.05) paid by the Bank and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto.


                                   ARTICLE IV

                                   CONDITIONS

     SECTION 4.01.  Initial Loan.  The obligation of the Bank to make the
initial Loan hereunder is subject to the satisfaction of the following
conditions:

           (a)  receipt by the Bank of the duly executed Note, complying with
      the provisions of Section 2.03, and such other Loan Documents as the Bank
      may reasonably request;



15
<PAGE>   20

           (b)  receipt by the Bank of an opinion of counsel for the Loan
      Parties, substantially in the form of Exhibit B and covering such
      additional matters as the Bank may reasonably request; and

           (c)  receipt by the Bank of all documents that the Bank may request
      relating to the existence of the Loan Parties, the authorization for and
      the validity of the Loan Documents, and any other matters relevant
      thereto, all in form and substance satisfactory to the Bank.

     SECTION 4.02.  Each Loan.  The obligation of the Bank to make any Loan
(including the initial Loan) is subject to the satisfaction of the following
conditions precedent:

           (a) receipt by the Bank of a notice of borrowing in accordance with
      Section 2.06;

           (b) the fact that immediately after the making of such Loan, the
      aggregate outstanding principal amount of the Loans will not exceed the
      amount of the Commitment;

           (c) the fact that, immediately before and after such Loan, no
      Default shall have occurred and be continuing; and

           (d) the fact that the representations and warranties of the Borrower
      contained in this Agreement and the other Loan Documents shall be true
      and correct on and as of the date of such Loan.

Each borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such borrowing that the conditions precedent
specified in clauses (b), (c), and (d) of this Section have been satisfied.

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     To induce the Bank to enter into this Agreement, the Borrower represents
and warrants to the Bank that:

     SECTION 5.01.  Existence.  The Borrower and each Subsidiary (a) is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization; and (b) has the requisite power and authority
and legal right to own its assets and carry on its business as now being or as
proposed to be conducted.  The Borrower has the power, authority, and legal
right to execute, deliver, and perform its obligations under the Loan
Documents.



16
<PAGE>   21

     SECTION 5.02.  Financial Statements.  The Financial Statements are
complete and correct, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, and fairly and accurately
present the financial condition of the Borrower and the Subsidiaries as of the
respective dates indicated therein and the results of operations for the
respective periods indicated therein.  Since the effective date of the
Financial Statements, no event or condition has occurred that could have a
Material Adverse Effect.

     SECTION 5.03.  Authorization; No Breach.  The execution, delivery, and
performance by the Borrower of the Loan Documents to which it is a party and
compliance with the terms and provisions thereof have been duly authorized by
all requisite action on the part of the Borrower and do not and will not (a)
violate or conflict with, or result in a breach of, or require any consent
under (i) the articles of incorporation, bylaws, or other organizational
documents of the Borrower or any of the Subsidiaries, (ii) any applicable law,
rule, or regulation or any order, writ, injunction, or decree of any
Governmental Authority or arbitrator, or (iii) any agreement or instrument to
which the Borrower or any of the Subsidiaries is a party or by which any of
them or any of their property is bound or subject, or (b) constitute a default
under any such agreement or instrument.

     SECTION 5.04.  Litigation.  There is no action,  suit, investigation, or
proceeding before or by any Governmental Authority or arbitrator pending, or to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary, that could, if adversely determined, have a Material Adverse
Effect.

     SECTION 5.05.  Enforceability. This Agreement constitutes, and the other
Loan Documents when executed and delivered by the Borrower shall constitute,
the legal, valid, and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms, except as limited by
applicable Debtor Relief Laws and general principles of equity.

     SECTION 5.06.  Approvals.  No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower
of any of the Loan Documents to which it is a party or for the validity or
enforceability thereof.

     SECTION 5.07.  Disclosure.  No statement, information, report,
representation, or warranty made by the Borrower in any Loan Document or
furnished to the Bank in connection with any Loan Document contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading.


17
<PAGE>   22

                                   ARTICLE VI

                                   COVENANTS

     The Borrower agrees that, so long as the Bank has any Commitment hereunder
or any amount payable under the Note remains unpaid:

     SECTION 6.01.  Information.  The Borrower shall deliver to the Bank:

           (a) as soon as available and in any event within 120 days after the
      end of each fiscal year of the Borrower a consolidated balance sheet of
      the Borrower and the Subsidiaries as of the end of such fiscal year and
      the related consolidated statements of income and cash flows for such
      fiscal year, setting forth in each case in comparative form the figures
      for the previous fiscal year, all prepared in accordance with generally
      accepted accounting principles applied on a consistent basis and
      certified by independent public accountants of nationally recognized
      standing;

           (b) as soon as available and in any event within 45 days after the
      end of each of the first three quarters of each fiscal year of the
      Borrower a consolidated balance sheet of the Borrower and the
      Subsidiaries as of the end of such quarter and the related consolidated
      statements of income and cash flows for such quarter and for the portion
      of the Borrower's fiscal year ended at the end of such quarter, setting
      forth in each case in comparative form the figures for the corresponding
      quarter and the corresponding portion of the Borrower's previous fiscal
      year, all in reasonable detail and duly certified (subject to normal
      year-end adjustments) by the chief financial officer of the Borrower as
      having been prepared in accordance with generally accepted accounting 
      principles applied on a consistent basis;

           (c) at the time of delivery of the financial statements provided for
      in Sections 6.01(a) and(b) hereof, a certificate of an authorized
      financial officer of each of the Borrowers to the effect that such
      financial statements have been prepared in accordance with generally
      accepted accounting principles applied on a consistent basis and that
      such Borrower is in compliance  with the terms of the Credit Agreement
      and the other Loan Documents and no Default or Event of Default exists,
      or if any Default or Event of Default does exist specifying the nature
      and extent thereof and what action such Borrower proposes to take with
      respect thereto.  In addition, such officer's certificate shall
      demonstrate compliance of the financial covenants contained in Sections
      6.02, 6.03, 6.04, and 6.05 by calculation thereof as of the end of each
      such fiscal period.



18
<PAGE>   23

           (d) within the period for delivery of the annual financial
      statements provided in Section 6.01 (a), a certificate of the accountants
      conducting the annual audit stating that they have reviewed this Credit
      Agreement and stating further whether, in the course of their audit, they
      have become aware of any Default or Event of Default (insofar as any such
      terms or provisions pertain to accounting matters) and, if any such
      Default or Event of Default exists, specifying the nature and extent
      thereof.

           (e) within three (3) days after any officer of the Borrower obtains
      knowledge of any Default, a certificate of the chief financial officer of
      the Borrower setting forth the details thereof and any action that the
      Borrower is taking or proposes to take with respect thereto; and

           (f) from time to time such additional information regarding the
      financial condition or business of the Borrower and the Subsidiaries as
      the Bank may reasonably request.

      SECTION 6.02.  Current Ratio.
The Borrower shall maintain a ratio of Current Assets to Current Liabilities of
not less than 1.0 to 1.0.

      SECTION 6.03.  Minimum Tangible Net Worth.
The Borrower shall maintain at all times Tangible Net Worth of at least
$14,000,000, provided, however, on December 31, 1996 and the last day of each
fiscal year thereafter such required amount shall be increased by an amount
that is the greater of $2,000,000 or 50% of the net income of the Borrowers
for the fiscal year then ending, with such increases to be cumulative.

      SECTION 6.04.  Maximum Funded Liabilities to Tangible Net Worth.
The Borrower shall maintain a ratio of total Funded Liabilities to Tangible Net
Worth of not more than .75 to 1.0.

      SECTION 6.05.  Maximum Funded Liabilities to Consolidated EBITDA Ratio
The Borrower shall maintain a ratio of Funded Liabilities to Consolidated
EBITDA of not more than 2.0 to 1.0 for the fiscal year ending December 31,
1996.

      SECTION 6.06.  Obligations.  The Borrower shall, and shall cause each of
the Subsidiaries to:

           (a) preserve and maintain all of its rights, privileges, and
      franchises necessary or desirable in the normal conduct of its business;


19
<PAGE>   24

           (b) comply with the requirements of all applicable laws, rules,
      regulations, and orders of Governmental Authorities;

           (c) pay and discharge when due all taxes, assessments, and
      governmental charges or levies imposed on it or on its income or profits
      or any of its property, except for any such tax, assessment, charge, or
      levy the payment of which is being contested in good faith and by proper
      proceedings and against which adequate reserves are being maintained;

           (d) maintain all of its properties owned or used in its business in
      good working order and condition ordinary wear and tear excepted;

           (e) permit representatives of the Bank, during normal business
      hours, to examine, copy, and make extracts from its books and records, to
      inspect its properties, and to discuss its business and affairs with its
      officers, directors, and accountants; and

           (f) maintain insurance in such amounts, with such deductibles, and
      against such risks as is customary for similarly situated businesses.


                                  ARTICLE VII

                                    DEFAULT

     SECTION 7.01.  Events of Default.  Each of the following shall constitute
an "Event of Default":

           (a) the Borrower shall fail to pay when due any principal of or
      interest on any Loan, or any Loan Party shall fail to pay when due any
      other amount payable under any Loan Document.

           (b) any representation, warranty, certification, or statement made
      or deemed made by any Loan Party (or any of its officers) in any Loan
      Document or in any certificate, financial statement, or other document
      delivered pursuant thereto shall be false, misleading, or incorrect in
      any material respect when made or deemed made.

           (c) the Borrower shall fail to perform, observe, or comply with any
      covenant, agreement, or term contained in Section 6.01 of this Agreement.


20
<PAGE>   25

           (d) any Loan Party shall fail to perform, observe, or comply with
      any other covenant, agreement, or term contained in any Loan Document
      (other than a failure covered elsewhere in this Section 7.01) and such
      failure shall continue for a period of thirty (30) days after notice
      thereof to such Loan Party by the Bank.

           (e) any Loan Party or any Subsidiary shall admit in writing its
      inability to, or be generally unable to, pay its debts as such debts
      become due.

           (f) any voluntary or involuntary proceeding under any Debtor Relief
      Law shall be commenced by or against any Loan Party or any Subsidiary or
      any of their respective assets, and if an involuntary proceeding is
      commenced, such proceeding shall not be dismissed within thirty (30) days
      after the commencement thereof.

           (g) any Loan Party or any Subsidiary shall fail to pay when due any
      principal of or interest on any indebtedness for borrowed money (other
      than the Note) having an outstanding principal amount greater than
      $250,000, whether as principal obligor, guarantor, or otherwise, or the
      maturity of any such indebtedness shall have been accelerated, or any
      event shall have occurred that permits (or, with the giving of notice or
      lapse of time or both, would permit) any holder or holders of such
      indebtedness or any Person acting on behalf of such holder or holders to
      accelerate the maturity thereof.

           (h) any judgment or order for the payment of money in excess of
      $250,000 shall be rendered against any Loan Party or any Subsidiary and
      either (i) enforcement proceedings shall have been commenced by any
      creditor upon such judgment or order or (ii) there shall be any period of
      10 consecutive days during which a stay of enforcement of such judgment
      or order, by reason of a pending appeal or otherwise, shall not be in
      effect.

           (i) any Loan Party shall dissolve, liquidate, or terminate its legal
      existence or shall convey, transfer, lease, or dispose of (whether in one
      transaction or a series of transactions) all or substantially all of its
      assets to any Person.

           (j) any person or group of persons (within the meaning of Section 13
      or 14 of the Securities Exchange Act of 1934, as amended) shall have
      acquired beneficial ownership (within the meaning of Rule 13d-3
      promulgated by the Securities and Exchange Commission under said Act) of
      20% or more of the outstanding shares of common stock of the Borrower; or
      during any period of 12 consecutive calendar months, individuals who were
      directors of the Borrower on the first day of such period shall cease to
      constitute a majority of the board of directors of the Borrower.



21
<PAGE>   26


           (k) any event or condition shall occur that could reasonably be
      expected to have a Material Adverse Effect.

     SECTION 7.02.  Remedies.  If any Event of Default shall occur and be
continuing, the Bank may do any one or more of the following:

           (a) Acceleration.  Declare all outstanding principal of and accrued
      and unpaid interest on the Note and all other amounts payable by the
      Borrower under the Loan Documents immediately due and payable, and the
      same shall thereupon become immediately due and payable, without
      presentment, demand, protest, notice of acceleration, notice of intent to
      accelerate, or other notices or formalities of any kind, all of which are
      hereby expressly waived by the Borrower.

           (b) Termination of Commitment.  Terminate the Commitment without
      notice to the Borrower.

           (c) Rights.  Exercise any and all rights and remedies afforded by
      applicable law or otherwise.

Notwithstanding the foregoing, upon the occurrence of an Event of Default under
Section 7.01(f), the Commitment shall automatically terminate, and the
outstanding principal of and accrued and unpaid interest on the Note and all
other amounts payable by the Borrower under the Loan Documents shall thereupon
become immediately due and payable without presentment, demand, protest, notice
of acceleration, notice of intent to accelerate, or other notices or
formalities of any kind, all of which are hereby expressly waived by the
Borrower.


                                  ARTICLE VIII

                                 MISCELLANEOUS

     SECTION 8.01.  Expenses.  The Borrower shall on demand pay or reimburse
the Bank for paying (a) all reasonable costs and expenses of the Bank,
including the fees and disbursements of counsel for the Bank (including the
allocated cost of internal counsel), in connection with the administration of
the Loan Documents, the preparation of any waiver or consent thereunder or any
amendment thereof or any Default or alleged Default and (b) if an Event of
Default occurs, all costs and expenses incurred by the Bank, including  the
fees and disbursements of counsel (including the allocated cost of internal
counsel), in connection with such Event of Default and any collection,
bankruptcy, insolvency, and other enforcement proceedings resulting therefrom.


22
<PAGE>   27


     SECTION 8.02.  INDEMNIFICATION.  THE BORROWER AGREES TO INDEMNIFY THE BANK
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS (EACH AN "INDEMNIFIED PERSON") FROM, AND HOLD EACH OF
THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES, INCLUDING ALL FEES
AND DISBURSEMENTS OF COUNSEL (INCLUDING THE ALLOCATED COST OF INTERNAL
COUNSEL) (COLLECTIVELY THE "INDEMNIFIED LIABILITIES"), WHICH DIRECTLY OR
INDIRECTLY ARISE FROM OR RELATE TO ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREBY, BUT EXCLUDING ANY OF THE FOREGOING TO THE EXTENT CAUSED
BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PERSON.
WITHOUT LIMITING ANY PROVISION OF ANY LOAN DOCUMENT, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH INDEMNIFIED PERSON SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL INDEMNIFIED LIABILITIES
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE
INDEMNIFIED PERSON.

     SECTION 8.03.  Right of Set-off.  Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank
(or any of its affiliates) to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter
existing under the Loan Documents, irrespective of whether the Bank shall have
made any demand under the Loan Documents and although such obligations may be
unmatured.  The Bank agrees promptly to notify the Borrower after any such
set-off and application made by the Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.  The rights of the Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that the Bank may have.

     SECTION 8.04.  No Waiver; Cumulative Remedies.  No failure on the part of
the Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under any Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.  The rights and remedies provided for in the Loan Documents are
cumulative and not exclusive of any rights and remedies provided by law.

     SECTION 8.05.  Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Bank.  The Bank may at any time and from time to time (a) grant participating
interests in the 


23
<PAGE>   28

Commitment and the Loans to any Person(s), and (b) assign all or any portion 
of its rights and/or obligations under the Loan Documents to any Person(s); 
provided, that the Bank may not assign its Commitment to any Person (other 
than an affiliate of the Bank) without the prior written consent of the
Borrower.  All information provided by the Borrower to the Bank may be
furnished by the Bank to its affiliates and to any actual or proposed assignee
or participant.

     SECTION 8.06.  Amendments.  No amendment or waiver of any provision of any
Loan Document to which the Borrower is a party, nor any consent to any
departure by the Borrower therefrom, shall be effective unless the
same shall be agreed or consented to in writing by the Bank and the Borrower,
and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

     SECTION 8.07.  Notices.  All notices, requests, and other communications
to either party hereunder shall be in writing (including facsimile
transmission) and shall be given to such party at its address or facsimile
number set forth on the signature pages hereof.  Each such notice, request, or
other communication shall be effective (i) if given by facsimile transmission,
when transmitted to the facsimile number referred to in this Section and
confirmation of receipt is received, (ii) if given by mail, three (3) Business
Days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any other means,
when delivered at the address referred to in this Section; provided that
notices to the Bank shall not be effective until received.

     SECTION 8.08.  Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     SECTION 8.09.  Severability.  Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.

     SECTION 8.10.  Controlling Agreement.  Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable law (the "Maximum Rate").  If the Bank shall
receive interest in an amount that exceeds the Maximum Rate, the excessive
interest shall be applied to the principal of the Loans or, if it exceeds the
unpaid principal, refunded to the Borrower.  In determining whether the
interest contracted for, charged, or received by the Bank exceeds the Maximum
Rate, the Bank may, to the extent permitted by applicable law, (a) characterize
any payment that is not principal as an expense, fee, or premium rather than
interest, (b) 


24
<PAGE>   29

exclude voluntary prepayments and the effects thereof, and (c) amortize, 
prorate, allocate, and spread in equal or unequal parts the total amount of 
interest throughout the contemplated term of the Loans.

     SECTION 8.11.  Survival.  All representations and warranties made or
deemed made by the Borrower in the Loan Documents shall survive the execution
and delivery thereof and the making of the Loans, and no investigation by the
Bank or any closing shall affect the representations and warranties by the
Borrower or the right of the Bank to rely upon them.  Without prejudice to the
survival of any other obligation of the Borrower hereunder, the obligations of
the Borrower under Article III and Sections 8.01 and 8.02 shall survive
repayment of the Note and termination of the Commitment.

     SECTION 8.12.  Governing Law.  This Agreement and the Note shall be
governed by and construed in accordance with, the law of the State where the
Principal Office is located and the applicable laws of the United States of
America.  The Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court and each state court in the city where the
Principal Office is located for the purposes of all legal proceedings arising
out of or relating to any of the Loan Documents or the transactions
contemplated thereby.  The Borrower irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of copies of
such process to the Borrower at its address set forth underneath its signature
hereto.  The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.

     SECTION 8.13.  WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.


     SECTION 8.14.  ENTIRE AGREEMENT.  THIS WRITTEN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.



25
<PAGE>   30





















26
<PAGE>   31



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

                          BORROWERS:

                          VARSITY SPIRIT CORPORATION
                          By: /s/ John M. Nichols
                          Title: Senior Vice-President, Chief Financial Officer

                          VARSITY SPIRIT FASHIONS AND SUPPLIES, INC.
                          By: /s/ John M. Nichols
                          Title: Senior Vice-President, Chief Financial Officer

                          VARSITY/INTROPA TOURS, INC.
                          By: /s/ John M. Nichols
                          Title: Senior Vice-President, Chief Financial Officer
                          Address for Notices:
                          2525 Horizon Lake Drive, #1
                          Memphis, TN  38133


                          Facsimile No.: 901-387-4356

                          Attention:  John Nichols


                          BANK:

                          NATIONSBANK, N.A.
                          By: /s/ John E. Ball
                          Title: Senior Vice-President

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<PAGE>   32


                                    Address for Notices:
                                    One NationsBank Plaza, 5th Floor
                                    Nashville, TN  37239



                                    Facsimile No.: 615-749-4640
                                    Attention: John E. Ball










28
<PAGE>   33





                                                                       EXHIBIT A


                               PROMISSORY NOTE




$9,000,000                      JULY 1, 1996

     FOR VALUE RECEIVED, the undersigned, VARSITY SPIRIT CORPORATION and
VARSITY SPIRIT FASHIONS AND SUPPLIES, INC., both Tennessee Corporations and
VARSITY/INTROPA TOURS, INC. a Tennessee corporation (the "Borrowers"),
hereby promises to pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of America and in
immediately available funds, the principal amount of NINE  MILLION AND
NO/100---------------- Dollars ($9,000,000) or such lesser amount as shall
equal the aggregate unpaid principal amount of the Loans made by the Bank to
the Borrower under the Credit Agreement referred to below, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Loan, at such office, in like money
and funds, for the period commencing on the date of such Loan until such Loan
shall be paid in full, at the rates per annum and on the dates provided in the
Credit Agreement.

     The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.

     This Note is the Note referred to in the Credit Agreement of even date
herewith, between the Borrower and the Bank (such Credit Agreement, as the same
may be amended, modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Loans made by the Bank
thereunder.  The Credit Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the happening of certain stated
events and for prepayments of Loans prior to the maturity of this Note upon the
terms and conditions specified in the Credit Agreement.  Capitalized terms used
in this Note have the respective meanings assigned to them in the Credit
Agreement.




1
<PAGE>   34

     This Note shall be governed by and construed in accordance with the laws
of the State where the Principal Office is located and the applicable laws of
the United States of America.

                          VARSITY SPIRIT CORPORATION
                          By: /s/ John M. Nichols
                          Title: Senior Vice-President, Chief Financial Officer
 
                          VARSITY SPIRIT FASHIONS AND SUPPLIES, INC.
                          By: /s/ John M. Nichols
                          Title: Senior Vice-President, Chief Financial Officer

                          VARSITY/INTROPA TOURS, INC.
                          By: /s/ John M. Nichols
                          Title: Senior Vice-President, Chief Financial Officer






2
<PAGE>   35


                                                                       EXHIBIT B

                                   OPINION OF
                          COUNSEL FOR THE LOAN PARTIES



                                                            JULY 1, 1996

To NationsBank, N.A.
One NationsBank Plaza, 5th Floor
Nashville, TN  37239


Gentlemen:

     We have acted as counsel for VARSITY SPIRIT CORPORATION and VARSITY SPIRIT
FASHIONS AND SUPPLIES, INC., both Tennessee Corporations and VARSITY/INTROPA
TOURS, INC. a Tennessee corporation (the "Borrowers"), in connection
with the Credit Agreement (the "Credit Agreement") dated as of July 1, 1996,
between the Borrower and NationsBank, N.A. (the "Bank").  Terms defined in the
Credit Agreement are used herein as therein defined.  This opinion is being
rendered to you at the request of the Borrower pursuant to Section 4.01(b) of
the Credit Agreement.

     We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials, and other instruments and have conducted such other investigations
of fact and law as we have deemed necessary or advisable for purposes of this
opinion.

     Upon the basis of the foregoing, we are of the opinion that:

     1. Each Loan Party is duly organized, validly existing and in good
standing under the laws of the State of its organization and has all corporate
powers and all governmental licenses, authorizations, consents, and approvals
required to carry on its business as now conducted.

<PAGE>   36

     2. The execution, delivery, and performance by each Loan Party of the Loan
Documents to which it is a party and compliance with the terms and provisions
thereof do not and will not (a) violate any provision of the charter, by-laws,
or other organizational documents of such Loan Party, (b) violate any
applicable law, rule, or regulation, (c) violate any order, writ, injunction,
or decree of any Governmental Authority or arbitral award applicable to such
Loan Party, or (d) result in a breach of, constitute a default under, require
any consent under, or result in the acceleration or require prepayment of any
indebtedness pursuant to the terms of any agreement or instrument to which such
Loan Party is a party or by which it is bound, or result in the creation or
imposition of any lien or other encumbrance upon any property of such Loan
Party pursuant to the terms of any such agreement or instrument.

     3. The Loan Documents have been duly executed and delivered by the Loan
Parties, constitute the valid and binding obligations of the Loan Parties, and
are enforceable against the Loan Parties in accordance with their respective 
terms, except as the enforceability thereof may be limited by applicable 
Debtor Relief Laws and general principles of equity.

     4. There is no action, suit, or proceeding pending against, or to the best
of our knowledge threatened against or affecting, any Loan Party or Subsidiary
before any arbitrator or Governmental Authority in which an adverse decision
could have a Material Adverse Effect or which in any manner draws into question
the validity or enforceability of any Loan Document.

     5. No authorization, consent, or approval of, or filing or registration
with, any Governmental Authority is required for the execution, delivery, or
performance by any Loan Party of the Loan Documents to which it is a party or
for the validity or enforceability thereof.


                                                  Very truly yours,