EXHIBIT 10.4
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                                CREDIT AGREEMENT

                                      among

                              USOL HOLDINGS, INC.,


                                   USOL, INC.,

                                 VARIOUS BANKS,


                                    PARIBAS,

                 as Administrative Agent and Syndication Agent,

                                       and

                       DEUTSCHE BANK AG, NEW YORK BRANCH,

                             as Documentation Agent

                                   $35,000,000

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                          Dated as of December 30, 1999

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                  CREDIT  AGREEMENT,  dated as of December 30, 1999,  among USOL
HOLDINGS, INC., a corporation organized and existing under the laws of the State
of Oregon ("Holdings"),  USOL, INC., a corporation  organized and existing under
the laws of the State of Delaware (the "Borrower"),  the financial  institutions
party hereto from time to time (each a "Bank" and,  collectively,  the "Banks"),
PARIBAS,  as Administrative  Agent and Syndication  Agent, and DEUTSCHE BANK AG,
NEW YORK BRANCH, as Documentation  Agent.  Unless otherwise defined herein,  all
capitalized  terms  used  herein and  defined  in Section 11 are used  herein as
therein defined.

                              W I T N E S S E T H :
                               - - - - - - - - - -


                  WHEREAS,  subject to and upon the terms and conditions  herein
set  forth,  the  Banks  are  willing  to make  available  to the  Borrower  the
respective credit facilities provided for herein;

                  NOW, THEREFORE, IT IS AGREED:

                  Section 1. Amount and Terms of Credit.

                   1.01 The  Commitments.  Subject  to and upon  the  terms  and
conditions set forth herein, each Bank with a Commitment severally agrees at any
time and from time to time on and after the Initial  Borrowing Date and prior to
the Conversion  Date, to make a loan or loans (each a "Loan" and,  collectively,
the  "Loans")  to the  Borrower,  which  Loans (i)  shall,  at the option of the
Borrower,  be Base Rate Loans or Eurodollar  Loans;  provided (x) that except as
otherwise  specifically  provided in Section  1.10(b),  all Loans comprising the
same  Borrowing  shall at all  times be of the same  Type and (y) no  Eurodollar
Loans may be incurred prior to the Syndication  Termination  Date and (ii) shall
not exceed for any Bank at any time  outstanding in aggregate  principal  amount
the lesser of (x) the Commitment of such Bank at such time (before giving effect
to any reductions  thereto on such date pursuant to Section 2.03(a)(i) but after
giving  effect to any  reductions  thereto on or prior to such date  pursuant to
Section  2.03(a)(ii) and (y) that amount which equals such Bank's  Percentage of
the Borrowing Base at such time. Once repaid,  the Loans may be reborrowed prior
to the  Conversion  Date in accordance  with the  provisions  hereof.  After the
Conversion Date, once repaid Loans may not be reborrowed.

                  1.02 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing under the Facility hereunder shall not be less than the
Minimum Borrowing Amount for the Facility and, if greater,  shall be in integral
multiples  of $250,000  in the case of all Loans.  More than one  Borrowing  may
occur on the same date, but at no time shall there be outstanding  more than six
Borrowings of Eurodollar Loans.

                  1.03 Notice of  Borrowing.  Whenever the  Borrower  desires to
make a Borrowing hereunder, it shall give the Administrative Agent at its Notice
Office,  prior to 11:00 a.m.  (New York time) at least one Business  Day's prior
written  notice (or  telephonic  notice  promptly  confirmed in writing) of each

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Borrowing  of Base Rate Loans and at least three  Business  Days' prior  written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar  Loans.  Each such notice (each a "Notice of  Borrowing"),  except as
otherwise  expressly provided in Section 1.10, shall be irrevocable and shall be
given by the  Borrower in the form of Exhibit  A-1,  appropriately  completed to
specify (i) the aggregate  principal  amount of the Loans to be made pursuant to
such Borrowing,  (ii) the date of such Borrowing (which shall be a Business Day)
and (iii)  whether the Loans being made  pursuant  to such  Borrowing  are to be
initially  maintained as Base Rate Loans or Eurodollar  Loans and, if Eurodollar
Loans, the initial Interest Period to be applicable thereto. Any notice received
after  11:00 a.m.  (New York time)  shall be deemed to be  received  on the next
succeeding Business Day. The Administrative  Agent shall promptly give each Bank
which is  required  to make Loans  notice of such  proposed  Borrowing,  of such
Bank's  proportionate  share thereof and of the other  matters  specified in the
Notice of Borrowing.

                  1.04 Disbursement of Funds. No later than 12:00 Noon (New York
time) on the date  specified  in each  Notice  of  Borrowing,  each  Bank with a
Commitment  will make  available its pro rata portion  (determined in accordance
with Section 1.07) of each such Borrowing requested to be made on such date. All
such amounts  shall be made  available in Dollars and in  immediately  available
funds at the Payment Office of the Administrative  Agent, and the Administrative
Agent will make available to the Borrower at the Payment Office the aggregate of
the amounts so made  available  by the Banks.  Unless the  Administrative  Agent
shall have been  notified in writing by any Bank prior to the date of  Borrowing
that such Bank does not intend to make  available  to the  Administrative  Agent
such Bank's portion of any Borrowing to be made on such date, the Administrative
Agent  may  assume  that  such  Bank  has  made  such  amount  available  to the
Administrative Agent on such date of Borrowing and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount.  If such  corresponding  amount  is not in fact  made  available  to the
Administrative Agent by such Bank, the Administrative Agent shall be entitled to
recover such  corresponding  amount on demand from such Bank.  If such Bank does
not pay such  corresponding  amount  forthwith upon the  Administrative  Agent's
demand therefor,  the Administrative Agent shall promptly notify the appropriate
Borrower,  and such Borrower shall immediately pay such corresponding  amount to
the  Administrative  Agent. The  Administrative  Agent shall also be entitled to
recover on demand from such Bank or such Borrower,  as the case may be, interest
on such  corresponding  amount  in  respect  of each  day  from  the  date  such
corresponding  amount was made  available  by the  Administrative  Agent to such
Borrower,  until  the  date  such  corresponding  amount  is  recovered  by  the
Administrative  Agent,  at a rate per annum equal to (i) if recovered  from such
Bank, the cost to the Administrative  Agent of acquiring overnight federal funds
and (ii) if recovered from either Borrower,  the rate of interest  applicable to
the respective  Borrowing,  as determined  pursuant to Section 1.08.  Nothing in
this  Section  1.04 shall be deemed to relieve any Bank from its  obligation  to
make Loans  hereunder  or to prejudice  any rights which such  Borrower may have
against  any  Bank  as a  result  of any  failure  by such  Bank  to make  Loans
hereunder.

                  1.05 Notes. (a) The Borrower's obligation to pay the principal
of,  and  interest  on,  the Loans  made by each Bank  shall be  evidenced  by a
promissory note duly executed and delivered by the Borrower substantially in the
form of Exhibit B with blanks  appropriately  completed in  conformity  herewith
(each, a "Note" and, collectively, the "Notes").

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                  (b) The Note issued to each Bank with a  Commitment  shall (i)
be  executed by the  Borrower,  (ii) be payable to the order of such Bank or its
registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated
principal  amount  equal to the  Commitment  of such Bank and be  payable in the
principal  amount of the Loans  evidenced  thereby,  (iv) mature on the Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect  of the  Base  Rate  Loans  and  Eurodollar  Loans,  as the case may be,
evidenced thereby, (vi) be subject to voluntary repayment as provided in Section
3.01, and mandatory  repayment as provided in Section 3.02 and (vii) be entitled
to the  benefits  of this  Agreement  and the  Guaranties  and be secured by the
Security Documents.

                  (c) Each Bank will note on its internal  records the amount of
each Loan made by it and each  payment in respect  thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced  thereby.  Failure to make any such notation
or  the  making  of an  incorrect  notation  shall  not  affect  the  Borrower's
obligations in respect of such Loans.

                  1.06  Conversions.  Each  Borrower  shall  have the  option to
convert,  on any Business Day, all or a portion at least equal to the applicable
Minimum Borrowing Amount of the outstanding  principal amount of the Loans, made
pursuant  to one or more  Borrowings  of one Type of Loan  into a  Borrowing  or
Borrowings of the other Type of Loan; provided that:

                  (i)  except  as   otherwise   provided  in  Section   1.10(b),
         Eurodollar Loans may be converted into Base Rate Loans only on the last
         day of an Interest  Period  applicable to the Loans being converted and
         no such  partial  conversion  of  Eurodollar  Loans  shall  reduce  the
         outstanding  principal amount of such Eurodollar Loans made pursuant to
         a single  Borrowing  to less  than  the  applicable  Minimum  Borrowing
         Amount;

                  (ii)   Base Rate Loans may only be converted  into  Eurodollar
         Loans if no Default or Event of Default is in existence on the date of
         the conversion;

                  (iii) no conversion pursuant to this Section 1.06 shall result
         in a greater number of Borrowings than is permitted under Section 1.02;
         and

                  (iv)  prior to the Syndication  Termination  Date, no Loan may
         be converted  into  Eurodollar Loans.

Each  such  conversion   shall  be  effected  by  the  Borrower  by  giving  the
Administrative Agent at its Notice Office prior to 12:00 Noon (New York time) at
least three Business Days' prior written notice (or telephonic  notice  promptly
confirmed in writing) (each a "Notice of  Conversion")  which notice shall be in
the form of Exhibit A-2,  appropriately  completed to specify the Loans to be so
converted, the Borrowing(s) pursuant to which such Loans were made and, if to be
converted into Eurodollar Loans, the Interest Period to be initially  applicable
thereto. The Administrative Agent shall give each Bank prompt notice of any such
proposed conversion affecting any of its Loans.

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                  1.07 Pro Rata  Borrowings.  All Borrowings of Loans under this
Agreement  shall be  incurred  from  the  Banks  pro rata on the  basis of their
respective  Commitments.  It is understood that no Bank shall be responsible for
any default by any other Bank of its obligation to make Loans hereunder and that
each  Bank  shall be  obligated  to make  the  Loans  provided  to be made by it
hereunder  regardless  of the  failure  of any  other  Bank  to make  its  Loans
hereunder.

                  1.08  Interest.  (a) The  Borrower  agrees to pay  interest in
respect  of the unpaid  principal  amount of each Base Rate Loan made to it from
the date of the Borrowing  thereof until the earlier of (i) the maturity thereof
(whether  by  acceleration  or  otherwise)  of such  Base Rate Loan and (ii) the
conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06,
at a rate  per  annum  which  shall  at all  times  be  equal  to the sum of the
Applicable Margin plus the Base Rate in effect from time to time.

                  (b) The  Borrower  agrees to pay  interest  in  respect of the
unpaid  principal amount of each Eurodollar Loan made to it from the date of the
Borrowing  thereof  until the earlier of (i) the  maturity  thereof  (whether by
acceleration  or otherwise) of such  Eurodollar  Loan and (ii) the conversion of
such  Eurodollar  Loan to a Base Rate Loan  pursuant  to Section  1.06,  1.09 or
1.10(b),  as applicable,  at a rate per annum which shall,  during each Interest
Period applicable thereto, be equal to the sum of the Applicable Margin plus the
Quoted Rate for such Interest Period.

                  (c) Overdue  principal  and, to the extent  permitted  by law,
overdue  interest in respect of each Loan and any other overdue  amount  payable
hereunder  shall,  in each case,  bear interest at a rate per annum equal to the
rate which is 2.0% in excess of the rate borne by such Loans; provided, however,
with  respect to  Eurodollar  Loans at the end of the then  applicable  Interest
Period,  the rate shall be a rate per annum equal to 2.0% per annum in excess of
the rate  otherwise  applicable  to Base Rate Loans from time to time.  Interest
which accrues under this Section 1.08(c) shall be payable on demand.

                  (d) Accrued (and therefore  unpaid)  interest shall be payable
(i) in respect of each Base Rate Loan,  quarterly  in arrears on each  Quarterly
Payment  Day,  (ii) in  respect of each  Eurodollar  Loan on (x) the date of any
prepayment or repayment thereof (on the amount prepaid or repaid),  (y) the date
of any  conversion  into a Base Rate Loan  pursuant  to  Section  1.06,  1.09 or
1.10(b), as applicable (on the amount converted) and (z) on the last day of each
Interest  Period  applicable  thereto and, in the case of an Interest  Period in
excess of three months,  on each date occurring at three month  intervals  after
the first day of such  Interest  Period and (iii) in  respect  of each Loan,  at
maturity  (whether by acceleration  or otherwise)  and, after such maturity,  on
demand.

                  (e) Upon each Interest  Determination Date, the Administrative
Agent shall  determine  the Quoted Rate for the Interest  Period  applicable  to
Eurodollar  Loans and shall promptly  notify the Borrower and the Banks thereof.
Each such  determination  shall,  absent manifest error, be final and conclusive
and binding on all parties hereto.

                  (f) All  computations  of interest  hereunder shall be made in
accordance with Section 13.07(b).

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                  1.09  Interest  Periods.  At the time it gives  any  Notice of
Borrowing  or Notice of  Conversion  in respect of the making of, or  conversion
into, a Eurodollar Loan (in the case of the initial  Interest Period  applicable
thereto) or prior to 11:00 a.m. (New York time) on the third  Business Day prior
to the expiration of an Interest  Period  applicable to such Eurodollar Loan (in
the case of any subsequent  Interest Period),  the Borrower shall have the right
to elect, by giving the Administrative Agent notice thereof, the interest period
(each an "Interest  Period")  applicable to such Eurodollar Loan, which Interest
Period shall, at the option of such Borrower,  be a one, two, three or six month
period; provided that:

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

                  (ii) the initial Interest Period for any Eurodollar Loan shall
         commence on the date of Borrowing of such Loan  (including  the date of
         any  conversion  thereto  from a Borrowing of Base Rate Loans) and each
         Interest  Period  occurring  thereafter  in  respect of such Loan shall
         commence  on the  day on  which  the  next  preceding  Interest  Period
         applicable thereto expires;

                  (iii) if any Interest  Period  relating to a  Eurodollar  Loan
         begins on a day for which there is no numerically  corresponding day in
         the calendar  month at the end of such Interest  Period,  such Interest
         Period shall end on the last Business Day of such calendar month;

                  (iv) if any Interest  Period would  otherwise  expire on a day
         which is not a Business Day,  such Interest  Period shall expire on the
         next succeeding Business Day; provided,  however,  that if any Interest
         Period for a Eurodollar Loan would  otherwise  expire on a day which is
         not a  Business  Day but is a day of the month  after  which no further
         Business Day occurs in such month, such Interest Period shall expire on
         the next preceding Business Day;

                  (v) no Interest Period for a Borrowing shall be selected which
         extends beyond the Maturity Date;

                  (vi) no  Interest  Period may be selected at any time when any
         Default or Event of Default is then in existence;

                  (vii) no Interest  Period in respect of any  Borrowing  of the
         Loans  shall be  selected  which  extends  beyond any date upon which a
         mandatory  repayment  of such Loans will be  required  to be made under
         Section  3.02(A)(c)  if, after giving  effect to the  selection of such
         Interest  Period,   the  aggregate   principal  amount  of  such  Loans
         maintained as Eurodollar  Loans which have  Interest  Periods  expiring
         after such date will be in excess of the aggregate  principal amount of
         such Loans then  outstanding less the aggregate amount of such required
         prepayment; and

                  (viii) no Interest Period may be selected prior to the Syndi-
         cation Termination Date.

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<PAGE>

                  If upon the expiration of any Interest Period  applicable to a
Borrowing  of  Eurodollar  Loans the Borrower has failed to elect a new Interest
Period to be applicable to such Eurodollar  Loans as provided above or a Default
or Event of Default then exists, the Borrower shall be deemed to have elected to
convert  such  Eurodollar  Loans  into  Base  Rate  Loans  effective  as of  the
expiration date of such current Interest Period.

                  1.10 Increased Costs,  Illegality,  etc. (a) In the event that
any Bank shall have  determined  (which  determination  shall,  absent  manifest
error,  be final and  conclusive  and binding upon all parties  hereto but, with
respect to clause (i) below, may be made only by the Administrative Agent):

                  (i) on any Interest  Determination Date that, by reason of any
         changes  arising  after  the  date  of  this  Agreement  affecting  the
         interbank  Eurodollar market,  adequate and fair means do not exist for
         ascertaining the applicable  interest rate on the basis provided for in
         the definition of Quoted Rate; or

                  (ii) at any time,  that such Bank shall incur  increased costs
         or reductions  in the amounts  received or  receivable  hereunder  with
         respect to any Eurodollar Loan because of (x) any change since the date
         of  this  Agreement  in  any  applicable  law  or  governmental   rule,
         regulation,  order,  guideline  or request  (whether  or not having the
         force of law) or in the  interpretation or  administration  thereof and
         including  the  introduction  of  any  new  law or  governmental  rule,
         regulation,  order, guideline or request, such as, for example, but not
         limited  to: (A) a change in the basis of  taxation  of payments to any
         Bank of the  principal of or interest on the Notes or any other amounts
         payable  hereunder  (except  for  changes  in the  rate of tax  on,  or
         determined  by  reference  to,  the net  income or profits of such Bank
         imposed by the jurisdiction in which its principal office or applicable
         lending  office  is  located)  or  (B) a  change  in  official  reserve
         requirements  (but, in all events,  excluding  reserves  required under
         Regulation D to the extent  included in the  computation  of the Quoted
         Rate) and/or (y) other  circumstances  since the date of this Agreement
         affecting such Bank or the interbank  Eurodollar market or the position
         of such Bank in such market; or

                  (iii) at any  time,  that the  making  or  continuance  of any
         Eurodollar  Loan has been made (x) unlawful by any law or  governmental
         rule,  regulation or order, (y) impossible by compliance by any Bank in
         good faith with any  governmental  request  (whether  or not having the
         force  of  law)  or (z)  impracticable  as a  result  of a  contingency
         occurring  after  the  date  of this  Agreement  which  materially  and
         adversely affects the interbank Eurodollar market;

then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above)  shall  promptly  give  notice (if by  telephone,  promptly
confirmed  in writing) to the  Borrower,  and,  except in the case of clause (i)
above,  to the  Administrative  Agent of such  determination  (which  notice the
Administrative  Agent  shall  promptly  transmit  to each of the  other  Banks).
Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer
be available until such time as the  Administrative  Agent notifies the Borrower
and  the  Banks  that  the  circumstances  giving  rise to  such  notice  by the

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<PAGE>

Administrative  Agent no longer exist,  and any Notice of Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar Loans which have not
yet been incurred  (including by way of conversion) shall be deemed rescinded by
the Borrower,  (y) in the case of clause (ii) above,  the Borrower  shall pay to
such Bank, upon receipt of written demand therefor,  such additional amounts (in
the form of an increased rate of, or a different method of calculating, interest
or otherwise as such Bank in its sole  discretion  shall  determine) as shall be
required to  compensate  such Bank for such  increased  costs or  reductions  in
amounts received or receivable  hereunder (a written notice as to the additional
amounts  owed to such  Bank,  showing  in  reasonable  detail  the basis for the
calculation  thereof,  submitted  to the  Borrower  by such Bank  shall,  absent
manifest  error,  be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause  (iii) above,  the Borrower  shall take one of the
actions  specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.

                  (b) At any time that any  Eurodollar  Loan is  affected by the
circumstances  described in Section  1.10(a)(ii) or (iii), the Borrower may (and
in the case of a  Eurodollar  Loan  affected by the  circumstances  described in
Section  1.10(a)(iii)  shall) either (i) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion,  by giving the  Administrative
Agent  telephonic  notice  (confirmed  in  writing)  on the same  date that such
Borrower was notified by the affected Bank or the Administrative  Agent pursuant
to Section 1.10(a)(ii) or (iii), cancel the respective  Borrowing or conversion,
or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' written notice to the Administrative  Agent, require the affected
Bank to convert such  Eurodollar  Loan into a Base Rate Loan;  provided  that if
more than one Bank is  affected  at any time,  then all  affected  Banks must be
treated the same pursuant to this Section 1.10(b).

                  (c) If any Bank  shall  have  determined  that  after the date
hereof,  the adoption or effectiveness of any applicable law, rule or regulation
regarding  capital  adequacy,  or  any  change  therein,  or any  change  in the
interpretation or administration thereof by any governmental authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof,  or compliance by such Bank or any  corporation  controlling  such Bank
with any request or directive  regarding capital adequacy (whether or not having
the force of law) of any such authority,  central bank or comparable agency, has
or would have the effect of  reducing  the rate of return on such Bank's or such
other corporation's capital or assets as a consequence of such Bank's Commitment
or  Commitments  hereunder  or its  obligations  hereunder to a level below that
which  such Bank or such other  corporation  could  have  achieved  but for such
adoption,  effectiveness,  change or compliance  (taking into consideration such
Bank's or such other  corporation's  policies with respect to capital adequacy),
then from time to time,  upon  written  demand by such Bank  (with a copy to the
Administrative  Agent),  accompanied  by the  notice  referred  to in  the  last
sentence of this clause (c), the Borrower shall pay to such Bank such additional
amount or amounts as will  compensate  such Bank or such other  corporation  for
such  reduction.  In determining  such  additional  amounts,  each Bank will act
reasonably and in good faith and will use reasonable  averaging and  attribution
methods. Each Bank, upon determining that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written notice thereof to the
Borrower  (a copy of  which  shall  be sent by such  Bank to the  Administrative
Agent),  which  notice  shall set forth  the  basis of the  calculation  of such
additional  amounts,  although  the  failure to give any such  notice  shall not

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<PAGE>

release  or  diminish  the  Borrower's  obligations  to pay  additional  amounts
pursuant to this Section 1.10(c) upon the subsequent  receipt of such notice.  A
Bank's  reasonable good faith  determination  of  compensation  owing under this
Section  1.10(c)  shall,  absent  manifest  error,  be final and  conclusive and
binding on all the parties hereto.

                  (d)  The  Borrower  shall  not  be  under  any  obligation  to
compensate  any Bank under Section  1.10(a)(ii) or (c) with respect to increased
costs or reductions with respect to any period prior to the date that is 90 days
prior to the date on which such Bank knew of the increased costs or reductions.

                  1.11  Compensation.  The Borrower shall  compensate each Bank,
upon its written request (which request shall set forth in reasonable detail the
basis  for  requesting  such  compensation),   for  all  losses,   expenses  and
liabilities  (including,  without  limitation,  any loss,  expense or  liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Loans) which such Bank may sustain:
(i) if for any reason  (other than a default by such Bank or the  Administrative
Agent) a Borrowing of, or  conversion  from or into,  Eurodollar  Loans does not
occur on a date  specified  therefor  in a Notice  of  Borrowing  or  Notice  of
Conversion  (whether  or not  withdrawn  by such  Borrower  or deemed  withdrawn
pursuant to Section  1.10(a));  (ii) if any repayment  (including  any repayment
made  pursuant to Section  4.02 or as a result of an  acceleration  of the Loans
pursuant to Section 10 or as a result of the  replacement  of a Bank pursuant to
Section 1.12 or 13.12(b)) or conversion of any of its Eurodollar Loans occurs on
a date which is not the last day of an  Interest  Period with  respect  thereto;
(iii) if any prepayment of any of its  Eurodollar  Loans is not made on any date
specified  in a  notice  of  prepayment  given  by such  Borrower;  or (iv) as a
consequence  of (x) any other  default by such  Borrower to repay its Loans when
required by the terms of this Agreement or any Note held by such Bank or (y) any
election  made  pursuant  to  Section  1.10(b).  A Bank's  basis for  requesting
compensation  pursuant to this Section,  and a Bank's calculations of the amount
thereof,  shall,  absent  manifest error, be final and conclusive and binding on
all the parties hereto.

                  1.12   Replacement  of  Banks.  (x)  If  any  Bank  becomes  a
Defaulting Bank or otherwise  defaults in its obligations to make Loans,  (y) if
any Bank (other  than the  Administrative  Agent)  refuses to consent to certain
proposed  changes,  waivers,  discharges  or  terminations  with respect to this
Agreement  which have been approved by the Required Banks as provided in Section
13.12(b) or (z) upon the occurrence of any event giving rise to the operation of
Section  1.10(a)(ii) or (iii),  Section  1.10(c) or Section 3.04 with respect to
any Bank  (other  than the Agent)  which  results in such Bank  charging  to the
Borrower  increased  costs in an amount  materially  in  excess  of those  being
charged by the other  Banks,  then the  Borrower  shall  have the  right,  if no
Default or Event of Default  then exists,  to replace  such Bank (the  "Replaced
Bank")  with  any  other  Bank  or  with  one or  more  Eligible  Transferee  or
Transferees,  none of whom shall  constitute  a  Defaulting  Bank or shall be in
default  in its  obligations  to make  Loans  at the  time  of such  replacement
(collectively,   the   "Replacement   Banks")   reasonably   acceptable  to  the
Administrative Agent, provided that:

                  (i) at the time of any  replacement  pursuant to this  Section
         1.12,  the  Replacement  Bank shall  enter into one or more  assignment
         agreements  pursuant  to Section  13.04(b)  (and with all fees  payable
         pursuant to said Section  13.04(b) to be paid by the Replacement  Bank)

                                       8
<PAGE>

         pursuant  to  which  the  Replacement  Bank  shall  acquire  all of the
         Commitments  and  outstanding   Loans  of  the  Replaced  Bank  and  in
         connection  therewith,  shall pay to (x) the  Replaced  Bank in respect
         thereof  an  amount  equal  to the sum of (A) an  amount  equal  to the
         principal of, and all accrued  interest on, all  outstanding  Loans and
         (B) an amount equal to all accrued, but therefore unpaid, Fees owing to
         the Replaced Bank pursuant to Section 2.01 hereof; and

                  (ii) all  obligations  of the  Borrower  owing to the Replaced
         Bank (other than those  specifically  described  in clause (i) above in
         respect  of  which  the  assignment  purchase  price  has  been,  or is
         concurrently being, paid) shall be paid in full by the Borrower to such
         Replaced Bank concurrently with such replacement.

Upon the execution of the respective  assignment  documentation,  the payment of
amounts referred to in clauses (i) and (ii) above, recordation of the assignment
on the Register by the Administrative  Agent pursuant to Section 7.16 and, if so
requested  by the  Replacement  Bank,  delivery to the  Replacement  Bank of the
appropriate Notes executed by the Borrower,  the Replacement Bank shall become a
Bank  hereunder and the Replaced Bank shall cease to constitute a Bank hereunder
with respect to the Loans and Commitments so transferred, except with respect to
indemnification  provisions under this Agreement, which shall survive as to such
Replaced Bank.

                  1.13 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section  1.10(a)(ii)  or
(iii),  1.10(c) or 3.04 with respect to such Bank,  it will, if requested by the
Borrower,  use reasonable  efforts (subject to overall policy  considerations of
such Bank) to designate  another  lending  office for any Loans affected by such
event;  provided,  that such designation is made on such terms that, in the sole
judgment of such Bank,  such Bank and its  lending  office  suffer no  economic,
legal or regulatory  disadvantage,  with the object of avoiding the consequences
of the event giving rise to the operation of any such  Section.  Nothing in this
Section 1.13 shall affect or postpone any of the  obligations of the Borrower or
the right of any Bank provided in Section 1.10 or 3.04.

                  Section 2.  Fees; Reductions of Commitment.
                              ------------------------------

                  2.01   Fees.   (a)  The   Borrower   agrees   to  pay  to  the
Administrative  Agent  for  distribution  to  each  Bank  with  a  Commitment  a
commitment  commission  (the  "Commitment  Commission")  for the period from and
including the date of this  Agreement to and excluding the  Conversion  Date (or
such earlier date as the Total Commitment  shall have been terminated)  computed
at a rate for each day equal to the Applicable  Commitment Commission Percentage
per annum on the daily Unutilized  Commitment of such Bank.  Accrued  Commitment
Commission  shall be due and  payable  quarterly  in arrears  on each  Quarterly
Payment  Date and on the  Conversion  Date (or such  earlier date upon which the
Total Commitment is terminated).

                  (b) The Borrower  shall pay to the  Administrative  Agent when
and as due, for its own  account,  such fees as may be agreed to in writing from
time to time between the Borrower and the Administrative Agent.


                                       9

<PAGE>

                  (c) All  computations of Fees shall be made in accordance with
Section 13.07(b).

                  2.02 Voluntary Termination of Unutilized Commitments. (a) Upon
at least five Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) to the  Administrative  Agent at its Notice  Office (which
notice the  Administrative  Agent shall promptly transmit to each of the Banks),
the Borrower shall have the right,  without premium or penalty, to terminate the
Total  Unutilized  Commitment  in whole or in part;  provided that (i) each such
reduction shall apply  proportionately to reduce the Commitment of each Bank and
(ii)  any  partial  reduction  pursuant  to this  Section  2.02  shall  be in an
aggregate  principal amount of at least the applicable  Minimum Borrowing Amount
and, if greater, in integral multiples of at least $1 million.

                  (b) In the event of certain  refusals  by a Bank to consent to
certain proposed  changes,  waivers,  discharges or terminations with respect to
this  Agreement  which have been  approved by the Required  Banks as provided in
Section  13.12(b),  the Borrower shall have the right,  upon five Business Days'
prior  written  notice to the  Administrative  Agent at its Notice Office (which
notice the  Administrative  Agent shall promptly transmit to each of the Banks),
to terminate all of the Commitment of such Bank, so long as all Loans,  together
with accrued and unpaid interest, Fees and all other amounts, owing to such Bank
are repaid  concurrently with the effectiveness of such termination  pursuant to
Section 3.01(b) and at such time, unless the respective Bank continues to act as
a Bank with respect to any Loans or has a Commitment hereunder,  such Bank shall
no longer  constitute  a "Bank" for  purposes  of this  Agreement,  except  with
respect to indemnifications  and similar provisions under this Agreement,  which
shall survive as to such repaid Bank.

                  2.03 Mandatory  Reduction of  Commitments.  (a) In addition to
any other  mandatory  commitment  reductions  pursuant to this Section 2.03, the
Total  Commitment  (and the  Commitment of each Bank) shall (i) terminate in its
entirety on the  Conversion  Date (after giving effect to the making of Loans on
such  date),  and (ii)  prior to the  termination  of the  Total  Commitment  as
provided  in clause  (i)  above,  be  reduced  from  time to time to the  extent
required by Section 3.02.

                  (b) In addition to any other mandatory  commitment  reductions
pursuant to this Section 2.03,  after the Conversion  Date the Total  Commitment
(and the  Commitment  of each Bank)  shall be reduced at the time any payment is
required to be made on the  principal  amount of the Loans (or would be required
to be made of the Loans then outstanding) pursuant to Section 3.02(B)(a),  by an
amount  equal to the  maximum  amount of the Loans that would be  required to be
repaid pursuant to Section 3.02(B)(a), assuming the Loans were outstanding in an
aggregate principal amount equal to the Total Commitment.


                                       10

<PAGE>

                  Section 3.  Prepayments; Payments; Taxes.
                              ----------------------------

                  3.01  Voluntary  Prepayments.  (a) The Borrower shall have the
right to prepay Loans, without premium or penalty, in whole or in part from time
to time on the following terms and conditions:

                  (i) the Borrower shall give the Administrative  Agent prior to
         11:00 a.m.  (New York time) at its Notice Office at least five Business
         Days'  prior  written  notice in the case of  Eurodollar  Loans and one
         Business  Day's prior written  notice in the case of Base Rate Loans of
         its intent to prepay the Loans,  the amount of such  prepayment and the
         Types of Loans to be prepaid and, in the case of Eurodollar  Loans, the
         specific  Borrowing or Borrowings  pursuant to which made, which notice
         the Administrative Agent shall promptly transmit to each of the Banks;

                  (ii) each prepayment shall be in an aggregate principal amount
         of at least $250,000 and, if greater, in integral multiples of $10,000;
         provided that no partial  prepayment of Eurodollar  Loans made pursuant
         to any Borrowing  shall reduce the  outstanding  Loans made pursuant to
         such Borrowing to an amount less than the Minimum Borrowing Amount;

                  (iii) no prepayments of Eurodollar Loans made pursuant to this
         Section  3.01  may be made  on a day  other  than  the  last  day of an
         Interest Period applicable thereto; and

                  (iv) each  prepayment in respect of any Loans made pursuant to
         a Borrowing shall be applied pro rata among such Loans.

                  (v)  each  prepayment  of  Loans  after  the  Conversion  Date
         pursuant  to this  Section  3.01  shall be  applied  to reduce the then
         remaining Scheduled Repayments in inverse order of maturity.

                  (b) In the event of certain  refusals  by a Bank to consent to
certain proposed  changes,  waivers,  discharges or terminations with respect to
this  Agreement  which have been  approved by the Required  Banks as provided in
Section  13.12(b),  the Borrower shall have the right,  upon five Business Days'
prior  written  notice to the  Administrative  Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks) to
repay all Loans,  together with accrued and unpaid interest,  Fees and all other
amounts owing to such Bank in accordance  with said Section  13.12(b) so long as
(A) in the case of the  repayment  of the  Loans of any Bank  with a  Commitment
pursuant  to  this  clause  (b)  the  Commitment  of  such  Bank  is  terminated
concurrently  with such  repayment  pursuant  to  Section  3.02 (at  which  time
Schedule I shall be deemed modified to reflect the changed Commitments), and (B)
in the case of the  repayment of the Loans of any Bank the consents  required by
Section  13.12(b) in connection  with the repayment  pursuant to this clause (b)
shall have been obtained.


                                       11

<PAGE>

                  3.02  Mandatory Repayments and Commitment Reductions.
                        ----------------------------------------------

                  (A)  Requirements:

                  (a) On any day on or prior to the Conversion Date on which the
aggregate  outstanding  principal amount of Loans exceeds the Total  Commitment,
the  Borrower  shall repay the  principal  of Loans in the amount  equal to such
excess.

                  (b)  Prior  to the  Conversion  Date,  if any  Borrowing  Base
Certificate  shall  disclose the existence of a Borrowing Base  Deficiency,  the
Borrower shall, on the date of the delivery of the Borrowing Base Certificate in
accordance with Section 7.01(k), repay the principal of the Loans outstanding in
an aggregate amount equal to the remaining Borrowing Base Deficiency.

                  (c)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this Section 3.02(A),  the Borrower shall be
required  to repay on each date set  forth  below  the  principal  amount of the
Loans,  to the extent then  outstanding,  equal to (i) the  aggregate  principal
amount of Loans  outstanding on the Conversion  Date (after giving effect to any
Loans made on such  date)  multiplied  by (ii) the  percentage  set forth  below
opposite  such date (each such  repayment as the same may be reduced as provided
in Sections 3.01 and 3.02(B), a "Scheduled Repayment" and, collectively referred
to as the "Scheduled Repayments"):

Scheduled Repayment Dates Percentage
------------------------------------

         Each Quarterly Payment Date occurring
         during the 12 month period commencing
         on January 1, 2002                                          2.00%

         Each Quarterly Payment Date occurring
         during the 12 month period commencing
         on January 1, 2003                                          2.50%

         Each Quarterly Payment Date occurring
         during the 12 month period commencing
         on January 1, 2004                                          5.50%

         Each Quarterly Payment Date occurring
         during the 12 month period commencing
         on January 1, 2005                                          6.75%

         Each Quarterly Payment Date occurring
         during the 12 month period commencing
         on January 1, 2006                                          8.25%

                  (d)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions pursuant to this Section 3.02, on the date of the receipt
thereof by Holdings or any of its Subsidiaries, an amount equal to:

                  (i) 100% of the cash proceeds (net of  underwriting  discounts
       and  commissions  and all other  reasonable  costs  associated  with such
       transaction)  from any sale or issuance on or after the Effective Date of
       equity  of  Holdings   or  any   Subsidiary   of  Holdings   (other  than
       Residentclub)  and from any contribution to capital of Holdings or any of
       its Subsidiaries; and


                                       12

<PAGE>

                  (ii) 100% of the cash proceeds (net of underwriting  discounts
       and commissions, loan fees and all other reasonable costs associated with
       such  transaction) from any incurrence of any Indebtedness by Holdings or
       any Subsidiary of Holdings (other than Indebtedness  permitted by Section
       8.05 as said Section is in effect on the Effective Date),

shall be applied as provided in Section 3.02(B).

                  (e)  In  addition  to  any  other   mandatory   repayments  or
commitment reductions pursuant to this Section 3.02, no later than 90 days after
the last day of each fiscal year of Holdings  ending after the Conversion  Date,
an amount  equal to 75% of Excess  Cash Flow of  Holdings  and its  Subsidiaries
(other than Residentclub) for the relevant Excess Cash Flow Payment Period shall
be applied as provided in Section 3.02(B).

                  (f)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this Section  3.02, on each date on or after
the Effective Date on which  Holdings or any Subsidiary of Holdings  (other than
Residentclub)   receives  cash  proceeds  from  any  sale  of  assets  or  other
dispositions  (including  capital stock and  partnership  interests  (including,
without  limitation,  the sale of  stock  of  Residentclub  by  Holdings  or any
Subsidiary  of  Holdings  (other than  Residentclub)  that holds such stock) and
securities other than capital stock and partnership  interests the proceeds from
the sale of which is recaptured under Section 3.02(A)(d), and including payments
on any  outstanding  notes  held  by  Holdings  or any of its  Subsidiaries  but
excluding (1) sales of inventory in the ordinary  course of business and (2) the
sale of assets so long as the  aggregate  amount of Net Sale  Proceeds  excluded
pursuant to this clause (2) does not exceed  $500,000 in the  aggregate  for all
such asset sales in any fiscal year of the Borrower), an amount equal to 100% of
the Net Sale Proceeds thereof shall be applied as provided in Section 3.02(B).

                  (g)  In  addition  to  any  other   mandatory   repayments  or
commitment  reductions  pursuant to this Section  3.02, on each date on or after
the  Effective  Date of the receipt  thereof by Holdings  or any  Subsidiary  of
Holdings (other than Residentclub), an amount equal to 100% of the cash proceeds
of any Recovery Event (net of reasonable  costs incurred in connection with such
Recovery Event (including the estimated  marginal increase in income taxes which
will be payable as a result of such Recovery Event by Holdings or any Subsidiary
of  Holdings))  shall be applied as provided in Section  3.02(B);  provided that
such proceeds not in excess of $500,000 in the aggregate for all Recovery Events
occurring  during one fiscal  year of  Holdings  shall not be  required to be so
applied on such date to the extent that Holdings  delivers a certificate  to the
Administrative  Agent on or prior to such date stating that such proceeds  shall
be used to replace or restore any  properties or assets in respect of which such
proceeds were paid within a period  specified in such  certificate not to exceed
180 days after the date of receipt of such proceeds (which certificate shall set
forth estimates of the proceeds to be so expended);  and provided further,  that
if all or any  portion  of such  proceeds  not so  applied  pursuant  to Section
3.02(B)  are not so used  within  the  period  specified  in the  proviso,  such
remaining  portion shall be applied on the last day of such specified  period as
provided in Section 3.02(B).

                                       13

<PAGE>

                  (h)   Notwithstanding   anything  to  the  contrary  contained
elsewhere in this Agreement,  all then outstanding Loans shall be repaid in full
on the Maturity Date.

                  (B)  Application:

                  (a) Each  mandatory  repayment  of Loans  pursuant  to Section
3.02(A)(d)  through  (g),  inclusive,  shall be applied  (except as described in
clause (c) below):

                  (i) first, to prepay the principal of outstanding  Loans (with
         a  corresponding  reduction  to the Total  Commitment),  with the total
         amount to be applied as a mandatory repayment of Loans pursuant to this
         Section 3.02(B);  to be applied to reduce the then remaining  Scheduled
         Repayments on a pro rata basis, based upon the remaining amount of each
         such Scheduled  Repayment  after giving effect to all prior  reductions
         thereto;

                  (ii)  second,   to  reduce  the  Total  Commitment  (it  being
         understood and agreed that the amount of such reduction shall be deemed
         to  be  an  application  of  proceeds  for  purposes  of  this  Section
         3.02(B)(a)(ii) even though cash is not actually applied).

                  (b) With respect to each  repayment of Loans  required by this
Section  3.02,  the  Borrower may  designate  the Types of Loans which are to be
repaid  and,  in the  case  of  Eurodollar  Loans,  the  specific  Borrowing  or
Borrowings  pursuant to which made;  provided that: (i) repayments of Eurodollar
Loans  pursuant  to this  Section  3.02  may  only be made on the last day of an
Interest  Period  applicable  thereto unless all Eurodollar  Loans with Interest
Periods  ending on such date of required  repayment and all Base Rate Loans have
been paid in full; (ii) if any repayment of Eurodollar  Loans made pursuant to a
single Borrowing shall reduce the outstanding  Eurodollar Loans made pursuant to
such  Borrowing  to  an  amount  less  than  $1,000,000,  such  Borrowing  shall
immediately be converted  into Base Rate Loans;  and (iii) each repayment of any
Loans made pursuant to a single  Borrowing  shall be applied pro rata among such
Loans.  In the absence of a  designation  by the  Borrower as  described  in the
preceding sentence,  the Administrative  Agent shall, subject to the above, make
such  designation  in  its  sole  discretion.   Notwithstanding   the  foregoing
provisions of this Section 3.02(B),  if at any time the mandatory  prepayment of
Loans pursuant to Section 3.02(A) above would result, after giving effect to the
procedures  set forth above,  in the  Borrower  incurring  breakage  costs under
Section 1.11 as a result of  Eurodollar  Loans being  prepaid  other than on the
last day of an Interest  Period  applicable  thereto (the  "Affected  Eurodollar
Loans"),  then the  Borrower  may in its sole  discretion  initially  deposit  a
portion  (up to 100%) of the  amounts  that  otherwise  would  have been paid in
respect of the Affected  Eurodollar Loans with the  Administrative  Agent (which
deposit must be equal in amount to the amount of Affected  Eurodollar  Loans not
immediately  prepaid) to be held as security for the obligations of the Borrower
hereunder  pursuant  to  a  cash  collateral  arrangement  satisfactory  to  the
Administrative  Agent  and  the  Borrower  and  shall  provide  for  investments
satisfactory  to the  Administrative  Agent  and the  Borrower,  with  such cash
collateral to be directly  applied upon the first  occurrence  (or  occurrences)
thereafter  of the last day of an Interest  Period  applicable  to the  relevant
Loans  that are  Eurodollar  Loans  (or such  earlier  date or dates as shall be
requested by the Borrower), to repay an aggregate principal amount of such Loans
equal to the Affected  Eurodollar  Loans not initially  prepaid pursuant to this
sentence.  Notwithstanding anything to the contrary contained in the immediately

                                       14
<PAGE>

preceding  sentence,  all amounts  deposited as cash collateral  pursuant to the
immediately  preceding  sentence shall be held for the sole benefit of the Banks
whose Loans  would  otherwise  have been  immediately  prepaid  with the amounts
deposited  and upon the taking of any action by the  Administrative  Agent or by
the Banks pursuant to the remedial  provisions of Section 9, any amounts held as
cash  collateral  pursuant  to  this  Section  3.02(B)  shall,  subject  to  the
requirements of applicable law, be immediately applied to the Loans.

                  (c)  Proceeds  from  the  exercise  of  warrants  and  options
outstanding  on the Effective  Date which are exercised  prior to the Conversion
Date  shall  be used to repay  Loans  but  there  shall  not be a  corresponding
reduction to the Commitment.

                  3.03  Method  and  Place  of  Payment.   Except  as  otherwise
specifically  provided  herein,  all payments  under this  Agreement or any Note
shall be made to the  Administrative  Agent for the account of the Bank or Banks
entitled  thereto not later than 12:00 Noon (New York time) on the date when due
and shall be made in  Dollars  in  immediately  available  funds at the  Payment
Office of the Administrative Agent. Whenever any payment to be made hereunder or
under any Note shall be stated to be due on a day which is not a  Business  Day,
the due date thereof shall be extended to the next succeeding  Business Day and,
with  respect  to  payments  of  principal,  interest  shall be  payable  at the
applicable rate during such extension.

                  3.04  Net  Payments.  (a) All  payments  made by the  Borrower
hereunder,  or by the  Borrower  under any Note,  will be made  without  setoff,
counterclaim or other defense.  Except as provided in Section 3.04(b),  all such
payments  will be made free and clear of, and without  deduction or  withholding
for, any present or future taxes, levies, imposts,  duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments  (but  excluding,  except as provided in the second  succeeding
sentence, any tax imposed on or measured by the net income of a Bank pursuant to
the laws of the  jurisdiction or any political  subdivision or taxing  authority
thereof or therein in which it is organized or in which the principal  office or
applicable  lending office of such Bank is located) and all interest,  penalties
or similar  liabilities  with respect thereto  (collectively,  "Taxes").  If any
Taxes are so levied or imposed,  the  Borrower  agrees to pay the full amount of
such  Taxes,  and such  additional  amounts  as may be  necessary  so that every
payment of all amounts due  hereunder or under any Note,  after  withholding  or
deduction  for or on  account  of any  Taxes,  will not be less than the  amount
provided  for herein or in such Note.  If any  amounts are payable in respect of
Taxes pursuant to the preceding  sentence,  then the Borrower shall be obligated
to reimburse each Bank, upon the written request of such Bank, for taxes imposed
on or  measured  by the net  income  of such  Bank  pursuant  to the laws of the
jurisdiction or any political subdivision or taxing authority thereof or therein
in which such Bank is organized or in which the  principal  office or applicable
lending office of such Bank is located  and/or any  withholding of taxes as such
Bank shall  determine  are payable by or  withheld  from such Bank in respect of
such  amounts  so paid to or on behalf of such Bank  pursuant  to the  preceding
sentence  and in  respect  of any  amounts  paid to or on  behalf  of such  Bank
pursuant to this sentence. The Borrower will furnish to the Administrative Agent
within 45 days  after the date of the  payment  of any  Taxes  due  pursuant  to
applicable law certified copies of tax receipts  evidencing such payment by such
Borrower.  The Borrower  agrees to indemnify and hold  harmless  each Bank,  and

                                       15
<PAGE>

reimburse  such Bank upon its  written  request,  for the amount of any Taxes so
levied or imposed and paid by such Bank.

                  (b) Each Bank that is not a United States person (as such term
is defined  in  Section  7701(a)(30)  of the Code) for U.S.  Federal  income tax
purposes  agrees to deliver to the Borrower and the  Administrative  Agent on or
prior  to the  Initial  Borrowing  Date,  or in the  case  of a Bank  that is an
assignee or transferee of an interest under this  Agreement  pursuant to Section
13.04 (unless the respective Bank was already a Bank hereunder immediately prior
to such  assignment or transfer),  on the date of such assignment or transfer to
such Bank,  (i) two  accurate and complete  original  signed  copies of Internal
Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption
under an income tax  treaty)  (or  successor  forms)  certifying  to such Bank's
entitlement  as  of  such  date  to a  complete  exemption  from  United  States
withholding  tax with  respect to payments to be made under this  Agreement  and
under  any  Note,  or (ii) if the Bank is not a "bank"  within  the  meaning  of
Section  881(c)(3)(A)  of the Code and cannot  deliver either  Internal  Revenue
Service Form W-8ECI or Form W-8BEN (with respect to a complete  exemption  under
an  income  tax  treaty)  pursuant  to  clause  (i)  above,  (x)  a  certificate
substantially  in the  form of  Exhibit  C (any  such  certificate,  a  "Section
3.04(b)(ii)  Certificate")  and (y) two accurate and  complete  original  signed
copies of Internal  Revenue  Service Form W-8BEN (with  respect to the portfolio
interest exemption) (or successor form) certifying to such Bank's entitlement to
a complete exemption from United States withholding tax with respect to payments
of interest to be made under this  Agreement  and under any Note.  In  addition,
each Bank agrees that from time to time after the Initial Borrowing Date, when a
lapse in time or change in  circumstances  renders  the  previous  certification
obsolete or inaccurate in any material respect,  it will deliver to the Borrower
and the  Administrative  Agent two new  accurate and  complete  original  signed
copies of Internal Revenue Service Form W-8ECI, Form W-8BEN (with respect to the
benefits  of any  income  tax  treaty),  or Form  W-8BEN  (with  respect  to the
portfolio interest exemption and a Section 3.04(b)(ii) Certificate,  as the case
may be, and such other forms as may be required in order to confirm or establish
the  entitlement  of such Bank to a continued  exemption  from or  reduction  in
United States  withholding tax with respect to payments under this Agreement and
any Note,  or it shall  immediately  notify the Borrower and the  Administrative
Agent of its  inability to deliver any such Form or  Certificate,  in which case
such Bank shall not be required to deliver any such Form or Certificate pursuant
to this Section 3.04(b).  Notwithstanding  anything to the contrary contained in
Section 3.04(a),  but subject to the immediately  succeeding  sentence,  (x) the
Borrower  shall be  entitled,  to the extent it is  required to do so by law, to
deduct or withhold  income or similar taxes imposed by the United States (or any
political  subdivision  or taxing  authority  thereof or therein) from interest,
fees or other amounts payable hereunder for the account of any Bank which is not
a United  States person (as such term is defined in Section  7701(a)(30)  of the
Code) for U.S.  Federal income tax purposes to the extent that such Bank has not
provided to the Borrower U.S.  Internal  Revenue  Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated  pursuant to Section 3.04(a) hereof to gross-up  payments to be
made to a Bank in  respect  of income or  similar  taxes  imposed  by the United
States if (I) such Bank has not provided to the  Borrower  the Internal  Revenue
Service Forms  required to be provided to the Borrower  pursuant to this Section
3.04(b)  or (II) in the  case  of a  payment,  other  than  interest,  to a Bank
described in clause (ii) above, to the extent that such Forms do not establish a

                                       16

<PAGE>

complete exemption from withholding of such taxes.  Notwithstanding  anything to
the contrary  contained in the  preceding  sentence or elsewhere in this Section
3.04, the Borrower  agrees to pay any  additional  amounts and to indemnify each
Bank in the manner set forth in Section 3.04(a)  (without regard to the identity
of the  jurisdiction  requiring the deduction or  withholding) in respect of any
Taxes  deducted or  withheld by it as  described  in the  immediately  preceding
sentence as a result of any changes that are effective  after the Effective Date
in any applicable  law,  treaty,  governmental  rule,  regulation,  guideline or
order,  or  in  the  interpretation  thereof,   relating  to  the  deducting  or
withholding of such Taxes.

                  Section  4.  Conditions  Precedent  to  Loans  on the  Initial
Borrowing  Date.  The  obligation  of each  Bank to make  Loans  on the  Initial
Borrowing  Date is subject at the time of such Loan to the  satisfaction  of the
following conditions:

                  4.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing  Date (i) the Effective  Date shall have occurred and (ii) there shall
have been delivered to the  Administrative  Agent for the account of each of the
Banks the appropriate Note executed by the Borrower, in each case in the amount,
maturity and as otherwise provided herein.

                  4.02 Officer's Certificate. On the Initial Borrowing Date, the
Agents shall have received a certificate dated the Initial Borrowing Date signed
on behalf of the  Borrower by the Chief  Executive  Officer,  President or Chief
Financial  Officer or any Vice President of the Borrower stating that all of the
conditions in Sections 4.10,  4.11,  4.14,  4.16, 5.01, 5.02, 5.03 and 5.04 have
been satisfied on such date;  provided the certificate  shall not be required to
certify as to the  acceptability  of any items to the Agents and/or the Banks or
as to whether the Agents and/or the Banks are satisfied  with any of the matters
described in said Sections.

                  4.03  Opinions of Counsel.  On the Initial  Borrowing  Date,
the Agents  shall have  received  from:  enkens &  Gilchrist,  P.C.,  counsel to
Holdings  and  its  Subsidiaries,  an  opinion  addressed  to  the  Agents,  the
Collateral  Agent and each of the Banks and  dated the  Initial  Borrowing  Date
covering the matters set forth in Exhibit D.

                  4.04  Corporate  Documents;  Proceedings.  (a) On the  Initial
Borrowing Date, the Agents shall have received a certificate,  dated the Initial
Borrowing  Date,  signed  by  the  Chief  Executive  Officer,  President,  Chief
Financial  Officer,  President or any Vice  President of each Credit Party,  and
attested to by the Secretary or any Assistant Secretary of such Credit Party, in
the form of Exhibit E with appropriate  insertions,  together with copies of the
Certificate  of  Incorporation   and  By-Laws  of  such  Credit  Party  and  the
resolutions or,  consents or similar  evidence of authority of such Credit Party
referred to in such  certificate,  and the foregoing  shall be acceptable to the
Agents and the Required Banks in their sole discretion.

                  (b) All corporate and legal  proceedings  and all  instruments
and agreements  relating to the transactions  contemplated by this Agreement and
the other  Documents  shall be  satisfactory in form and substance to the Agents
and the Required  Banks,  and the Agents shall have received all information and
copies of all documents and papers,  including records of corporate proceedings,
governmental approvals,  good standing certificates and bring-down telegrams, if

                                       17

<PAGE>

any,  which the Agents or the Required  Banks may have  requested in  connection
therewith, such documents and papers where appropriate to be certified by proper
corporate or governmental authorities.

                  4.05 Plans;  Shareholders' Agreements;  Management Agreements;
Employment  Agreements;   Collective  Bargaining  Agreements;  Debt  Agreements;
Affiliate Contracts;  Tax Sharing Agreements and Material Contracts. On or prior
to the Initial Borrowing Date, there shall have been delivered to the Banks true
and correct copies,  certified as true and complete by an appropriate officer of
Holdings of:

                  (i) all Plans (and for each Plan that is  required  to file an
annual report on Internal Revenue Service Form  5500-series,  a copy of the most
recent such report (including, to the extent required, the related financial and
actuarial   statements   and   opinions   and   other   supporting   statements,
certifications,  schedules  and  information),  and  for  each  Plan  that  is a
"single-employer  plan," as defined in Section  4001(a)(15)  of ERISA,  the most
recently prepared actuarial  valuation therefor) and any other "employee benefit
plans," as defined in Section 3(3) of ERISA, and any other material  agreements,
plans or arrangements, with or for the benefit of current or former employees of
Holdings or any of its  Subsidiaries or any ERISA  Affiliate  (provided that the
foregoing  shall  apply in the case of any  multiemployer  plan,  as  defined in
4001(a)(3) of ERISA,  only to the extent that any document  described therein is
in the  possession  of  Holdings  or any  Subsidiary  of  Holdings  or any ERISA
Affiliate  or  reasonably  available  thereto from the sponsor or trustee of any
such plan) (collectively, the "Employee Benefit Plans");

                  (ii) all agreements entered into by Holdings or any Subsidiary
of Holdings governing the terms and relative rights of its capital stock and any
agreements entered into by shareholders relating to any such entity with respect
to their capital stock (collectively, the "Shareholders' Agreements");

                  (iii) all agreements  with members of, or with respect to the,
management  of Holdings or any  Subsidiary  of  Holdings  other than  Employment
Agreements (collectively, the "Management Agreements");

                  (iv) any employment agreements entered into by Holdings or any
Subsidiary  of  Holdings  with an officer or  director  of the  Borrower  or any
Subsidiary of Holdings (collectively, the "Employment Agreements");

                  (v) all collective  bargaining  agreements  applying or relat-
ing to any employee of Holdings or any Subsidiary of Holdings (collectively, the
"Collective Bargaining Agreements");

                  (vi) all agreements  evidencing or relating to Indebtedness of
Holdings or any  Subsidiary  of  Holdings  whether or not such  agreement  is to
remain outstanding after giving effect to the incurrence of Loans on the Initial
Borrowing Date (collectively, the "Debt Agreements");

                  (vii)  all tax  sharing,  tax  allocation  and  other  similar
agreements entered into by Holdings or any Subsidiary of Holdings (collectively,
the "Tax Sharing Agreements");

                                       18

<PAGE>

                  (viii) all  contracts,  agreements or  understandings  entered
into between Holdings or any of its Subsidiaries on the one hand, and any of its
Affiliates, on the other hand (collectively, the "Affiliate Contracts"); and

                  (ix) all material contracts and licenses of Holdings or any of
its  Subsidiaries,  that are to  remain  in effect  after  giving  effect to the
consummation of the Transaction,  including,  without limitation,  the Firstlink
Merger Documents (collectively, the "Material Contracts");

all of  which  Employee  Benefit  Plans,  Shareholders'  Agreements,  Management
Agreements,   Employment  Agreements,  Collective  Bargaining  Agreements,  Debt
Agreements,  Tax Sharing Agreements,  Affiliate Contracts and Material Contracts
shall be in form and substance satisfactory to the Agents and the Required Banks
and shall be in full force and effect on the Initial Borrowing Date.

                  4.06 Pledge  Agreement.  On the Initial  Borrowing  Date, each
Credit  Party  shall  have duly  authorized,  executed  and  delivered  a Pledge
Agreement in the form of Exhibit F (as  modified,  supplemented  or amended from
time to time, the "Pledge Agreement") and shall have delivered to the Collateral
Agent, as Pledgee thereunder,  all of the Pledged Securities referred to therein
then  owned by each  such  Credit  Party  (x)  endorsed  in blank in the case of
promissory notes constituting  Pledged Securities and (y) together with executed
and undated  irrevocable stock powers, in the case of capital stock constituting
Pledged Securities.

                  4.07 Security  Agreement.  On the Initial Borrowing Date, each
Credit  Party  shall have duly  authorized,  executed  and  delivered a Security
Agreement in the form of Exhibit G (as  modified,  supplemented  or amended from
time to time,  the  "Security  Agreement")  covering all of such Credit  Party's
present and future Security Agreement Collateral, together with:

                  (i)  proper  financing  statements  (Form  UCC-1 or such other
financing statements or similar notices as shall be required by local law) fully
executed for filing under the UCC or other  appropriate  filing  offices of each
jurisdiction  as may be necessary  or, in the opinion of the  Collateral  Agent,
desirable  to perfect  the  security  interests  purported  to be created by the
Security Agreement;

                  (ii)  certified  copies of Requests for  Information or Copies
(Form UCC-11), or equivalent  reports,  listing all judgment liens, tax liens or
effective financing statements that name Holdings or any of its Subsidiaries, or
a division or other  operating  unit of any such Person,  as debtor and that are
filed in the jurisdictions  referred to in said clause (i), together with copies
of such other  financing  statements  (none of which shall cover the  Collateral
except to the  extent  evidencing  Permitted  Liens or for which the  Collateral
Agent shall receive termination statements (Form UCC-3 or such other termination
statements as shall be required by local law) fully executed for filing);

                  (iii) evidence of the  completion of all other  recordings and
filings of, or with respect to, the Security  Agreement as may be necessary  or,
in the  opinion of the  Collateral  Agent,  desirable  to perfect  the  security
interests intended to be created by such Security Agreement; and

                                       19

<PAGE>

                  (iv)  evidence  that all other  actions  necessary  or, in the
opinion of the Collateral  Agent,  desirable to perfect and protect the security
interests purported to be created by the Security Agreement have been taken.

                  4.08  Subsidiaries  Guaranty.  On the Initial  Borrowing Date,
each  Subsidiary of Holdings  (other than the Borrower and  Residentclub)  shall
have duly authorized, executed and delivered a Guaranty in the form of Exhibit H
(as  modified,  supplemented  or amended  from time to time,  the  "Subsidiaries
Guaranty").

                  4.09 Consent  Letter.  The Agents shall have received a letter
from CT Corporation  System,  presently located at 1633 Broadway,  New York, New
York  10019,  substantially  in the form of  Exhibit  I hereto,  indicating  its
consent to its  appointment  by Holdings  and each other  Credit  Party as their
agent to  receive  service  of process  as  specified  in Section  12.08 of this
Agreement and Section 21 of the Subsidiaries Guaranty.

                  4.10 Material  Adverse  Change,  etc. Since December 31, 1998,
nothing  shall have  occurred (and the Banks shall have become aware of no facts
or conditions not previously known) which the Agents or the Required Banks shall
reasonably determine (a) could reasonably be expected to have a material adverse
effect on the rights or remedies  of the Banks or the Agents,  or on the ability
of Holdings  or any of its  Subsidiaries  to perform  their  obligations  to the
Agents and the Banks under this  Agreement  or any other  Credit  Document,  (b)
could  reasonably  be  expected  to  have a  materially  adverse  effect  on the
performance,  business,  assets,  nature  of  assets,  liabilities,  operations,
properties,  condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries  taken as a whole or (c) indicates  the  inaccuracy in any material
respect of the information previously provided to the Agents or the Banks (taken
as a whole) in connection with their analysis of the  transactions  contemplated
hereby or indicates that the information previously provided omitted to disclose
any material information.

                  4.11 Litigation.  On the Initial Borrowing Date, no litigation
by any entity  (private or  governmental)  shall be pending or  threatened  with
respect to this Agreement,  any other Document or any documentation  executed in
connection herewith or with respect to the transactions  contemplated hereby, or
which the Agents or Required Banks shall determine could  reasonably be expected
to have a materially  adverse effect on the  Transaction or on the  performance,
business,  assets,  nature  of  assets,  liabilities,   operations,  properties,
condition (financial or otherwise) or prospects of Holdings and its Subsidiaries
taken as a whole.

                  4.12 Fees, etc. On the Initial Borrowing Date,  Holdings shall
have  paid in full to the  Agents  and the Banks all  costs,  fees and  expenses
(including,  without  limitation,  all legal fees and  expenses)  payable to the
Agents  and the Banks to the extent  then due  pursuant  hereto or as  otherwise
agreed between Holdings and the Agents.

                  4.13 Solvency Certificate;  Insurance Analyses. On the Initial
Borrowing  Date,  the Borrower shall cause to be delivered to the Agents and the
Banks:  (i) a certificate from the chief financial  officer of Holdings,  in the
form of Exhibit J hereto,  supporting the conclusions after giving effect to the
Transaction and the incurrence of all financings  contemplated  herein that each

                                       20

<PAGE>

Credit Party,  and all Credit Parties taken as a whole,  as the case may be, are
not insolvent and will not be rendered insolvent by the Indebtedness incurred in
connection  therewith,  will not be left with  unreasonably  small  capital with
which to engage in their respective  businesses and will not have incurred debts
beyond  their  ability to pay such debts as they  mature and become due and (ii)
evidence  (including,  without  limitation,  certificates  with  respect to each
insurance  policy  listed  on  Schedule  II) of  insurance,  complying  with the
requirements  of Section  7.03,  with respect to the business and  properties of
Holdings and its Subsidiaries,  in scope, form and substance satisfactory to the
Agents and the  Required  Banks and naming  each of the  Collateral  Agent,  the
Agents and the Banks as an additional  insured and the Collateral  Agent as loss
payee and stating that such insurance  shall not be cancelled or revised without
30 days' prior written notice by the insurer to the Collateral Agent.

                  4.14  Approvals.  All necessary  governmental  and third party
approvals in connection with the Transaction and the  transactions  contemplated
by the Documents and otherwise referred to herein or therein (including, but not
limited to, those approvals  required in respect of existing  permits,  landlord
consents and  transfers of contract  rights) shall have been obtained and remain
in effect,  and all applicable  waiting  periods shall have expired  without any
action  being taken by any  competent  authority  which  restrains,  prevents or
imposes,  in the sole  judgment  of the Agents or the  Required  Banks,  adverse
conditions upon the  consummation  of the Transaction or the other  transactions
contemplated  by the  Documents  and  otherwise  referred  to herein or therein.
Additionally,  there shall not exist any  judgment,  order,  injunction or other
restraint  issued  or filed or a  hearing  seeking  injunction  relief  or other
restraint  pending  or  notified  prohibiting  or  imposing  materially  adverse
conditions upon the consummation of the Transaction or the making of the Loans.

                  4.15  Financial  Statements;  Projections;  Management  Letter
Reports.  (a) On or prior to the Initial  Borrowing  Date,  the Banks shall have
received:

                    (i)  the   consolidated   balance   sheet  of  U.S.   Online
               Communications,  Inc.  (or its  successors)  and  Firstlink as at
               December  31, 1997,  December  31,  1998,  and for the nine month
               period ended  September 30, 1999,  and the related  statements of
               earnings and stockholders'  equity and cash flows of such Person,
               as  applicable  for the fiscal  periods  ended as of said  dates,
               which, in the case of the annual  statements,  have been examined
               by  Arthur   Andersen  LLP,  an  independent   certified   public
               accountant,   who  delivered   unqualified  opinions  in  respect
               thereto;

                    (ii)  the   consolidated   balance  sheet  of  U.S.   Online
               Communications,  Inc. (or its  successors) and Firstlink at March
               31, 1999,  June 30, 1999 and  September  30, 1999 and the related
               statements of  operations,  changes in partners'  equity and cash
               flows of U.S. Online Communications, Inc. (or its successors) and
               Firstlink for each of the  three-month  periods ended as of March
               31, 1999, June 30, 1999 and September 30, 1999; and

                    (iii) the pro forma (after giving effect to the  Transaction
               and the related financing thereof)  consolidated balance sheet of
               Holdings  as at  the  Initial  Borrowing  Date,  which  financial
               statements   shall  be  prepared  in  accordance  with  generally
               accepted accounting principles consistent with past practices and

                                       21
<PAGE>

               shall be in form and substance satisfactory to the Agents and the
               Required  Banks,  and shall not  disclose  any  material  adverse
               differences  in the business,  properties,  assets,  liabilities,
               results of  operations,  condition  (financial  or  otherwise) or
               prospects of Holdings and its Subsidiaries  taken as a whole from
               that previously disclosed to the Agents and the Required Banks.

                  (b) On the  Initial  Borrowing  Date,  the  Banks  shall  have
received detailed  consolidated  financial  projections,  certified by the Chief
Financial Officer of Holdings, for Holdings and its Subsidiaries,  which include
the projected  results of the Borrower,  after giving effect to the  Transaction
and the other transactions contemplated herein, for the period commencing on the
Initial  Borrowing Date and ending after the Maturity Date (the  "Projections"),
which Projections,  and the supporting assumptions and explanations thereto, and
the accounting practices and procedures to be utilized by Holdings following the
Initial  Borrowing  Date,  shall be  satisfactory  in form and  substance to the
Agents and the Required Banks.

                  (c) On or prior to the  Initial  Borrowing  Date,  the  Agents
shall have received a copy of any  "management  letter"  received by Holdings or
any of its Subsidiaries from its certified public accountants.

                  4.16 Refinancing.  (a) On the Initial Borrowing Date and after
giving effect to the Loans incurred on the Initial Borrowing Date, the Firstlink
Merger and the other transactions  contemplated hereby, neither Holdings nor any
of its Subsidiaries  shall have any Indebtedness or preferred stock  outstanding
except for the Loans,  and up to $2,500,000 of Capitalized  Lease Obligation and
the outstanding preferred stock of Holdings set forth on Schedule V.

                  (b) The Agents and the Required  Banks shall be satisfied with
the amount of and the terms and conditions of the repayment of, and  termination
of all commitments and  documentation  relating to, all  Indebtedness  repaid by
Holdings or its Subsidiaries,  in connection with the transactions  contemplated
hereby  (collectively,  the  "Refinanced  Indebtedness")  and the  amount of all
accrued interest,  premiums,  fees, commissions and expenses owing in connection
with the  repayment  of such  Refinanced  Indebtedness.  In no event  shall  the
aggregate amount paid pursuant to the preceding sentence exceed $13,000,000. All
Liens arising in connection  with such Refinanced  Indebtedness  shall have been
terminated  (and  all  appropriate  releases,  termination  statements  or other
instruments of assignment  with respect  thereto shall have been  obtained),  in
each case to the  satisfaction  of the Agents and the  Required  Banks,  and the
Banks  shall  have  received  opinions  of  counsel  to such  effect in form and
substance satisfactory to the Agents and the Required Banks.

                  (c) The Agents shall have received  copies,  certified as true
and complete by an appropriate officer of Holdings, of all documents executed in
connection with the repayment and termination of the Refinanced Indebtedness and
the release of the Liens  thereunder (the "Debt  Termination  Documents") all of
which shall be in form and substance satisfactory to the Agents and the Required
Banks.

                  Section 5.  Conditions  Precedent  to All Credit  Events.  The
obligation  of each Bank to make  Loans  (including  Loans  made on the  Initial
Borrowing Date) is subject, at the time of each such Loan (except as hereinafter
indicated), to the satisfaction of the following conditions:

                                       22

<PAGE>

                  5.01 No Default;  Representations and Warranties.  At the time
of each such Loan and also after giving effect  thereto (i) there shall exist no
Default  or  Event  of  Default  and (ii)  all  representations  and  warranties
contained  herein and in the other Credit Documents shall be true and correct in
all material  respects with the same effect as though such  representations  and
warranties had been made on the date of the making of such Loan.

                  5.02  Notice of  Borrowing.  Prior to the making of each Loan,
the  Administrative  Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.03.

                  5.03 Pro Forma Compliance.  At the time of each Loan, Holdings
shall have delivered to each of the Banks a certificate  of its chief  financial
officer  demonstrating  that  Holdings  would have  complied  with the financial
covenants  set forth in  Sections  8.10,  8.11,  and 8.13,  to the  extent  then
applicable,  at the time of such Loan on a pro  forma  basis as if the Loans had
been incurred at the  beginning of the  immediately  preceding  fiscal month for
which  such  financial  covenants  were  tested  at the end of such  immediately
preceding  fiscal  quarter and determined as if all such  Indebtedness  had been
outstanding  from the  first day of the  relevant  calculation  period  (and the
interest expense associated with such  Indebtedness,  shall be determined at the
rates which would have been  applicable had such debt been  outstanding  for the
whole such period).

                 5.04 ROE  Agreements.  Prior to the  making of each  Loan,  the
proceeds of which are to be used for Capital  Expenditures,  the Borrower  shall
certify to the Administrative Agent that ROE Agreements substantially similar to
the ROE  Agreement  Standard  Form have  been  entered  into with the  owners of
multiple  dwelling units to be  constructed,  in part, with the proceeds of such
Loans.

                  The acceptance of the benefits of each Loan shall constitute a
representation  and  warranty by the  Borrower to each of the Banks that all the
conditions  specified in Section 4 and in this Section 5 and  applicable to such
Loan exist as of that time. All of the Notes,  certificates,  legal opinions and
other  documents  and papers  referred  to in  Section 4 and in this  Section 5,
unless otherwise  specified,  shall be delivered to the Administrative  Agent at
the  Notice  Office for the  account  of each of the Banks  and,  except for the
Notes, in sufficient  counterparts  for each of the Banks and, unless  otherwise
specified, shall be in form and substance satisfactory to the Banks.

                  Section 6.  Representations,  Warranties  and  Agreements.  In
order to induce  the Banks to enter into this  Agreement  and to make the Loans,
each of Holdings and the Borrower make the following representations, warranties
and  agreements  as to  itself  and as to  each of its  Subsidiaries,  as of the
Initial  Borrowing Date (both before and after giving effect to the  Transaction
and the other transactions  contemplated by the Documents, and all references to
Holdings and Subsidiaries herein and elsewhere in this Agreement,  shall, unless
otherwise  specifically  indicated,  be references to Holdings and  Subsidiaries
after giving effect to the  Transaction)  and as of the date of each  subsequent
Loan  which  representations,   warranties  and  agreements  shall  survive  the

                                       23

<PAGE>

execution and delivery of this Agreement and the Notes and any subsequent  Loan,
with the  occurrence of each Loan on or after the Initial  Borrowing  Date being
deemed to constitute a representation and warranty that the matters specified in
this Section 6 are true and correct on and as of the Initial  Borrowing Date and
on the date of each such Loan.

                  6.01 Corporate  Status.  Each of Holdings and its Subsidiaries
(i) is a duly organized and validly existing  corporation in good standing under
the laws of the jurisdiction of its  organization,  (ii) has the corporate power
and  authority  to own its  property  and assets and to transact the business in
which it is engaged and presently proposes to engage and (iii) is duly qualified
and is authorized  to do business and is in good  standing in each  jurisdiction
where the  ownership,  leasing or  operation  of  property or the conduct of its
business  requires  such  qualifications  except for failures to be so qualified
which,  in the  aggregate,  could not  reasonably be expected to have a material
adverse  effect  on  the  performance,   business,  assets,  nature  of  assets,
liabilities,  operations,  properties,  condition  (financial  or  otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

                  6.02 Corporate  Power and Authority.  Each of Holdings and its
Subsidiaries  has the corporate power to execute,  deliver and perform the terms
and  provisions  of each of the Documents to which it is party and has taken all
necessary corporate action to authorize the execution,  delivery and performance
by it of each of such Documents.  Each of Holdings and its Subsidiaries has duly
executed and delivered  each of the Documents to which it is party,  and each of
such Documents  constitutes its legal, valid and binding obligation  enforceable
in  accordance  with its  terms,  except as the  enforceability  thereof  may be
limited by bankruptcy, reorganization, moratorium or similar laws relating to or
limiting  creditors'  rights  generally  or  by  general  equitable   principles
(regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law).

                  6.03  No  Violation.   Neither  the  execution,   delivery  or
performance by Holdings or any of its  Subsidiaries of the Documents to which it
is a party, nor compliance by it with the terms and provisions thereof, (i) will
contravene any provision of any applicable law,  statute,  rule or regulation or
any  order,   writ,   injunction   or  decree  of  any  court  or   governmental
instrumentality,  (ii) will  conflict with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the  obligation to create or impose)
any Lien (except pursuant to the Security Documents) upon any of the property or
assets  of  Holdings  or any of its  Subsidiaries  pursuant  to the terms of any
indenture,  mortgage,  deed of trust, credit agreement or loan agreement, or any
other agreement, contract or instrument to which Holdings or its Subsidiaries is
a party or by which it or any of its  property or assets is bound or to which it
may be  subject  or (iii) will  violate  any  provision  of the  Certificate  of
Incorporation,  By-Laws (or similar organizational documents) of Holdings or any
of its Subsidiaries.

                  6.04  Governmental  Approvals.  No order,  consent,  approval,
license,  authorization  or validation of, or filing,  recording or registration
with (except as have been obtained or made on or prior to the Initial  Borrowing
Date and are in full force and effect),  or exemption  by, any  governmental  or
public body or authority,  or any subdivision thereof, is required to authorize,
or is required in connection  with, (i) the execution,  delivery and performance
of any Document or (ii) the legality, validity, binding effect or enforceability
of any such Document.

                                       24
<PAGE>


                  6.05 Financial  Statements;  Financial Condition;  Undisclosed
Liabilities;  Projections;  etc. (a) (i) The consolidated  balance sheet of U.S.
Online  Communications,  Inc. (or its  successors) and Firstlink at December 31,
1997,  December 1998, and for the nine month period ended September 30, 1999 and
the related  statements of earnings and  stockholders'  equity and cash flows of
such Person, as applicable for the fiscal periods ended as of said dates, which,
in the case of the annual statements,  have been examined by Arthur Andersen LLP
an independent  certified public accountant,  who delivered unqualified opinions
in  respect  thereto,  (ii)  the  consolidated  balance  sheet  of  U.S.  Online
Communications,  Inc. (or its successor)  and Firstlink at March 31, 1999,  June
30,  1999 and  September  30,  1999 and the related  statements  of  operations,
changes in partners' equity and cash flows of U.S. Online  Communications,  Inc.
(or its successor) and Firstlink for each of the three-month periods ended as of
March 31,  1999,  June 30, 1999 and  September  30, 1999 and (iii) the pro forma
(after  giving  effect to the  Transaction  and the related  financing  thereof)
consolidated balance sheet of Holdings as at the Effective Date, copies of which
financial statements have heretofore been furnished to each Bank, present a good
faith  estimate  of the  pro  forma  financial  condition  of  Holdings  and its
Subsidiaries (after giving effect to the Transaction) on a consolidated basis at
the date thereof).  Such financial  statements  have been prepared in accordance
with generally accepted accounting principles and practices consistently applied
except to the extent provided in the notes to said financial  statements.  Since
December 31, 1998, there has been no material adverse change in the performance,
business,  assets,  nature  of  assets,  liabilities,   operations,  properties,
condition  (financial  or  otherwise)  or  prospects  of the  Holdings  and  its
Subsidiaries taken as a whole.

                  (b) On and as of the Initial  Borrowing  Date,  on a pro forma
basis  after  giving  effect  to the  Transaction  and  all  other  transactions
contemplated  by  the  Documents  and to all  Indebtedness  (including,  without
limitation,  the Loans) being incurred in connection with the  Transaction,  and
Liens created, and to be created, by each Credit Party in connection  therewith:
(a) the sum of the assets (including all contribution and subrogation rights and
other intangible assets), at a fair valuation,  of each Credit Party will exceed
its debts;  (b) no Credit Party has incurred or intends to, or believes  that it
will, incur debts beyond its ability to pay such debts as such debts mature; and
(c) each Credit  Party will have  sufficient  capital  with which to conduct its
business.  For purposes of this Section  6.05(b) "debt" means any liability on a
claim,  and "claim"  means (i) right to payment,  whether or not such a right is
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment,  whether or not such  right to an  equitable  remedy is reduced to
judgment,  fixed,  contingent,  matured,  unmatured,   subordinated,   disputed,
undisputed, secured or unsecured.

                  (c) Except as fully reflected in the financial  statements and
the notes related  thereto  described in Section  6.05(a),  there were as of the
Initial Borrowing Date (and after giving effect to the Transaction and the other
transactions  contemplated  hereby  and  by the  Documents)  no  liabilities  or
obligations  with respect to Holdings or any of its  Subsidiaries  of any nature
whatsoever  (whether absolute,  accrued,  contingent or otherwise and whether or
not due)  which,  either  individually  or in  aggregate,  could  reasonably  be
expected to be material to Holdings and its Subsidiaries taken as a whole. As of
the Initial Borrowing Date,  neither Holdings nor any of its Subsidiaries  knows
of any basis for the assertion  against  Holdings or any of its  Subsidiaries of
any liability or obligation of any nature whatsoever that is not fully reflected

                                       25

<PAGE>

in the financial  statements and the notes related thereto  described in Section
6.05(a) which,  either  individually  or in the aggregate,  could  reasonably be
expected to be material to Holdings and its Subsidiaries taken as a whole. As of
the Initial  Borrowing Date (and after giving effect to the Transaction) none of
Holdings or any of its  Subsidiaries  will have any outstanding  Indebtedness or
preferred  stock other than (i) the Loans,  (ii) the Existing  Indebtedness  and
(iii) the outstanding preferred stock of Holdings set forth on Schedule V.

                  (d) On and as of the Initial  Borrowing  Date, the Projections
have been  prepared in good faith by  Holdings  and there are no  statements  or
conclusions  in  any  of  the  Projections  which  are  based  upon  or  include
information  known to  Holdings  to be  misleading  or which  fail to take  into
account  material  information  regarding the matters reported  therein.  On the
Initial  Borrowing Date,  Holdings believes that the Projections were reasonable
and attainable  (although  actual results may differ from the Projections and no
representation is made that the Projections will in fact be attained).

                  6.06  Litigation.  There are no actions,  suits or proceedings
pending or, to the best  knowledge of Holdings,  threatened  (i) with respect to
any Document,  or (ii) that are  reasonably  likely to materially  and adversely
affect  the  performance,  business,  assets,  nature  of  assets,  liabilities,
operations,  properties,  condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole.

                  6.07 True and  Complete  Disclosure.  All factual  information
(taken as a whole) heretofore or contemporaneously  furnished by or on behalf of
Holdings  or any  Subsidiary  of  Holdings  in writing  to any Bank  (including,
without limitation,  all information contained in the Documents) for purposes of
or in connection with this Agreement or any transaction  contemplated herein is,
and all other such factual  information  (taken as a whole with all  information
previously  furnished)  hereafter  furnished  by or on behalf of Holdings or any
Subsidiary  of Holdings in writing to any Bank will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact.

                  6.08 Use of Proceeds; Margin Regulations.  (a) All proceeds of
the  Loans  incurred  by the  Borrower  shall  be used to repay  the  Refinanced
Indebtedness,  to pay Transaction Fees and Expenses,  for general  corporate and
working capital  purposes of the Borrower and its  Subsidiaries  and for Capital
Expenditures.

                  (b) No  part  of the  proceeds  of any  Loan  will  be used to
purchase  or carry any  Margin  Stock or to extend  credit  for the  purpose  of
purchasing or carrying any Margin Stock.  Neither the making of any Loan nor the
use of the proceeds  thereof nor the  occurrence  of any other Credit Event will
violate or be  inconsistent  with the  provisions of Regulation T, U or X of the
Board of Governors of the Federal Reserve System.

                  6.09 Tax Returns and  Payments.  Each of Holdings  and each of
its  Subsidiaries  has  timely  filed or caused to be  timely  filed  (including
pursuant to any valid extensions of time for filing) with the appropriate taxing
authority,  all returns,  statements,  forms and reports for taxes and all other
material tax returns,  domestic and foreign (the "Returns") required to be filed

                                       26

<PAGE>

by or with respect to the income,  properties or  operations of Holdings  and/or
any of its Subsidiaries. The Returns accurately reflect in all material respects
all  liability  for taxes of Holdings  and its  Subsidiaries  as a whole for the
periods covered thereby. Each of Holdings and each of its Subsidiaries have paid
all material taxes and  assessments  payable by them which have become due other
than those  contested in good faith and for which  adequate  reserves  have been
established in accordance with generally accepted accounting  principles.  There
is no material  action,  suit,  proceeding,  investigation,  audit, or claim now
pending or, to the knowledge of Holdings or any of its Subsidiaries,  threatened
by  any  authority  regarding  any  taxes  relating  to  Holdings  or any of its
Subsidiaries.  As of the Initial Borrowing Date, neither Holdings nor any of its
Subsidiaries  has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or  collection  of taxes of Holdings or any of its  Subsidiaries,  or is
aware of any  circumstances  that would cause the taxable years or other taxable
periods of Holdings or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations.

                  6.10 Compliance  with ERISA.  (a) Schedule III to be delivered
on or prior to the Initial Borrowing Date and in form and substance satisfactory
to the Agent and the  Required  Banks sets forth each Plan;  each Plan (and each
related trust, insurance contract or fund) is in substantial compliance with its
terms and with all applicable laws, including, without limitation, ERISA and the
Code;  each  Plan (and each  related  trust,  if any)  which is  intended  to be
qualified under Section 401(a) of the Code has received a  determination  letter
from the Internal  Revenue Service to the effect that it meets the  requirements
of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred;  no
Plan which is a multiemployer  plan (as defined in Section  4001(a)(3) of ERISA)
is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no
Plan which is subject to Section  412 of the Code or Section 302 of ERISA has an
accumulated funding deficiency,  within the meaning of such sections of the Code
or ERISA,  or has  applied for or  received a waiver of an  accumulated  funding
deficiency  or an extension of any  amortization  period,  within the meaning of
Section  412 of the  Code or  Section  303 or 304 of  ERISA;  all  contributions
required  to be made  with  respect  to a Plan have been  timely  made;  neither
Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate has incurred any
material liability  (including any indirect,  contingent or secondary liability)
to or on account of a Plan pursuant to Section 409, 502(i),  502(l),  515, 4062,
4063,  4064, 4069,  4201, 4204 or 4212 of ERISA or Section  401(a)(29),  4971 or
4975 of the  Code or  expects  to  incur  any such  liability  under  any of the
foregoing  sections with respect to any Plan; no condition exists which presents
a material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate
of  incurring a liability to or on account of a Plan  pursuant to the  foregoing
provisions  of ERISA and the  Code;  no  proceedings  have  been  instituted  to
terminate or appoint a trustee to administer  any Plan which is subject to Title
IV of ERISA; no action, suit,  proceeding,  hearing, audit or investigation with
respect to the administration, operation or the investment of assets of any Plan
(other than routine  claims for  benefits) is pending,  expected or  threatened;
using actuarial  assumptions and computation  methods  consistent with Part 1 of
subtitle E of Title IV of ERISA,  the  aggregate  liabilities  of Holdings,  its
Subsidiaries and its ERISA Affiliates to all plans which are multiemployer plans
(as  defined  in  Section  4001(a)(3)  of  ERISA)  in the  event  of a  complete
withdrawal  therefrom,  as of the close of the most  recent  fiscal year of each
such Plan ended prior to the date of the most  recent  Credit  Event,  would not
exceed $50,000; each group health plan (as defined in Section 607(1) of ERISA or

                                       27

<PAGE>

Section 4980B(g)(2) of the Code) which covers or has covered employees or former
employees of Holdings, any Subsidiary of Holdings, or any ERISA Affiliate has at
all times been operated in compliance  with the provisions of Part 6 of subtitle
B of Title I of ERISA and Section  4980B of the Code;  no lien imposed under the
Code or ERISA on the assets of  Holdings  or any  Subsidiary  of Holdings or any
ERISA  Affiliate  exists  or is  likely to arise on  account  of any  Plan;  and
Holdings  and its  Subsidiaries  may cease  contributions  to or  terminate  any
employee  benefit plan maintained by any of them without  incurring any material
liability.

                  6.11  The  Security  Documents.  (a)  The  provisions  of  the
Security  Agreement are effective to create in favor of the Collateral Agent for
the benefit of the Secured  Creditors a legal,  valid and  enforceable  security
interest in all right,  title and interest of the  respective  Credit Parties in
the Collateral  described  therein and the Collateral  Agent, for the benefit of
the Secured Creditors,  has a fully perfected Lien on, and security interest in,
all right,  title and interest of the respective  Credit Parties,  in all of the
Collateral  described  therein,  subject to no other Liens other than  Permitted
Liens. The recordation of the Security Agreement in the United States Patent and
Trademark  Office  together  with  filings on Form UCC-1  made  pursuant  to the
Security  Agreement  will be effective,  under federal and state law, to perfect
the security  interest  granted to the  Collateral  Agent in the  trademarks and
patents  covered  by the  Security  Agreement  and the  filing  of the  Security
Agreement with the United States  Copyright Office together with filings on Form
UCC-1 made pursuant to the Security  Agreement  will be effective  under federal
and state law to perfect the security  interest  granted to the Collateral Agent
in the copyrights covered by the Security Agreement.  Each of the Credit Parties
party  to  the  Security  Agreement  has  good  and  merchantable  title  to all
Collateral described therein, free and clear of all Liens except those described
above in this clause (a).

                  (b) The security  interests created in favor of the Collateral
Agent,  as Pledgee for the benefit of the  Secured  Creditors,  under the Pledge
Agreement   constitute  first  perfected   security  interests  in  the  Pledged
Securities  described in the Pledge Agreement,  subject to no security interests
of any other Person.  No filings or recordings  are required in order to perfect
(or maintain the  perfection or priority of) the security  interests  created in
the Pledged Securities and the proceeds thereof under the Pledge Agreement.

                  6.12   Representations   and  Warranties  in  Documents.   All
representations  and  warranties set forth in the Documents are true and correct
in all  material  respects  at the time as of  which  such  representations  and
warranties were made and on the Initial Borrowing Date.

                  6.13 Properties. None of Holdings or its Subsidiaries owns any
real property. Each Leasehold leased by Holdings or any of its Subsidiaries,  as
of the  Initial  Borrowing  Date,  and the nature of the  interest  therein,  is
correctly  set forth in Schedule IV (which  Schedule  shall be  delivered  on or
prior  to the  Initial  Borrowing  Date  and  shall  be in  form  and  substance
satisfactory to the Administrative Agent and the Required Banks),  including but
not limited to all locations where Holdings or its Subsidiaries has the right to
use, occupy, or maintain space for the  installation,  use or maintenance of its
communications  systems.  Each Leasehold is in full force and effect.  All rents
and additional  rents due to date under each of the Leaseholds have been paid in
full, and all other obligations of Holdings, or any of its Subsidiaries,  as the

                                       28

<PAGE>

case may be as lessees or licensees have been  performed.  Neither  Holdings nor
any of its  Subsidiaries  has  received  notice of any default  under any of the
Leaseholds.  Each of the Leaseholds is in a state of good maintenance and repair
and is adequate and suitable to enable  Holdings and its  Subsidiaries to engage
in the business of providing communications  services.  Neither Holdings nor any
of its  Subsidiaries  has  assigned,  transferred,  conveyed  or  mortgaged  any
interest in any of the Leaseholds.

                  6.14  Capitalization.  On the Initial Borrowing Date and after
giving effect to the Transaction,  the authorized  capital stock of Holdings and
all owners thereof,  shall be as set forth on Schedule V which Schedule shall be
delivered  on or prior to the  Initial  Borrowing  Date and shall be in form and
substance  satisfactory  to the  Administrative  Agent and the  Required  Banks.
Except as set forth on Schedule V, neither  Holdings nor any of its Subsidiaries
has any outstanding  securities  convertible into or exchangeable for any of its
equity  interests  or  outstanding  rights to subscribe  for or to purchase,  or
warrants  or options  for the  purchase,  or any  agreements  providing  for the
issuance  (contingent or otherwise)  of, or any calls,  commitments or claims of
any character  relating to, its  partnership or other equity  interests,  as the
case may be.

                  6.15   Subsidiaries.   On  the  Initial  Borrowing  Date,  the
corporations  listed on Schedule VI are the only  Subsidiaries of Holdings which
Schedule shall be delivered on or prior to the Initial  Borrowing Date and shall
be in form  and  substance  satisfactory  to the  Administrative  Agent  and the
Required Banks.  Schedule VI correctly sets forth,  as of the Initial  Borrowing
Date, the percentage  ownership  (direct and indirect) of Holdings in each class
of capital  stock of each of its  Subsidiaries  and also  identifies  the direct
owner thereof.

                  6.16 Compliance  with Statutes,  etc. Each of Holdings and its
Subsidiaries  is in compliance  with all applicable  statutes,  regulations  and
orders of, and all applicable  restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of  its  property  (including  applicable  statutes,   regulations,  orders  and
restrictions  relating to  environmental  standards and  controls),  except with
respect to each of the foregoing such  noncompliance as could not,  individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the performance,  business, assets, nature of assets,  liabilities,  operations,
properties,  condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.

                  6.17  Investment  Company Act. None of Holdings nor any of its
Subsidiaries  is  an  "investment  company"  or a  company  "controlled"  by  an
"investment  company," within the meaning of the Investment Company Act of 1940,
as amended.

                  6.18 Public Utility  Holding Company Act. None of Holdings nor
any of its Subsidiaries is a "holding  company," or a "subsidiary  company" of a
"holding  company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.

                  6.19  Environmental  Matters.  (a)  Holdings  and  each of its
Subsidiaries  have  complied  with,  and on the date of such Credit Event are in
compliance  with, in all respects,  all  applicable  Environmental  Laws and the
requirements  of any permits  issued under such  Environmental  Laws except such

                                       29

<PAGE>

noncompliances which, in the aggregate, could not reasonably be expected to have
a  material  adverse  effect on the  performance,  business,  assets,  nature of
assets, liabilities,  operations, properties, condition (financial or otherwise)
or  prospects of Holdings and its  Subsidiaries  taken as a whole.  There are no
past,  pending  or,  to the best  knowledge  of  Holdings,  threatened  material
Environmental  Claims against  Holdings or any of its  Subsidiaries  or any Real
Property  currently  owned or operated  by Holdings or any of its  Subsidiaries.
There are no facts,  circumstances,  conditions or  occurrences  concerning  the
business  or  operations  of  Holdings  or any of its  Subsidiaries  or any Real
Property  owned or operated  at any time by Holdings or any of its  Subsidiaries
or, to the knowledge of Holdings,  any property adjoining any such Real Property
that could  reasonably  be  expected  (i) to form the basis of an  Environmental
Claim against  Holdings or any of its Subsidiaries or any Real Property owned or
operated  by  Holdings  or any of its  Subsidiaries  or (ii) to cause  such Real
Property to be subject to any restrictions on the ownership,  occupancy,  use or
transferability  of such Real Property under any  Environmental  Law except such
Environmental  Claims and  restrictions  which  individually or in the aggregate
could not  reasonably  be  expected  to have a  material  adverse  effect on the
performance,  business,  assets,  nature  of  assets,  liabilities,  operations,
properties,  condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.

                  (b) Neither Holdings nor any of its  Subsidiaries  has, at any
time,  generated,  used,  treated,  stored,  transported  or released  Hazardous
Materials on, to or from any Real  Property at any time owned,  leased or at any
time  operated by Holdings or any of its  Subsidiaries  in each case which could
reasonably be expected to cause a material  adverse  effect on the  performance,
business,  assets,  nature  of  assets,  liabilities,   operations,  properties,
condition (financial or otherwise) or prospects of Holdings and its Subsidiaries
taken as a whole.

                  (c)  There are not now and  never  have  been any  underground
storage tanks located on any Real Property  owned or operated by Holdings or any
of its Subsidiaries.

                  (d) No Real Property at any time owned or at any time operated
by  Holdings  or any of its  Subsidiaries  is located on any site  listed on, or
proposed  in the  Federal  Register  for  listing  on,  the  Superfund  National
Priorities  List,  or  listed  on  the  Comprehensive   Environmental   Response
Compensation and Liability Information System or their state equivalents.

                  6.20  Labor  Relations.   Neither  Holdings  nor  any  of  its
Subsidiaries  is engaged in any unfair labor  practice that could  reasonably be
expected  to have a material  adverse  effect on Holdings  and its  Subsidiaries
taken as a whole.  There is (i) no significant  unfair labor practice  complaint
pending against Holdings or any of its Subsidiaries or, to the best knowledge of
Holdings,  threatened  against any of them,  before the National Labor Relations
Board,  and no  significant  grievance  or  significant  arbitration  proceeding
arising  out of or under  any  collective  bargaining  agreement  is so  pending
against  Holdings  or any of its  Subsidiaries  or,  to the  best  knowledge  of
Holdings,  threatened against any of them and (ii) no significant strike,  labor
dispute,   slowdown  or  stoppage   pending  against  Holdings  or  any  of  its
Subsidiaries or, to the best knowledge of Holdings,  threatened against Holdings
or any of its  Subsidiaries  in each case that could  reasonably  be expected to
have a material adverse effect on the performance,  business,  assets, nature of
assets, liabilities,  operations, properties, condition (financial or otherwise)
or prospects of Holdings and its Subsidiaries taken as a whole.

                                       30

<PAGE>


                  6.21 Patents, Licenses, Franchises and Formulas. (a) Holdings,
together with its Subsidiaries,  has a license to use or otherwise has the right
to use, free and clear of pending or threatened Liens, all the material patents,
patent  applications,  trademarks,  service marks,  trade names,  trade secrets,
copyrights,  proprietary  information,  computer programs, data bases, licenses,
franchises and formulas, or rights with respect to the foregoing  (collectively,
"Intellectual  Property"),  and has  obtained  all  licenses and other rights of
whatever nature, necessary for the present conduct of its business,  without any
known conflict with the rights of others which,  or the failure to obtain which,
as the case may be,  could  reasonably  be expected  to have a material  adverse
effect on the  performance,  business,  assets,  nature of assets,  liabilities,
operations,  properties,  condition  (financial  or  otherwise)  or prospects of
Holdings and its Subsidiaries taken as a whole.

                  (b) Holdings, together with its Subsidiaries, has the right to
practice under and use substantially all of its material Intellectual Property.

                  (c) Neither Holdings nor any of its Subsidiaries has knowledge
of any claim by any third party contesting the validity,  enforceability, use or
ownership of the Intellectual  Property,  or of any existing state of facts that
would  support a claim that use by  Holdings or any of its  Subsidiaries  of any
such Intellectual  Property has infringed or otherwise violated any Intellectual
Property  right of any other  Person and that to the best  knowledge of Holdings
and its  Subsidiaries  no claim is threatened  except for such claims that could
not  individually or in the aggregate  reasonably be expected to have a material
adverse  affect  on  the  performance,   business,  assets,  nature  of  assets,
liabilities,  operations,  properties,  condition  (financial  or  otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

                  6.22  Indebtedness.  Schedule  VII  (which  Schedule  shall be
delivered  on or prior to the  Initial  Borrowing  Date and shall be in form and
substance  satisfactory to the Administrative Agent and the Required Banks) sets
forth a true and complete  list of all  Indebtedness  (other than the Loans) and
preferred  stock of  Holdings  and each of its  Subsidiaries  as of the  Initial
Borrowing Date after giving effect to the Transaction and the other transactions
contemplated  hereby (the  "Existing  Indebtedness"),  in each case  showing the
aggregate  amount thereof and the name of the  respective  obligor and any other
entity which directly or indirectly  guaranteed  such debt. None of the Existing
Indebtedness  was  incurred in  connection  with,  or in  contemplation  of, the
Transaction or the other transactions contemplated hereby.

                  6.23  Restrictions on or Relating to Subsidiaries.  There does
not exist any encumbrance or restriction on the ability of (i) any Subsidiary of
Holdings to pay dividends or make any other  distributions on its capital stock,
or any other interest or  participation  in its profits owned by Holdings or any
Subsidiary  of  Holdings,  or to pay  any  Indebtedness  owed to  Holdings  or a
Subsidiary  of  Holdings,  (ii) any  Subsidiary  of  Holdings  to make  loans or
advances to Holdings or any of Holdings'  Subsidiaries  or (iii) Holdings or any
Subsidiary  of Holdings to transfer any of its  properties or assets to Holdings
or any  Subsidiary of Holdings,  except for such  encumbrances  or  restrictions
existing  under or by reason of (w)  applicable  law, (x) this  Agreement or the
other Credit  Documents or (y) customary  provisions  restricting  subletting or
assignment  of any  lease  governing  a  leasehold  interest  of  Holdings  or a
Subsidiary of Holdings or (z)  Indebtedness  incurred in accordance with Section
8.05(iii).

                                       31

<PAGE>

                  6.24 The Transaction. All aspects of the Transaction have been
effected in accordance with the Documents and all applicable law. At the time of
consummation   thereof,   all  consents  and   approvals  of,  and  filings  and
registrations  with,  and all other  actions  in respect  of,  all  governmental
agencies,  authorities or instrumentalities  required in order to consummate the
Transaction  shall  have been  obtained,  given,  filed or taken and are in full
force and effect (or  effective  judicial  relief with respect  thereto has been
obtained) in each case where the failure to do so could  reasonably  be expected
to have a material adverse effect on the performance,  business,  assets, nature
of  assets,  liabilities,   operations,   properties,  condition  (financial  or
otherwise) or prospects of Holdings and its  Subsidiaries  taken as a whole. All
applicable  waiting periods with respect thereto have or, prior to the time when
required,  will have, expired without, in all such cases, any action being taken
by any competent authority which restrains, prevents or imposes material adverse
conditions upon the consummation of the Transaction.  Additionally,  at the time
of consummation thereof, there does not exist any judgment,  order or injunction
prohibiting or imposing material adverse conditions upon the consummation of the
Transaction.

                  6.25  Material  Contracts.   All  Material  Contracts  of  the
Borrower  and  each  of  its  Subsidiaries  as of  the  Initial  Borrowing  Date
(including,  but not limited to, all of the ROE Agreements  which are designated
as such on Schedule  VIII) are listed on Schedule VIII which  Schedule  shall be
delivered  on or prior to the  Initial  Borrowing  Date and shall be in form and
substance satisfactory to the Administrative Agent and the Required Banks.

                  6.26 Year 2000  Reprogramming.  Any reprogramming  required to
permit the proper  functioning,  in and  following the year 2000, of Holdings or
any of its  Subsidiaries',  (i) computer  systems and (ii) equipment  containing
embedded microchips  (including systems and equipment supplied by others or with
which the Holdings  systems  interface)  and the testing of all such systems and
equipment, as so reprogrammed, has been completed. The costs to Holdings and its
Subsidiaries of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 (including,  without limitation,  reprogramming errors
and the  failure  of others'  systems  or  equipment)  could not  reasonably  be
expected to have a material adverse effect on the performance, business, assets,
nature of assets, liabilities,  operations,  properties, condition (financial or
otherwise) or prospects of Holdings and its  Subsidiaries  taken as a whole. The
computer and  management  information  systems of Holdings and its  Subsidiaries
are, and with ordinary course  upgrading and maintenance will continue to be for
the  term  of  this  Agreement,  sufficient  to  permit  the  Holdings  and  its
Subsidiaries  to conduct  their  business  without such  conduct  resulting in a
material adverse effect on the performance,  business, assets, nature of assets,
liabilities,  operations,  properties,  condition  (financial  or  otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

                  Section 7.  Affirmative  Covenants.  Each of Holdings  and the
Borrower covenants and agrees that on and after the Effective Date and until the
Total Commitment has terminated and the Loans and Notes, together with interest,
Fees and all other Obligations  incurred  hereunder and thereunder,  are paid in
full:

                  7.01  Information Covenants.  The Borrower will furnish to the
 Administrative Agent:

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<PAGE>


                  (a)  Monthly  Reports.  Within  30 days  after the end of each
fiscal  month (i) other  than the last  fiscal  month of any  fiscal  quarter of
Holdings,  the consolidated and consolidating balance sheets of Holdings and its
Subsidiaries  as at the  end of such  month  and the  related  consolidated  and
consolidating  statements of earnings for such month and for the elapsed portion
of the fiscal year ended with the last day of such month,  in each case  setting
forth  comparative  figures for the  corresponding  month and elapsed portion of
such fiscal year for the prior fiscal year and comparable  budgeted  figures for
such period,  all of which shall be certified by the chief financial  officer or
controller of the Borrower,  subject to normal  year-end audit  adjustments  and
shall be accompanied  by a management  discussion and analysis of the results of
operations  and  financial  condition  with  respect to such period and (ii) the
Subscriber Penetration Report for such period.

                  (b) Quarterly Financial  Statements.  Within 45 days after the
close of each of the first  three  quarterly  accounting  periods in each fiscal
year of Holdings,  (i) the  consolidated  and  consolidating  balance  sheets of
Holdings and its  Subsidiaries  as at the end of such  quarterly  period and the
related consolidated and consolidating  statements of earnings and stockholders'
equity  and  statement  of cash  flows for such  quarter,  in each case for such
quarterly  period and for the elapsed  portion of the fiscal year ended with the
last day of such  quarterly  period,  in each case,  setting  forth  comparative
figures for the related periods in the prior fiscal year and comparable budgeted
figures for such period,  all of which shall be certified by the chief financial
officer  or  controller  of the  Borrower,  subject  to  normal  year-end  audit
adjustments and shall be accompanied by a management  discussion and analysis of
the results of operations  and financial  condition  with respect to such period
and (ii) the Subscriber Penetration Report for such period.

                  (c)  Annual  Financial  Statements.  Within 90 days  after the
close of each fiscal year of Holdings,  (i) the consolidated  and  consolidating
balance  sheets of Holdings  and its  Subsidiaries  as at the end of such fiscal
year and the related  consolidated and consolidating  statements of earnings and
stockholders'  equity  and  statement  of cash  flows for such  fiscal  year and
setting forth  comparative  figures for the preceding fiscal year and comparable
budgeted  figures  for  such  period  and  certified,  (x)  in the  case  of the
consolidating statements, by the chief financial officer of the Borrower and (y)
in the  case  of the  consolidated  financial  statements  of  Holdings  and its
Subsidiaries,  by any of the "big five" or other  independent  certified  public
accountants  of  recognized  national  standing  reasonably  acceptable  to  the
Required  Banks,  together with a signed opinion of such  accounting firm (which
opinion shall not be qualified in any respect) stating that in the course of its
regular audit of the financial  statements of Holdings which audit was conducted
in accordance with generally accepted auditing  standards,  such accounting firm
obtained no knowledge of any Default or Event of Default  which has occurred and
is continuing  or, if in the opinion of such  accounting  firm such a Default or
Event of Default has  occurred and is  continuing,  a statement as to the nature
thereof and shall be accompanied by a management  discussion and analysis of the
results of operations  and financial  condition  with respect to such period and
(ii) the Subscriber Penetration Report for such period.

                  (d) Management Letters.  Promptly after the receipt thereof by
Holdings or any of its Subsidiaries,  a copy of any "management letter" received
by Holdings or any of its Subsidiaries from its certified public accountants.

                                       33

<PAGE>


                  (e) Budgets.  As soon as available  but in no event later than
30 days  after  the first  day of the  fiscal  year of  Holdings,  a budget  for
Holdings  and  its  Subsidiaries  in  form  customarily   prepared  by  Holdings
(including  budgeted  statements  of  earnings  and sources and uses of cash and
balance sheets) prepared by Holdings for each calendar month of such fiscal year
and on an  annual  basis  for  the  next  succeeding  fiscal  year  prepared  in
reasonable detail with appropriate  presentation and discussion of the principal
assumptions  upon which such budgets are based,  accompanied by the statement of
the chief financial officer or controller of the Borrower to the effect that, to
the best of his knowledge,  the budget is a reasonable  estimate for the periods
covered thereby.

                  (f) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 7.01(a), (b) and (c), a certificate
of the chief financial  officer of the Borrower to the effect that no Default or
Event of Default has occurred and is  continuing  or, if any Default or Event of
Default  has  occurred  and is  continuing,  specifying  the  nature  and extent
thereof,  which certificate,  (x) in the case of certificates delivered pursuant
to  Section  8.01(b)  or (c),  shall  set  forth the  calculations  required  to
establish whether the Borrower was in compliance with the provisions of Sections
2.03, 3.02,  8.02, 8.04, 8.05, 8.06 and 8.08 through 8.13,  inclusive at the end
of such  fiscal  quarter  or year,  as the  case may be,  and (y) in the case of
certificates  delivered  pursuant to Section 8.01(c),  the amount of Excess Cash
Flow for the relevant Excess Cash Flow Payment Period.

                  (g)  Notice of  Default or  Litigation.  Promptly,  and in any
event  within  three  Business  Days after an officer of  Holdings or any of its
Subsidiaries  obtains  knowledge  thereof,  notice of (i) the  occurrence of any
event which  constitutes a Default or Event of Default,  (ii) any  litigation or
governmental  investigation  or proceeding  pending (x) against  Holdings or its
Subsidiaries  which could  reasonably  be expected to  materially  and adversely
affect  the  performance,  business,  assets,  nature  of  assets,  liabilities,
operations,  properties,  condition  (financial  or  otherwise)  or prospects of
Holdings  and its  Subsidiaries  taken  as a whole or (y)  with  respect  to any
Document  and (iii) any other  event  which  could  reasonably  be  expected  to
materially and adversely affect the  performance,  business,  assets,  nature of
assets, liabilities,  operations, properties, condition (financial or otherwise)
or prospects of Holdings and its Subsidiaries taken as a whole.

                  (h) Other  Reports and  Filings.  Promptly  upon  transmission
thereof,  copies  of  any  financial  information,  proxy  materials  and  other
information  and  reports,  if  any,  which  any  Credit  Party  or  any  of its
Subsidiaries  (x) has filed with the  Securities  and Exchange  Commission  (the
"SEC") or (y) has  delivered to holders of, or any agent or trustee with respect
to,  Indebtedness of any Credit Party or any of its Subsidiaries in its capacity
as such a holder, agent, or trustee.

                  (i)  Environmental  Matters.  Promptly  upon, and in any event
within  three  Business  Days  after an  officer  of  Holdings  or of any of its
Subsidiaries  obtains  knowledge  thereof,   notice  of  any  of  the  following
environmental matters (i) any pending or threatened material Environmental Claim
against  Holdings  or any of its  Subsidiaries  or any  Real  Property  owned or
operated at any time by Holdings or any of its Subsidiaries;  (ii) any condition
or occurrence on or arising from any Real Property owned or operated at any time
by Holdings or any of its Subsidiaries  that (a) could reasonably be anticipated
to result in a material  noncompliance  by Holdings  or any of its  Subsidiaries

                                       34

<PAGE>

with any applicable Environmental Law, or (b) could reasonably be anticipated to
form the basis of a material  Environmental Claim against Holdings or any of its
Subsidiaries  or any Real  Property  owned or operated by Holdings or any of its
Subsidiaries;  (iii) any condition or  occurrence on any Real Property  owned or
operated by Holdings or any of its  Subsidiaries or any property  adjoining such
Real Property that could  reasonably be  anticipated to cause such Real Property
to be subject to any material restrictions on the ownership,  occupancy,  use or
transferability  of such Real Property under any Environmental Law; and (iv) the
taking of any  removal or remedial  action in response to a material  Release or
material  threatened  Release or the actual or alleged presence of any Hazardous
Material  on or from any Real  Property  owned  or  operated  at any time by the
Borrower  or  any  of  its   Subsidiaries  in  each  case  as  required  by  any
Environmental Law or any governmental or other  administrative  agency. All such
notices  shall   describe  in  reasonable   detail  the  nature  of  the  claim,
investigation,  condition,  occurrence  or  removal or  remedial  action and the
Borrower or such  Subsidiary's  response  thereto.  In addition,  Holdings  will
provide the Banks with copies of all material communications with any government
or governmental agency relating to material  Environmental  Claims, all material
communications  with any person relating to material  Environmental  Claims, and
such detailed reports of any Environmental  Claim as may reasonably be requested
by the Required Banks.

                  (j)  Annual  Meetings  with  Banks.  Within 120 days after the
close of each fiscal year of  Holdings,  Holdings  shall,  at the request of any
Agent or the Required Banks,  hold a meeting (at a mutually  agreeable  location
and time) with all Banks who  choose to attend  such  meeting  at which  meeting
shall be reviewed  the  financial  results of the  previous  fiscal year and the
financial  condition  of the  Holdings  and its  Subsidiaries  and  the  budgets
presented for the current fiscal year of the Holdings and its Subsidiaries.

                  (k) Borrowing Base  Certificate.  (i) On the Initial Borrowing
Date and (ii) thereafter,  not later than 12:00 noon (New York time) on the 15th
Business Day after the end of each fiscal month,  a borrowing  base  certificate
substantially  in the form of Exhibit K (each, a "Borrowing Base  Certificate"),
as of (x) in the case of clause  (i),  November  30, 1999 and (y) in the case of
clause (ii), the last day of the immediately preceding fiscal month, and in each
case, certified by the Chief Financial Officer of the Borrower.

                  (l)  Other   Information.   From  time  to  time,  such  other
information  or documents  (financial or  otherwise)  with respect to any Credit
Party  or any of its  Subsidiaries,  as any  Agent  or the  Required  Banks  may
reasonably request.

                  7.02 Books,  Records and Inspections.  Holdings will, and will
cause each of its  Subsidiaries  to, keep proper  books of record and account in
which full, true and correct entries, in conformity with United States generally
accepted accounting principles and all requirements of law, shall be made of all
dealings and  transactions in relation to its business and activities.  Holdings
will, and will cause each of its Subsidiaries to, permit officers and designated
representatives of the  Administrative  Agent or any Bank (at their own expense)
to visit  and  inspect,  under  guidance  of  officers  of  Holdings  or of such
Subsidiary, any of the properties of Holdings or such Subsidiary, and to examine
the books of account of Holdings  or such  Subsidiary  and discuss the  affairs,
finances and accounts of Holdings or of such Subsidiary  with, and be advised as

                                       35

<PAGE>

to the same  by,  its and  their  officers,  all at such  reasonable  times  and
intervals and to such reasonable extent as the Administrative Agent or such Bank
may request.

                  7.03 Maintenance of Property,  Insurance. (a) Schedule II sets
forth a true and complete  listing of all  insurance  maintained by Holdings and
each of its Subsidiaries as of the Initial  Borrowing Date, which Schedule shall
be delivered on or prior to the Initial  Borrowing Date and shall be in form and
substance  satisfactory  to the  Administrative  Agent and the  Required  Banks.
Holdings will, and will cause each of its Subsidiaries to, (i) keep all material
property  (including  Leaseholds)  useful and  necessary in its business in good
working order and condition  (ordinary  wear and tear  excepted),  (ii) maintain
with financially sound and reputable  insurance  companies  insurance on all its
property  in at least  such  amounts  and  against  at least  such  risks as are
described on Schedule II, and (iii) furnish to each Bank, upon written  request,
full  information  as to the  insurance  carried.  Within  120  days  after  the
Effective  Date, the Borrower will obtain and thereafter  will maintain and keep
in full force and effect key-man life insurance on the life of Robert Solomon in
the amount of  $5,000,000.  The  Collateral  Agent  shall be the loss payee with
respect to such  insurance.  The provisions of this Section 7.03 shall be deemed
to be  supplemental  to, but not  duplicative  of, the  provisions of any of the
Security Documents that require the maintenance of insurance.

                  (b)  Holdings  will at all times keep,  and will cause each of
its  Subsidiaries  (other than  Residentclub)  to keep, its property  insured in
favor of the Collateral Agent, and all policies (including mortgage policies) or
certificates  (or certified  copies thereof) with respect to such insurance (and
any other  insurance  maintained  by  Holdings or its  Subsidiaries  (other than
employee  benefit  insurance))  (i) shall be endorsed to the Collateral  Agent's
satisfaction  for  the  benefit  of the  Collateral  Agent  (including,  without
limitation,  by  naming  the  Collateral  Agent as loss  payee  and  naming  the
Collateral  Agent,  the  Administrative  Agent  and each  Bank as an  additional
insured)  with  respect  to  Collateral,  (ii) shall  state that such  insurance
policies shall not be cancelled or revised without 30 days' prior written notice
thereof by the respective  insurer to the Collateral Agent,  (iii) shall provide
that the respective insurers irrevocably waive any and all rights of subrogation
with  respect  to  the  Collateral   Agent,  (iv)  shall  contain  the  standard
noncontributory  mortgagee  clause  endorsement in favor of the Collateral Agent
with respect to hazard  insurance  coverage,  (v) shall  provide that any losses
shall be payable  notwithstanding  (A) any act or neglect of  Holdings or any of
its Subsidiaries,  (B) the occupation or use of the properties for purposes more
hazardous  than those  permitted by the terms of the  respective  policy if such
coverage is obtainable at commercially  reasonable rates and is of the kind from
time to time  customarily  insured  against by Persons  owning or using  similar
property  and in such amounts as are  customary,  (C) any  foreclosure  or other
proceeding  relating to the insured properties or (D) any change in the title to
or ownership or possession of the insured properties and (vi) shall be deposited
with the Collateral Agent. If Holdings or any of its Subsidiaries  shall fail to
maintain  insurance in accordance  with this Section 7.03, or if Holdings or any
of  its  Subsidiaries  shall  fail  to  endorse  and  deposit  all  policies  or
certificates  with respect  thereto,  the Collateral  Agent shall have the right
(but shall be under no obligation) to procure such insurance and Holdings agrees
to reimburse the  Collateral  Agent for all costs and expenses of procuring such
insurance.

                  7.04  Corporate  Franchises.  Holdings will do, and will cause
each of its  Subsidiaries  to do or cause to be done,  all things  necessary  to
preserve  and keep in full  force  and  effect  its  existence  and its  rights,
franchises,   licenses,  permits,   trademarks,   service  marks,  trade  names,

                                       36


<PAGE>

copyrights and patents necessary for the operation of its respective businesses;
provided,  however,  that  nothing  in  this  Section  7.04  shall  prevent  the
transactions  permitted  by Section  8.02 or the  withdrawal  by Holdings or any
Subsidiary  of Holdings of its  qualification  as a foreign  corporation  in any
jurisdiction  where such  withdrawal  could not reasonably be expected to have a
material adverse effect on the performance,  business, assets, nature of assets,
liabilities,  properties,  operations,  condition  (financial  or  otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole.

                  7.05  Compliance with Statutes,  etc.  Holdings will, and will
cause  each  of its  Subsidiaries  to,  comply  with  all  applicable  statutes,
regulations  and orders  of, and all  applicable  restrictions  imposed  by, all
governmental  bodies,  domestic  or  foreign,  in respect of the  conduct of its
business and the ownership of its property except such  noncompliances  as could
not, individually or in the aggregate, reasonably be expected to have a material
adverse  effect  on  the  performance,   business,  assets,  nature  of  assets,
liabilities,  operations,  properties,  condition  (financial  or  otherwise) or
prospects of or Holdings and its Subsidiaries taken as a whole.

                  7.06  Compliance  with  Environmental  Laws. (a) Holdings will
comply,  and will cause each of its  Subsidiaries  to  comply,  in all  material
respects with all Environmental  Laws applicable to ownership or use of the Real
Property,  will  promptly  pay or cause  Holdings to pay all costs and  expenses
incurred  in such  compliance,  and will  keep or cause to be kept all such Real
Properties  free and clear of any Liens imposed  pursuant to such  Environmental
Laws. None of Holdings nor any Subsidiary of Holdings will generate, use, treat,
store, release or dispose of, or permit the generation, use, treatment, storage,
Release or disposal of Hazardous Materials on any Real Property, or transport or
permit the  transportation of Hazardous  Materials to or from any Real Property,
other than in compliance with applicable Environmental Law.

                  (b) At the reasonable request of the  Administrative  Agent or
the  Required  Banks at any time and from time to time during the  existence  of
this  Agreement:  (i) if an Event of Default exists under this  Agreement,  (ii)
upon the reasonable belief by the  Administrative  Agent that Holdings or any of
its Subsidiaries has breached any representation or covenant herein with respect
to any  environmental  matters  and such breach is  continuing,  or (iii) in the
event notice is provided under Section 7.01(i) herein, Holdings will provide, at
its sole cost and  expense  (or will cause  Holdings to provide at its sole cost
and  expense),  an  environmental  site  assessment  report  reasonable in scope
concerning  any Real  Property of Holdings or its  Subsidiaries,  prepared by an
environmental  consulting  firm  approved  by the  Administrative  Agent and the
Required Banks,  indicating the presence or Release of Hazardous Materials on or
from any of the Real Property and the potential  cost of any removal or remedial
action in connection  with any  Hazardous  Materials on such Real  Property.  If
Holdings fails to provide the same after thirty days' notice, the Administrative
Agent may order the same,  and  Holdings  shall  grant and hereby  grants to the
Administrative Agent and the Banks and their agents access to such Real Property
and specifically  grants the  Administrative  Agent and the Banks an irrevocable
non-exclusive license to undertake such an assessment all at Holdings' expense.

                  7.07 ERISA. As soon as possible and, in any event,  within ten
(10) days after  Holdings,  any  Subsidiary  of Holdings or any ERISA  Affiliate
knows or has reason to know of the occurrence of any of the following,  Holdings
will deliver to each of the Banks a certificate  signed on behalf of Holdings by

                                       37

<PAGE>

the chief  financial  officer of Holdings  setting  forth the full details as to
such occurrence and the action,  if any, that Holdings,  such Subsidiary or such
ERISA  Affiliate  is required or  proposes  to take,  together  with any notices
required or proposed to be given to or filed by Holdings,  such Subsidiary,  the
Plan  administrator  or such  ERISA  Affiliate  to or with the PBGC or any other
government  agency,  or a Plan participant and any notices received by Holdings,
such Subsidiary or ERISA Affiliate from the PBGC or any other government agency,
or a Plan participant with respect thereto: that a Reportable Event has occurred
(except to the extent that  Holdings  has  previously  delivered  to the Banks a
certificate  and notices  (if any)  concerning  such event  pursuant to the next
clause hereof);  that a contributing  sponsor (as defined in Section 4001(a)(13)
of ERISA)  of a Plan  subject  to Title IV of ERISA is  subject  to the  advance
reporting  requirement of PBGC  Regulation  Section  4043.61  (without regard to
subparagraph  (b)(1)  thereof),  and an event  described in subsection .62, .63,
 .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur  with  respect  to such Plan  within  the  following  30 days;  that an
accumulated funding  deficiency,  with the meaning of Section 412 of the Code or
Section 302 of ERISA,  has been  incurred or an  application  may be or has been
made for a waiver or modification of the minimum funding standard (including any
required installment  payments) or an extension of any amortization period under
Section 412 of the Code or Section  303 or 304 of ERISA with  respect to a Plan;
that any  contribution  required to be made with  respect to a Plan has not been
timely made; that a Plan has been or may be terminated, reorganized, partitioned
or  declared  insolvent  under  Title IV of ERISA;  that a Plan has an  Unfunded
Current Liability;  that proceedings may be or have been instituted to terminate
or appoint a trustee to administer a Plan which is subject to Title IV of ERISA;
that a  proceeding  has been  instituted  pursuant  to  Section  515 of ERISA to
collect a delinquent  contribution to a Plan; that the Borrower,  any Subsidiary
of  the  Borrower  or any  ERISA  Affiliate  will  or may  incur  any  liability
(including any indirect, contingent, or secondary liability) to or on account of
the  termination of or withdrawal  from a Plan under Section 4062,  4063,  4064,
4069,  4201,  4204 or 4212 of  ERISA or with  respect  to a Plan  under  Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(1) of
ERISA or with  respect to a group  health plan (as defined in Section  607(1) of
ERISA or Section  4980B(g)(2)  of the Code) under  Section 4980B of the Code; or
that  Holdings or any  Subsidiary  of Holdings may incur any material  liability
pursuant to any  employee  welfare  benefit  plan (as defined in Section 3(1) of
ERISA) that  provides  benefits to retired  employees or other former  employees
(other  than as required  by Section  601 of ERISA) or any Plan.  Holdings  will
deliver to the  Administrative  Agent copies of any records,  documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. Holdings will also deliver to the Administrative Agent
a  complete  copy  of the  annual  report  (on  Internal  Revenue  Service  Form
5500-series)  of each Plan  (including,  to the  extent  required,  the  related
financial and actuarial statements and opinions and other supporting statements,
certificates,  schedules and information) required to be filed with the Internal
Revenue  Service.  In addition to any  certificates or notices  delivered to the
Banks  pursuant to the first sentence  hereof,  copies of annual reports and any
records,  documents or other information required to be furnished to the PBGC or
any other government  agency and any material notices received by Holdings,  any
Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan, shall be
delivered to the Administrative Agent no later than ten (10) days after the date
such  annual  report has been filed with the  Internal  Revenue  Service or such

                                       38

<PAGE>

records,  documents  and/or  information  has been  furnished to the PBGC or any
other  government  agency or such  notice has been  received  by  Holdings,  the
Subsidiary or the ERISA Affiliate, as applicable.

                  7.08 End of Fiscal Years; Fiscal Quarters. Holdings will cause
its, and will cause each of its  Subsidiaries',  fiscal years to end on December
31 and each of its, and each of its  Subsidiaries',  first three fiscal quarters
to end on March 31, June 30 and September 30.

                  7.09 Performance of Obligations. Holdings will, and will cause
each of its Subsidiaries  to, perform all of its obligations  under the terms of
each mortgage,  indenture, security agreement and other debt instrument by which
it is bound, except such  non-performances as could not,  individually or in the
aggregate,  reasonably  be  expected  to have a material  adverse  effect on the
performance,  business,  assets,  nature  of  assets,  liabilities,  operations,
properties,  condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries taken as a whole.

                  7.10 Payment of Taxes.  Holdings will pay and  discharge,  and
will cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and  governmental  charges  or  levies  imposed  upon it or upon its  income  or
profits,  or upon any  properties  belonging  to it,  prior to the date on which
penalties  would  otherwise  attach  thereto,  and all lawful claims  which,  if
unpaid,  might become a Lien or charge upon any properties of Holdings or any of
its  Subsidiaries  not otherwise  permitted  under  Section 9.01;  provided that
neither Holdings nor any of its  Subsidiaries  shall be required to pay any such
tax,  assessment,  charge,  levy or claim which is being contested in good faith
and by proper  proceedings if it has maintained  adequate  reserves with respect
thereto in accordance with generally accepted accounting principles.

                  7.11 Interest Rate  Protection.  The Borrower shall,  upon the
Conversion Date enter into arrangements  acceptable to the Administrative  Agent
establishing a maximum interest rate acceptable to the  Administrative  Agent on
the  principal  amount  of  loans  equal  to 50% of  the  aggregate  outstanding
principal  amount of Loans on the  Conversion  Date (after  giving effect to all
Loans  incurred  on such  date)  for a  period  of at  least 3 years  after  the
Conversion Date.

                  7.12  Use of Proceeds. All proceeds of the Loans shall be used
 as provided in Section 6.08.

                  7.13 UCC  Searches.  On or after  the 60th day  following  the
Initial  Borrowing Date at the  Administrative  Agent's request,  Holdings shall
promptly deliver to the  Administrative  Agent (at Holdings' own cost) copies of
Request  for  Information  or Copies  (UCC-11),  or  equivalent  reports for the
purpose of verifying that all financing  statements necessary or, in the opinion
of the Collateral Agent desirable,  to perfect the security interests  purported
to be created by the Security  Agreement  shall have been properly  recorded and
filed.

                  7.14  Intellectual  Property  Rights.  Holdings will, and will
cause  each of its  Subsidiaries  to,  maintain  in full  force and  effect  all
Intellectual  Property  rights  necessary  or  appropriate  to the  business  of
Holdings or any  Subsidiary of Holdings and take no action  (including,  without
limitation,  the licensing of Intellectual Property), or fail to take an action,
as the case may be, in connection with such  Intellectual  Property rights which

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could  reasonably  be  expected  to result in a material  adverse  effect on the
performance,  business,  assets,  nature  of  assets,  liabilities,  properties,
operations,  condition (financial or otherwise) or prospects of Holdings and its
Subsidiaries  taken as a  whole.  Holdings  will,  and  will  cause  each of its
Subsidiaries  to,  diligently   prosecute  all  pending  applications  filed  in
connection with seeking or seeking to perfect the  Intellectual  Property rights
and  take  all  other  reasonable  actions  necessary  for  the  protection  and
maintenance of the Intellectual  Property rights necessary or appropriate to the
business of Holdings or any  Subsidiary  of Holdings at all times from and after
the Initial  Borrowing Date other than any such actions the failure of which, in
the  aggregate,  could not  reasonably  be expected  to have a material  adverse
effect on the  performance,  business,  assets,  nature of assets,  liabilities,
operations,  properties,  condition  (financial  or  otherwise)  or prospects of
Holdings and its Subsidiaries taken as a whole.

                  7.15  Year  2000  Reporting.  The  Borrower  ensures  that any
reprogramming  required to permit the proper  functioning,  in and following the
year 2000, of the Borrower's or any of its  Subsidiaries'  (i) computer  systems
and  (ii)  equipment  containing  embedded  microchips  (including  systems  and
equipment supplied by others or with which the Borrower's systems interface) and
the testing of all such  systems and  equipment,  as so  reprogrammed,  has been
completed,  except  insofar  as the  failure  to do so will not have a  material
adverse  effect  on  the  performance,   business,  assets,  nature  of  assets,
liabilities,  operations,  properties,  condition  (financial  or  otherwise) or
prospects  of the  Borrower  and its  Subsidiaries  taken  as a  whole,  and the
Borrower  will  notify  the  Administrative  Agent  and any Bank  promptly  upon
detecting  any material  failure to achieve  year 2000  computer  readiness.  In
addition,  the Borrower will provide the Administrative  Agent and any Bank with
such  information  about its year 2000 computer  readiness  (including,  without
limitation, information as to contingency plans, budgets and testing results) as
the Administrative Agent or such Bank shall reasonably request.

                  7.16   Registry.    The   Borrower   hereby   designates   the
Administrative  Agent to serve as the Borrower's  agent,  solely for purposes of
this Section  7.16,  to maintain a register  (the  "Register")  on which it will
record the Commitments from time to time of each of the Banks, the Loans made by
each of the Banks and each  repayment in respect of the principal  amount of the
Loans of each Bank.  Failure to make any such recordation,  or any error in such
recordation  shall not  affect  the  Borrower's  obligations  in respect of such
Loans.  With respect to any Bank,  the transfer of the  Commitments of such Bank
and the rights to the  principal  of, and interest on, any Loan made pursuant to
such  Commitments  shall not be effective until such transfer is recorded on the
Register  maintained  by the  Administrative  Agent with respect to ownership of
such  Commitments  and Loans and prior to such  recordation all amounts owing to
the transferor with respect to such  Commitments and Loans shall remain owing to
the transferor.  The registration of an assignment or transfer of all or part of
any Commitments and Loans shall be recorded by the  Administrative  Agent on the
Register  only upon the  acceptance  by the  Administrative  Agent of a properly
executed and delivered  assignment and assumption  agreement pursuant to Section
13.04(b).  Coincident  with the delivery of such an  assignment  and  assumption
agreement  to the  Administrative  Agent  for  acceptance  and  registration  of
assignment  or  transfer  of all or  part of a Loan,  or as soon  thereafter  as
practicable,   the  assigning  or  transferor  Bank  shall  surrender  the  Note
evidencing  such Loan, and thereupon one or more new Notes in the same aggregate
principal  amount shall be issued to the assigning or transferor Bank and/or the
new Bank.  The Borrower  agrees to indemnify the  Administrative  Agent from and

                                       40

<PAGE>

against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on,  asserted  against or  incurred  by the  Administrative
Agent in performing its duties under this Section 7.16.

                  7.17 Further Actions. (a) Each Credit Party shall grant to the
Collateral Agent, for the benefit of the Secured Creditors,  a security interest
in any Real  Property  owned or  leased by any such  Credit  Party and any other
assets  (exclusive  of vehicles)  of such Credit Party not already  subject to a
Mortgage or other Security  Document upon the acquisition  thereof.  Each Credit
Party  shall  take all  actions  requested  by the  Administrative  Agent or the
Required Banks (including,  without limitation, the execution of UCC-1 Financing
Statements,  obtaining  of  mortgage  policies,  title  surveys  and real estate
appraisals  satisfying the  requirements  of all applicable  laws) in connection
with the granting and perfection of such security  interests.  Without  limiting
the foregoing,  each Credit Party specifically  agrees to provide the Collateral
Agent with written notice advising the Collateral  Agent that a Credit Party has
entered into a material Leasehold.  Such notice shall be delivered in the manner
set forth in Section  13.03 of this  Agreement,  and shall be  delivered  within
three (3) Business  Days of the  execution of the Leasehold by the Credit Party.
The notice shall include a full and complete copy of the instrument creating the
Leasehold,   together  with  all  associated   documents   (including,   without
limitation,   a  copy  of  the  underlying  lease  for  the  real  property,  if
applicable),  and a legal  description  of the Leasehold  adequate to enable the
Collateral  Agent to effectively file a UCC-1 Financing  Statement  covering the
fixtures, equipment and other Collateral located on or affixed to the Leasehold.

                  (b) The security  interests required to be granted pursuant to
clause (a) above  shall be granted  pursuant  to  mortgages,  deeds of trust and
security  agreements,  in each case  satisfactory  in form and  substance to the
Administrative  Agent and the  Required  Banks,  which  mortgages  and  security
agreements shall create valid and enforceable perfected security interests prior
to the  rights  of all  third  Persons  and  subject  to no other  Liens  except
Permitted  Liens.  The  mortgages  and other  instruments  related  thereto  and
security  agreements  shall be duly recorded or filed in such manner and in such
places and at such times as are required by law to establish,  perfect, preserve
and protect the Liens,  in favor of the Collateral  Agent for the benefit of the
Secured  Creditors,  required to be granted  pursuant to such  documents and all
taxes,  fees and other charges payable in connection  therewith shall be paid in
full  by the  Borrower.  At  the  time  of the  execution  and  delivery  of the
additional documents, the Borrower shall cause to be delivered to the Collateral
Agent such opinions of counsel,  mortgage policies,  title surveys,  real estate
appraisals,  certificates  of  title  and  other  related  documents  as  may be
reasonably requested by the Administrative Agent or the Required Banks to assure
themselves that this Section 7.17 has been complied with.

                  7.18  Concentration  Account.  On  or  prior  to  the  Initial
Borrowing Date,  Holdings shall,  and shall have caused each of its Subsidiaries
(other than  Residentclub)  to, have duly  authorized,  executed and delivered a
Concentration  Account Consent Letter in such form as approved by the Collateral
Agent (each as modified, amended or supplemented from time to time in accordance
with the terms thereof and hereof,  a  "Concentration  Account Consent  Letter")
with the Collateral Agent and the Concentration Account Bank, acknowledging that
the Concentration Account listed on a notice sent to the Collateral Agent at the
time of creation of such account maintained at the Concentration Account Bank is

                                       41

<PAGE>


under the exclusive  dominion and control of the  Collateral  Agent and that all
moneys, instruments and other securities deposited in such Concentration Account
are to be  held  by the  Concentration  Account  Bank  for  the  benefit  of the
Collateral  Agent  subject to the right of the account  parties to utilize  such
deposited amounts in accordance with the  Concentration  Account Consent Letter,
which, in any event,  shall permit such utilization at all times when there does
not exist a Default.  Each Credit Party represents and warrants that (i) it does
not now maintain,  and will not in the future  maintain,  any other bank account
with any  bank  other  than  the  applicable  Concentration  Account;  provided,
however,  that each such Credit Party shall be  permitted to establish  new bank
accounts  pursuant to the terms of the Security  Agreement so long as in all the
bank accounts of the Credit Parties other than the  Concentration  Account there
is not an amount greater than $100,000 in the aggregate at the end of any day.

                 7.19. Asset Transfer. On or prior  to  the  Initial   Borrowing
Date Holdings shall have transferred all of its assets (other than capital stock
of the Borrower) to the Borrower as a capital contribution.

                  7.20  Landlord  Agreements;  UCC Fixture Filings.  Holdings
shall use its best efforts to furnish to the  Collateral  Agent,  on or prior to
the Initial Borrowing Date, the following:

                  (a)  agreements  from  landlords  of Real  Property  leased by
         Holdings or any of its Subsidiaries acknowledging,  among other things,
         the Collateral Agent's security interests in property maintained on the
         leased premises and waiving its own security interest,  if any, thereon
         and the Collateral  Agent's authority to obtain access to such property
         and covering such other matters as the Collateral  Agent may reasonably
         request; and

                  (b) fully executed  UCC-1  Financing  Statements,  in form and
         substance  satisfactory  to the  Required  Banks  (as  may be  amended,
         modified or  supplemented  from time to time)  covering all  Collateral
         which is or could be determined to be a fixture,  and owned by Holdings
         or  any of its  Subsidiaries,  which  UCC-1  Financing  Statements  are
         necessary or desirable to perfect a first lien security interest in and
         to all such Collateral in favor of the Collateral Agent for the benefit
         of the Secured Creditors.  The UCC-1 Financing  Statements described in
         the preceding  sentence shall be recorded in the real property  records
         of the county in which such fixtures (or property which could be deemed
         to be a fixture) are located.

                  Section  8.  Negative  Covenants.  Each  of  Holdings  and the
Borrower  hereby  covenants  that on and after the Effective  Date and until the
Total Commitment has terminated and the Loans and Notes, together with interest,
Fees and all other Obligations  incurred  hereunder and thereunder,  are paid in
full:

                  8.01 Liens.  Holdings will not, and will not permit any of its
Subsidiaries to, create,  incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal,  tangible or intangible) of
Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or
sell any such  property  or assets  subject to an  understanding  or  agreement,
contingent or otherwise,  to repurchase such property or assets (including sales
of accounts receivable with recourse to Holdings or any of its Subsidiaries), or

                                       42

<PAGE>

assign  any  right to  receive  income  or permit  the  filing of any  financing
statement  under the UCC or any other  similar  notice of Lien under any similar
recording or notice  statute;  provided that the provisions of this Section 8.01
shall not prevent Holdings or any of its Subsidiaries from creating,  incurring,
assuming or permitting the existence of the following (liens described below are
herein referred to as "Permitted Liens"):

                  (i)  inchoate  Liens with  respect to  Holdings  or any of its
         Subsidiaries  for taxes not yet due or Liens for taxes being  contested
         in  good  faith  and by  appropriate  proceedings  for  which  adequate
         reserves have been  established in accordance  with generally  accepted
         accounting principles;

                  (ii) Liens in respect of property or assets of the Borrower or
         any of its  Subsidiaries  imposed by law,  which were  incurred  in the
         ordinary course of business and do not secure Indebtedness for borrowed
         money, such as carriers', warehousemen's, materialmen's, mechanics' and
         landlords' liens and other similar Liens arising in the ordinary course
         of business,  and (x) which do not in the aggregate  materially detract
         from the value of  Holdings'  or any of its  Subsidiaries'  property or
         assets or  materially  impair the use thereof in the  operation  of the
         business  of  Holdings  or its  Subsidiaries  or (y)  which  are  being
         contested in good faith by appropriate  proceedings,  which proceedings
         have the effect of preventing the forfeiture or sale of the property or
         assets subject to any such Lien;

                  (iii) Liens of the Borrower or its  Subsidiaries  in existence
         on the  Initial  Borrowing  Date  which are  listed,  and the  property
         subject thereto  described,  on Schedule IX (which Schedule on or prior
         to the  Initial  Borrowing  Date and  shall  be in form  and  substance
         satisfactory  to the  Administrative  Agent  and the  Required  Banks),
         together with any refinancing,  renewal or extension thereof,  provided
         that the outstanding  principal  balance of such  Indebtedness  secured
         thereby is not increased above the amount outstanding immediately prior
         to such  refinancing,  renewal or extension and the Liens do not extend
         to any additional assets;

                  (iv)     Liens created pursuant to the Security Documents;

                  (v) Liens on property  of the  Borrower  and its  Subsidiaries
         subject to, and securing  only,  Capitalized  Lease  Obligations to the
         extent such  Capitalized  Lease  Obligations  are  permitted by Section
         8.05(iii); provided that such Liens only serve to secure the payment of
         Indebtedness  arising under such  Capitalized  Lease Obligation and the
         Lien  encumbering  the  asset  giving  rise  to the  Capitalized  Lease
         Obligation  does not encumber any other asset of Holdings or any of its
         Subsidiaries;

                  (vi) Liens  (other than any Lien imposed by ERISA) on property
         of Holdings or any of its Subsidiaries incurred or deposits made in the
         ordinary   course  of  business  in   connection   with  (x)   workers'
         compensation, unemployment insurance and other types of social security
         or (y) to secure the  performance  of tenders,  statutory  obligations,
         surety and appeal bonds,  bids,  leases,  government  contracts,  trade
         contracts,  performance  and  return-of-money  bonds and other  similar

                                       43

<PAGE>


         obligations  (exclusive  of  obligations  for the  payment of  borrowed
         money);  provided that the aggregate amount of cash and the fair market
         value of the  property  encumbered  by Liens  described  in this clause
         (vi)(y) shall not exceed $100,000;

                  (vii) Liens placed upon  equipment  or  machinery  used in the
         ordinary  course  of  the  business  of  the  Borrower  or  any  of its
         Subsidiaries  prior to or within 60 days following the time of purchase
         thereof by the Borrower or any of its Subsidiaries and improvements and
         accretions  thereto  to secure  Indebtedness  incurred  to pay all or a
         portion of the purchase price thereof or any  Indebtedness  incurred to
         refinance such Indebtedness,  provided that (x) the aggregate principal
         amount of all  Indebtedness  secured by Liens  permitted by this clause
         (vii) does not exceed at any one time outstanding the amounts permitted
         pursuant to 8.05(iii)  with respect to all  machinery and equipment and
         (y) in all events,  the Lien  encumbering the equipment or machinery so
         acquired and improvements and accretions  thereto does not encumber any
         other asset of Holdings or any of its Subsidiaries;

                  (viii)  Liens  arising  from  precautionary   UCC-1  financing
         statement filings  regarding  operating leases entered into by Holdings
         or any of its Subsidiaries in the ordinary course of business;

                  (ix) inchoate Liens (where there has been no execution or levy
         and no  pledge  or  delivery  of  collateral)  arising  from and out of
         judgments  or decrees in  existence  at such time not  constituting  an
         Event of Default;

                  (x)  Liens  on  property  or  assets  acquired  pursuant  to a
         Permitted Acquisition,  or on property or assets of a Subsidiary of the
         Borrower in existence at the time such Subsidiary is acquired  pursuant
         to a Permitted Acquisition,  provided that (i) any Indebtedness that is
         secured by such Liens is permitted  to exist under  Section  8.05,  and
         (ii) such Liens are not  incurred in  contemplation  of such  Permitted
         Acquisition and do not attach to any other asset of the Borrower or any
         of its Subsidiaries;

                  (xi) easements, rights-of-way, restrictions, encroachments and
         other similar  charges or  encumbrances on the property of the Borrower
         or any of its  Subsidiaries  arising in the ordinary course of business
         and not materially  interfering with the conduct of the business of the
         Borrower or any such Subsidiary; and

                  (xii) Liens on assets of the  Borrower  securing  Indebtedness
         under Section  8.05(iii) so long as the fair market value of the assets
         thereby do not exceed the Indebtedness.

                  8.02 Consolidation,  Merger,  Purchase or Sale of Assets, etc.
Holdings  will not,  and will not permit any of its  Subsidiaries  to,  wind up,
liquidate  or dissolve  its affairs or enter into any  transaction  of merger or
consolidation,  or convey,  sell, lease or otherwise  dispose of (or agree to do
any of the  foregoing  at any future  time) all or any part of its  property  or
assets,  or enter  into  any  partnerships,  joint  ventures  or  sale-leaseback

                                       44

<PAGE>

transactions,  or purchase or  otherwise  acquire (in one or a series of related
transactions)  any part of the property or assets (other than purchases or other
acquisitions by Holdings or any of its Subsidiaries of inventory,  materials and
equipment in the ordinary course of business) of any Person, except that:

                  (i) Capital  Expenditures by  Holdings  and  its  Subsidiaries
         shall be permitted to the extent not in violation of Section 8.08;

                  (ii) so long as there  shall not  exist a Default  or Event of
         Default  (both before and after giving  effect to such sale),  Holdings
         and its Subsidiaries may sell assets so long as the aggregate amount of
         Net Sale Proceeds  from such sales  pursuant to this clause (ii) in any
         one fiscal year does not exceed $500,000;

                  (iii)  each of  Holdings  and its  Subsidiaries  may lease (as
         lessee) real or personal  property to the extent  permitted by Sections
         8.04 and 8.08;

                  (iv)   investments may be made to the extent permitted by
         Section 8.06;

                  (v)    each of the  Borrower and its  Subsidiaries  may make
         sales of inventory in the ordinary course of business;

                  (vi)     the Transaction shall be permitted as contemplated by
          the Documents;

                  (vii) Holdings may transfer all its assets (other than capital
         stock of the  Borrower),  including  without  limitation  those  assets
         Holdings acquired in the Firstlink Merger, to the Borrower;

                  (viii) so long as no Default or Event of Default  then  exists
         or would result  therefrom,  the Borrower may acquire all of the assets
         or the capital stock of any Person (any such  acquisition  permitted by
         this clause (viii), a "Permitted Acquisition"), provided, that (i) such
         Person  (or the  assets so  acquired)  was,  immediately  prior to such
         acquisition,  engaged (or used) primarily in the Permitted  Businesses,
         (ii) the aggregate amount of cash paid and Holdings Common Stock issued
         in connection with any one  acquisition  after the Effective Date shall
         not exceed $2.5 million and in  connection  with all such  acquisitions
         after the  Effective  Date shall not exceed  $10.0  million,  (iii) the
         Agent and the Required  Banks shall be  satisfied  in their  reasonable
         discretion that the proposed Permitted  Acquisition will not reasonably
         likely  result  in  materially  increased  liabilities  (contingent  or
         otherwise) of Holdings or any of its Subsidiaries  (including,  without
         limitation,    tax,   ERISA   or   environmental   liabilities,    (iv)
         recalculations  are  made  by  the  Borrower  of  compliance  with  the
         covenants  contained  in  Sections  8.08  through  8.13  inclusive  and
         compliance  with the Borrowing Base  requirements  of Section 1.01, for
         the Calculation Period (or as of the most recent month end, as the case
         may be) on a pro forma basis  (after  giving  effect to any  additional
         Indebtedness  in  connection  with the  Permitted  Acquisition  and the
         Consolidated  EBITDA of the  Person or  business,  division  or product
         being acquired for the Calculation  Period, such Consolidated EBITDA to
         be  calculated   and   verifiable   in  a  manner   acceptable  to  the
         Administrative  Agent, and such recalculations shall show that all such
         covenants  would have been complied  with  throughout  the  Calculation
         Period on such pro forma  basis,  and (v) the  Borrower  in good  faith

                                       45

<PAGE>

         believes,  based on calculations made by Holdings, on a pro forma basis
         (as if the Calculation  Period were the one-year  period  following the
         date of the  consummation of the respective  Permitted  Acquisition and
         applying  the  principles   contained  in  the  immediately   preceding
         parenthetical)  that the financial covenants contained in such Sections
         8.08 through 8.13, inclusive,  will continue to be met for the one year
         period  following  the  date  of the  consummation  of  the  respective
         Permitted Acquisition;

                  (ix)  Residentclub  may enter into any  transaction  otherwise
         prohibited by this Section  other than a  transaction  with Holdings or
         any other Subsidiary of Holdings; and

                  (x)  the Borrower may sell its equity interest in Residentclub
         or may agree to sale of the assets of Residentclub.

To the extent the Required  Banks waive the provisions of this Section 8.02 with
respect to the sale of any  Collateral  (to the extent  the  Required  Banks are
permitted to waive such  provisions in accordance  with Section  13.12),  or any
Collateral is sold as permitted by this Section 8.02, such  Collateral  shall be
sold free and clear of the Liens  created  by the  Security  Documents,  and the
Administrative  Agent  and  Collateral  Agent  shall be  authorized  to take any
actions deemed appropriate in order to effect the foregoing.

                  8.03  Dividends.  Holdings will not, nor will Holdings  permit
any of its  Subsidiaries  (other  than  Residentclub)  to,  declare  or pay  any
Dividends with respect to Holdings or any of its Subsidiaries,  except that: (i)
any  Subsidiary  of the  Borrower  may  pay  Dividends  to the  Borrower  or any
Wholly-Owned Subsidiary of the Borrower and (ii) so long as there shall exist no
Default or Event of Default (and after  giving  effect to such  Dividends  there
will exist no Default or Event of Default),  the Borrower may pay cash Dividends
to Holdings for the purpose of paying,  and all such  proceeds are promptly used
by Holdings to pay its franchise  taxes and other fees and expenses  required to
maintain its corporate existence.

                  8.04 Leases.  Holdings will not incur any expense  (including,
without  limitation,  any  property  taxes  paid as  additional  rent  or  lease
payments) under any agreement to rent or lease any real or personal property (or
any extension or renewal thereof) (excluding  Capitalized Lease Obligations) and
Holdings will not permit the aggregate expense  (including,  without limitation,
any  property  taxes paid as  additional  rent or lease  payments)  incurred  by
Holdings and its Subsidiaries  (other than Residentclub) on a consolidated basis
under any  agreement  to rent or lease  any real or  personal  property  (or any
extension or renewal  thereof)  (excluding  Capitalized  Lease  Obligations  and
excluding the Borrower's  headquarters lease to the extent the aggregate expense
with respect  thereto does not exceed the amounts  required under the lease with
respect thereto as in effect on the Effective Date) to exceed $200,000.

                  8.05  Indebtedness.  Holdings will not and will not permit any
of its Subsidiaries to, contract,  create,  incur, assume or suffer to exist any
Indebtedness, except:

                  (i)   Indebtedness incurred pursuant to this Agreement and the
         other Credit Documents;


                                       46


<PAGE>

                (ii)  Indebtedness of the Borrower or any of its  Subsidiaries
         under any Interest Rate Protection or Other Hedging  Agreement or under
         any similar  type of  agreement  to the extent such is entered  into to
         satisfy the requirements of Section 7.11;

                  (iii)  Indebtedness  of  the  Borrower  and  its  Subsidiaries
         evidenced by  Capitalized  Lease  Obligations  to the extent  permitted
         pursuant to Section 8.08 and Indebtedness secured by Liens permitted by
         Section  8.01(vii)  and other  Indebtedness  incurred  in the  ordinary
         course of business;  provided that the aggregate amount of Indebtedness
         evidenced by  Capitalized  Lease  Obligations  under all Capital Leases
         when  aggregated  with the  amount  of  Indebtedness  secured  by Liens
         permitted by Section 8.01(vii) and other  Indebtedness  incurred in the
         ordinary  course of business and  outstanding at any one time shall not
         exceed $200,000;

                  (iv)    Existing  Indebtedness  of the  Borrower or any of its
         Subsidiaries  listed on Schedule VII but no refinancing, renewal,
         extension or increases in the principal amount thereof; and

                  (v)     Indebtedness constituting intercompany loans to Resi-
         dentclub to the extent  permitted  by Section 8.06(x).

                  8.06 Advances,  Investments and Loans.  Holdings will not, and
will not permit any of its Subsidiaries  (other than  Residentclub) to, directly
or indirectly  lend money or credit or make advances to any Person,  or purchase
or acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any other Person, or purchase or own a futures
contract  or  otherwise  become  liable for the  purchase or sale of currency or
other commodities at a future date in the nature of a futures contract,  or hold
any cash or Cash Equivalents, except that the following shall be permitted:

                  (i) the  Borrower  and its  Subsidiaries  may acquire and hold
         receivables  owing  to any of  them,  if  created  or  acquired  in the
         ordinary course of business and payable or  dischargeable in accordance
         with customary terms;

                  (ii) Holdings and its  Subsidiaries  may acquire and hold cash
         and  Cash  Equivalents;  provided  that  (I)  all  such  cash  or  Cash
         Equivalents  shall  be  held by  Holdings  or  such  Subsidiary  in the
         Concentration Account in accordance with the terms of the Concentration
         Account Consent  Letter;  provided  further,  that at any time that any
         Revolving Loans are outstanding,  the aggregate amount of cash and Cash
         Equivalents  permitted to be held by the Holdings and its  Subsidiaries
         shall not  exceed  (exclusive  of amounts  held in the Cash  Collateral
         Account  pursuant to the Cash  Collateral  Agreement)  $100,000 for any
         period of three consecutive Business Days;

                  (iii) the Borrower  may enter into  interest  rate  protection
         agreements   to  the  extent  such  is  entered  into  to  satisfy  the
         requirements of Section 7.11;

                  (iv)  the  Borrower and  its  Subsidiaries  may  make  Capital
         Expenditures  to  the  extent permitted by Section 8.08;


                                       47


<PAGE>

                  (v)  the Transaction shall be permitted in accordance with the
         provisions of Section 4;

                  (vi) the Borrower and its Subsidiaries may endorse  negotiable
         instruments for collection in the ordinary course of business;

                  (vii) the  Borrower  and its  Subsidiaries  may make loans and
         advances  in the  ordinary  course  of  business  consistent  with past
         practices  to  their  respective  employees  for  moving,   travel  and
         emergency expenses and other similar expenses, so long as the aggregate
         principal  amount  thereof  at any  one  time  outstanding  (determined
         without  regard to any  write-downs  or  write-offs  of such  loans and
         advances) shall not exceed $100,000;

                  (viii)   Dividends may be paid to the extent permitted by
         Section 8.03;

                  (ix)   Transactions permitted in accordance with Section 8.02;
         and

                  (x)  The  Borrower  may  make  loans  to  Residentclub  in  an
         aggregate amount not to exceed $2,000,000; provided, that (i) such loan
         is evidenced by an intercompany note in form and substance satisfactory
         to the Agent and the Required Banks and (ii) such  intercompany note is
         pledged to the Collateral Agent for the benefit of the Banks.

                  8.07 Transactions with Affiliates. Holdings will not, and will
not permit any of its  Subsidiaries  to, enter into any transaction or series of
related  transactions,  whether or not in the ordinary course of business,  with
any Affiliate of Holdings or any of its Subsidiaries  unless such transaction or
series of  related  transactions  is in  writing  and on terms  that are no less
favorable  to Holdings or such  Subsidiary,  as the case may be, than those that
would be available in a comparable  transaction in arm's-length dealings with an
unrelated third party;  except that (i) Holdings and its Subsidiaries may effect
the  Transaction,  (ii)  loans and  advances  made in  accordance  with  Section
8.06(vii)  shall be permitted,  (iii) Holdings or the Borrower may pay customary
fees  to  non-officer   directors  of  Holdings;   and  (iv)  Holdings  and  its
Subsidiaries  may  enter  into the  Employment  Agreements.  In no event may any
management, closing or similar fees be paid or payable by Holdings or any of its
Subsidiaries to any Affiliate of Holdings or any of its  Subsidiaries  and in no
event may any transactions be effected between  Residentclub and Holdings or any
of other  Subsidiary of Holdings other than loans to  Residentclub  permitted in
accordance with Section 8.05.

                  8.08  Capital  Expenditures.  Holdings  will  not and will not
permit  any  of  its  Subsidiaries   (other  than  Residentclub)  to,  make  any
expenditure  for  fixed  or  capital  assets  (including,   without  limitation,
expenditures  for  maintenance  and  repairs  which  should  be  capitalized  in
accordance  with  generally   accepted   accounting   principles  and  including
Capitalized Lease Obligations  (collectively,  "Capital  Expenditures"),  except
that the Borrower and its Subsidiaries may make Capital  Expenditures so long as
for each fiscal quarter of Holdings the aggregate amount of Capital Expenditures
related to Cable  Passings  during such  quarter  divided by the amount of Cable
Passings newly  constructed  during such fiscal quarter and in place on the last
day of such  quarter  shall not be more than  $450 and the  aggregate  amount of
Capital  Expenditures  related to Telephony Passings during such quarter divided

                                       48

<PAGE>

by the amount of Telephony Passings newly constructed during such fiscal quarter
and in place on the  first day of such  quarter  shall not be more than $700 and
the aggregate amount of Capital Expenditures related to Internet Passings during
such  quarter on all  Internet  Passings  shall not exceed  $200,000  for fiscal
quarters  ending  in the year  2000 and shall not  exceed  $250,000  for  fiscal
quarters ending thereafter.

                  8.09 Fixed Charge Coverage Ratio. Holdings will not permit the
Fixed Charge Coverage Ratio for any period of four  consecutive  fiscal quarters
ending on the last day of a fiscal  quarter of  Holdings,  in each case taken as
one accounting  period,  to be less than the ratio set forth below opposite such
date:

Fiscal Quarter Ended                                    Ratio
--------------------                                    -----
March 31, 2003 and thereafter                         1.10:1.00


                  8.10 Interest Coverage.  (A) Interest Coverage Ratio. Holdings
will not permit  the ratio of its  Consolidated  EBITDA to its Net  Consolidated
Interest  Expense for any period of four  consecutive  fiscal quarters ending on
the  last  day of a  fiscal  quarter  of  Holdings,  in each  case  taken as one
accounting period, to be less than the ratio set forth opposite such date below:

Fiscal Quarter Ended                                    Ratio
--------------------                                    -----
March 31, 2002                                        1.00:1.00
June 30, 2002                                         1.25:1.00
September 30, 2002                                    1.25:1.00
December 31, 2002                                     1.75:1.00
March 31, 2003                                        2.25:1.00
June 30, 2003                                         2.25:1.00
September 30, 2003                                    2.75:1.00
December 31, 2003                                     2.75:1.00
March 31, 2004                                        3.25:1.00
June 30, 2004                                         3.25:1.00
September 30, 2004                                    3.25:1.00
December 31, 2004                                     3.25:1.00
March 31, 2005 and thereafter                         3.50:1.00


                  (B) Adjusted Interest  Coverage.  Holdings will not permit the
ratio of its  Adjusted  Consolidated  EBITDA  to its Net  Consolidated  Interest
Expense for any period of four  consecutive  fiscal  quarters ending on the last
day of a fiscal quarter of Holdings (or, if shorter, the period beginning on the
Initial  Borrowing  Date and  ending  on the last  day of a  fiscal  quarter  of
Holdings  ended after the  Initial  Borrowing  Date),  in each case taken as one
accounting period, to be less than the ratio set forth opposite such date below:

                                       49

<PAGE>


Fiscal Quarter Ended                                  Ratio
--------------------                                  -----
September 30, 2000                                  1.50:1.00
December 31, 2000                                   1.50:1.00
March 31, 2001                                      1.75:1.00
June 30, 2001                                       1.75:1.00
September 30, 2001                                  2.00:1.00
December 31, 2001                                   2.00:1.00
March 31, 2002                                      2.50:1.00
June 30, 2002                                       2.50:1.00
September 30, 2002                                  2.50:1.00
December 31, 2002                                   2.50:1.00


                  8.11  Leverage  Ratios.   (A)  Consolidated   Indebtedness  to
Annualized   Consolidated  EBITDA.   Holdings  will  not  permit  the  ratio  of
Consolidated  Indebtedness  as at the end of any fiscal  quarter ended on a date
set forth below to Annualized  Consolidated  EBITDA for such fiscal quarter,  in
each case taken as one accounting period, ending on a date set forth below to be
greater than the ratio set forth opposite such date below:

Fiscal Quarter Ended                                  Ratio
--------------------                                  -----
March 31, 2002                                     13.00:1.00
June 30, 2002                                       9.00:1.00
September 30, 2002                                  9.00:1.00
December 31, 2002                                   7.00:1.00
March 31, 2003                                      5.50:1.00
June 30, 2003                                       5.50:1.00
September 30, 2003                                  4.00:1.00
December 31, 2003                                   4.00:1.00
March 31, 2004                                      3.00:1.00
June 30, 2004                                       3.00:1.00
September 30, 2004                                  3.00:1.00
December 31, 2004                                   3.00:1.00
March 31, 2005 and thereafter                       2.00:1.00

                  (B)   Consolidated   Indebtedness   to   Annualized   Adjusted
Consolidated  EBITDA.  Holdings  will  not  permit  the  ratio  of  Consolidated
Indebtedness as at the end of any fiscal quarter ended on a date set forth below
to Annualized Adjusted Consolidated EBITDA for such fiscal quarter, in each case
taken as one accounting  period,  ending on a date set forth below to be greater
than the ratio set forth opposite such date:

                 Fiscal Quarter Ended                                 Ratio
                 --------------------                                 -----
                 March 31, 2001                                     8.00:1.00
                 June 30, 2001                                      7.50:1.00
                 September 30, 2001                                 6.50:1.00
                 December 31, 2001                                  6.50:1.00
                 March 31, 2002                                     5.00:1.00
                 June 30, 2002                                      5.00:1.00

                                       50

<PAGE>
                 September 30, 2002                                 4.00:1.00
                 December 31, 2002                                  4.00:1.00

                  8.12 Corporate Overhead  Expenditures.  (a) Holdings will not,
and will not permit any of its Subsidiaries  (other than  Residentclub) to, make
any  Corporate  Overhead   Expenditures,   except  that  the  Borrower  and  its
Subsidiaries may make Corporate  Overhead  Expenditures so long as the aggregate
amount thereof does not exceed $1,200,000 during any fiscal quarter.

                  8.13 Debt Base.  Holdings  will not  permit  the  Consolidated
Indebtedness  of Holdings  and its  Subsidiaries  (other than  Residentclub)  to
exceed the Debt Base.

                  8.14  Limitation  on  Voluntary   Payments  and  Modification;
Limitation on Modifications of Certificate of Incorporation, By-Laws and Certain
Other  Agreements;  etc.  Holdings  will  not,  and will not  permit  any of its
Subsidiaries (other than Residentclub) to:

                  (i) make (or give any notice in respect of) any  voluntary  or
         optional payment or prepayment on or redemption  (including pursuant to
         any  change  of  control   provision)  or  acquisition   for  value  of
         (including,  without limitation,  by way of depositing with the trustee
         with respect thereto money or securities  before due for the purpose of
         paying when due), any Existing Indebtedness;

                  (ii) amend or modify,  or permit the amendment or modification
         of, any provision of the Documents,  the Existing Indebtedness,  or any
         agreement  relating  to any of the  foregoing  in any manner that would
         adversely affect the Banks;

                  (iii) amend, modify or change its Certificate of Incorporation
         (including,  without  limitation,  by the filing or modification of any
         certificate of designation) or By-Laws or any agreement entered into by
         it, with respect to its capital stock,  or enter into any new agreement
         with  respect to its capital  stock in any manner that would  adversely
         affect the Banks;

                  (iv)  amend,  modify or change,  terminate,  or enter into any
         new Shareholders'  Agreement in  any manner that would adversely affect
         the Banks;

                  (v)  amend,  modify,  change  or  terminate  any  Tax  Sharing
         Agreement  or enter into any new Tax  Sharing  Agreement  in any manner
         that would adversely affect the Banks; or

                  (vi) amend, modify or change, or enter into any new Management
         Agreement,  Employee Benefit Plan or Employment Agreement except if the
         aggregate  cost to Holdings  and its  Subsidiaries  as a result of such
         amendments, modifications, changes to such plans and agreements and new
         plans  and  agreements  is not  reasonably  likely  to have a  material
         adverse effect on the performance,  business,  property, assets, nature
         of assets, liabilities, condition (financial or otherwise) or prospects
         of Holdings and its Subsidiaries taken as a whole.



                                       51

<PAGE>

                8.15  Limitation  on  Certain  Restrictions  on  Subsidiaries.
Holdings  will not,  and will not permit  any of its  Subsidiaries  (other  than
Residentclub) to, directly or indirectly, create or otherwise cause or suffer to
exist or become  effective any  encumbrance or restriction on the ability of any
Subsidiary of Holdings to (i) pay dividends or make any other  distributions  on
its  capital  stock to  Holdings  or any  Subsidiary  of  Holdings  or any other
interest or  participation in its profits owned by Holdings or any Subsidiary of
Holdings,  or pay any Indebtedness owed to Holdings or a Subsidiary of Holdings,
(ii) make loans or  advances to Holdings  or any of  Holdings'  Subsidiaries  or
(iii)  transfer any of its  properties  or assets to  Holdings,  except for such
encumbrances  or  restrictions  existing  on the  Effective  Date or under or by
reason of (w) applicable law, (x) this Agreement and the other Credit  Documents
and (y) customary provisions  restricting subletting or assignments of any lease
governing a leasehold  interest of Holdings or a  Subsidiary  of Holdings or (z)
the asset transfer  restrictions  imposed by Indebtedness  permitted pursuant to
Section 8.05(iii) hereof.

                  8.16  Limitation  on Issuance of Capital  Stock.  (a) Holdings
will not permit any of its Subsidiaries to issue any capital stock (including by
way of sales of  treasury  stock) or any options or  warrants  to  purchase,  or
securities  convertible  into,  capital  stock,  except  (i) for  transfers  and
replacements of then outstanding shares, (ii) for stock splits,  stock dividends
and similar  issuances  which do not  decrease the  percentage  ownership of any
person in any class of the  capital  stock of Holdings  or such  Subsidiary  and
(iii) issuances of capital stock by Residentclub.  Any stock issued as permitted
by this Section  8.16,  if owned by Holdings or any of  Holdings'  Subsidiaries,
shall be immediately  pledged as Collateral and delivered pursuant to the Pledge
Agreement.

                  (b)  Holdings  will not issue any  capital  stock  except  for
issuances of common stock the proceeds of which are applied in  accordance  with
Section 3.02.

                  8.17  Business.  Holdings will not conduct any business  other
than holding the stock of the  Borrower and Holdings  will not permit any of its
Subsidiaries  to engage  (directly or  indirectly)  in any business other than a
Permitted Business.

                  8.18  Limitation  on Creation of  Subsidiaries.  Holdings will
not,  and will not  permit  any of its  Subsidiaries  to,  establish,  create or
acquire any new  Subsidiary  except in connection  with a Permitted  Acquisition
effected in accordance with Section 8.02.

                  8.19  Concentration  Account.  Holdings will not, and will not
permit any of its  Subsidiaries  to, directly or indirectly,  open,  maintain or
otherwise  have any checking,  savings or other deposit  accounts at any bank or
other  financial  institution  where  cash  or  Cash  Equivalents  is or  may be
deposited or maintained with any Person, other than the Concentration Account.

                  Section 9. Events of Default.  Upon the  occurrence  of any of
the following specified events (each an "Event of Default"):

                  9.01  Payments.  The Borrower shall (i) default in the payment
when due of any  principal  of any Loan or any  Note or (ii)  default,  and such
default  shall  continue  unremedied  for three or more  Business  Days,  in the

                                       52

<PAGE>

payment when due of any  interest on any Loan or Note,  or any Fees or any other
amounts owing by it hereunder or thereunder; or

                  9.02  Representations,  etc. Any  representation,  warranty or
statement made by any Credit Party herein or in any other Credit  Document or in
any certificate delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or

                  9.03 Covenants.  Any Credit Party shall (i) default in the due
performance or observance by it of any term,  covenant or agreement contained in
Section  7.01(g)(i),  7.08,  7.11,  7.16,  7.17 or 8, or (ii) default in the due
performance  or  observance  by it of any  other  term,  covenant  or  agreement
contained in this  Agreement,  and such default shall continue  unremedied for a
period  of 30  days  after  written  notice  thereof  to  the  Borrower  by  the
Administrative Agent or any Bank; or

                  9.04 Default  Under Other  Agreements.  Holdings or any of its
Subsidiaries  shall (i) default in any payment of any  Indebtedness  (other than
the Indebtedness referred to in Section 9.01) beyond the period of grace (not to
exceed 10 days),  if any,  provided in the  instrument or agreement  under which
such Indebtedness was created,  (ii) default in the observance or performance of
any  agreement  or  condition  relating  to any  Indebtedness  (other  than  the
Indebtedness  referred to in Section  9.01) or  contained in any  instrument  or
agreement  evidencing,  securing or relating  thereto,  or any other event shall
occur or  condition  exist,  the  effect  of  which  default  or other  event or
condition is to cause,  or to permit the holder or holders of such  Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required),  any  Indebtedness  to become
due prior to its stated  maturity and such default  shall not have been cured or
waived,  or (iii) any Indebtedness  (other than the Indebtedness  referred to in
Section 9.01) of Holdings or any of its Subsidiaries shall be declared to be due
and  payable,  or  required to be prepaid  other than by a  regularly  scheduled
required  prepayment,  prior to the stated  maturity  thereof;  provided that it
shall not  constitute  an Event of Default  pursuant to this Section 9.04 unless
the aggregate  amount of all Indebtedness  referred to in the preceding  clauses
(i) through (iii) above exceeds $500,000 at any one time; or

                  9.05  Bankruptcy,  etc.  Holdings  or any of its  Subsidiaries
shall commence a voluntary case  concerning  itself under Title 11 of the United
States  Code  entitled  "Bankruptcy,"  as now or  hereafter  in  effect,  or any
successor  thereto (the "Bankruptcy  Code"); or an involuntary case is commenced
against Holdings or any of its Subsidiaries and the petition is not controverted
within  10 days,  or is not  dismissed  or  discharged,  within  60 days,  after
commencement of the case; or a custodian (as defined in the Bankruptcy  Code) is
appointed for, or takes charge of, all or  substantially  all of the property of
Holdings or any of its  Subsidiaries,  commences any other  proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency  or  liquidation  or similar law of any  jurisdiction  whether now or
hereafter in effect relating to Holdings or any of its Subsidiaries, or there is
commenced  against Holdings or any of its Subsidiaries any such proceeding which
remains  undismissed or undischarged for a period of 60 days, or Holdings or any

                                       53

<PAGE>

of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered;  or Holdings or
any of its Subsidiaries suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue  undischarged or unstayed
for a period of 60 days; or Holdings or any of its Subsidiaries  makes a general
assignment  for the benefit of creditors;  or any  corporate  action is taken by
Holdings  or any of its  Subsidiaries  for the purpose of  effecting  any of the
foregoing; or

                  9.06  ERISA.  (a) Any Plan shall fail to satisfy  the  minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such  standard or  extension  of
any  amortization  period is sought or granted  under Section 412 of the Code or
Section  303 or 304  of  ERISA,  a  Reportable  Event  shall  have  occurred,  a
contributing  sponsor  (as  defined in Section  4001(a)(13)  of ERISA) of a Plan
subject  to  Title  IV of  ERISA  shall  be  subject  to the  advance  reporting
requirement of PBGC Regulation  Section 4043.61  (without regard to subparagraph
(b)(1)  thereof) and an event  described in subsection  .62, .63, .64, .65, .66,
 .67 or .68 of PBGC  Regulation  4043 shall be reasonably  expected to occur with
respect to such Plan within the following 30 days,  any Plan which is subject to
Title IV of ERISA  shall  have had or is likely to have a trustee  appointed  to
administer  such Plan,  any Plan which is subject to Title IV of ERISA is, shall
have been or is likely to be  terminated  or to be the  subject  of  termination
proceedings  under ERISA, any Plan shall have an Unfunded Current  Liability,  a
contribution  required  to be made with  respect  to a Plan has not been  timely
made, Holdings or any Subsidiary of Holdings or any ERISA Affiliate has incurred
or is likely to incur any  liability to or on account of a Plan or under Section
409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section  401(a)(29),  4971 or 4975 of the Code or on account  of a group  health
plan (as defined in Section 607(1) of ERISA or Section  4980B(g)(2) of the Code)
under Section  4980B of the Code, or Holdings or any  Subsidiary of Holdings has
incurred  or is likely to incur  liabilities  pursuant  to one or more  employee
welfare  benefit  plans (as  defined  in  Section  3(1) of ERISA)  that  provide
benefits to retired  employees or other former employees (other than as required
by Section 601 of ERISA) or Plans,  a  "default,"  within the meaning of Section
4219(c)(5) of ERISA,  shall occur with respect to any Plan; any applicable  law,
rule or regulation is adopted, changed or interpreted,  or the interpretation or
administration  thereof is changed,  in each case after the date hereof,  by any
governmental  authority or agency or by any court (a "Change in Law"),  or, as a
result of a Change  in Law,  an event  occurs  following  a Change in Law,  with
respect to or otherwise affecting any Plan; (b) there shall result from any such
event or events the imposition of a lien,  the granting of a security  interest,
or a liability or a material  risk of incurring a liability;  and (c) such lien,
security interest or liability,  individually,  and/or in the aggregate,  in the
opinion of the Required Banks, has had, or could reasonably be expected to have,
a material adverse effect upon the business, operations, condition (financial or
otherwise) or prospects of Holdings or any Subsidiary of Holdings; or

                  9.07 Security  Documents.  At any time after the execution and
delivery thereof,  any of the Security Documents shall cease to be in full force
and effect or shall  cease to give the  Collateral  Agent for the benefit of the
Secured  Creditors  the Liens,  rights,  powers and  privileges  purported to be
created thereby (including,  without  limitation,  a perfected security interest
in,  and Lien on,  all of the  Collateral),  in favor of the  Collateral  Agent,
superior to and prior to the rights of all third Persons (except as permitted by
Section  6.11),  and subject to no other Liens  (except as  permitted by Section

                                       54

<PAGE>

6.11), or any Credit Party shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to any of the Security  Documents  and such default  shall  continue  beyond any
grace  period  specifically  applicable  thereto  pursuant  to the terms of such
Security Document; or

                  9.08 Guaranties.  At any time after the execution and delivery
thereof,  any Guaranty or any provision  thereof shall cease to be in full force
or effect as to any  Guarantor,  or any  Guarantor or any Person acting by or on
behalf of any Guarantor  shall deny or disaffirm  such  Guarantor's  obligations
under  the  respective  Guaranty,  or any  Guarantor  shall  default  in the due
performance  or observance of any term,  covenant or agreement on its part to be
performed or observed pursuant to the respective Guaranty and such default shall
continue beyond any grace period specifically applicable thereto; or

                  9.09  Judgments.  One or more  judgments  or decrees  shall be
entered against Holdings or any of its  Subsidiaries  involving in the aggregate
for Holdings and its  Subsidiaries  a liability  (not paid or fully covered by a
reputable  insurance  company) in excess of $500,000 for all such  judgments and
decrees  and any such  judgments  or decrees  shall not be  satisfied,  vacated,
discharged or stayed or bonded  pending  appeal for any period of 60 consecutive
days; or

                  9.10  Change in Control.  There shall be a Change in Control;
                        -----------------

then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing,  the Administrative Agent, upon the written request of
the Required Banks, shall by written notice to the Borrower,  take any or all of
the following  actions,  without prejudice to the rights of the Agents, any Bank
or the  holder of any Note to  enforce  its  claims  against  any  Credit  Party
(provided  that,  if an Event of Default  specified  in Section 9.05 shall occur
with  respect to the  Borrower,  the result which would occur upon the giving of
written  notice by the  Administrative  Agent to the  Borrower as  specified  in
clauses (i) and (ii) below shall occur  automatically  without the giving of any
such  notice):  (i)  declare  the Total  Commitment  terminated,  whereupon  all
Commitments  of each Bank shall  forthwith  terminate  immediately  and any Fees
shall  forthwith  become due and payable  without any other  notice of any kind;
(ii) declare the  principal of and any accrued  interest in respect of all Loans
and  the  Notes  and all  Obligations  owing  hereunder  and  thereunder  to be,
whereupon the same shall become,  forthwith due and payable without presentment,
demand,  protest or other notice of any kind,  all of which are hereby waived by
each  Credit  Party;  (iii)  exercise  any rights or  remedies  under any of the
Guaranties; and (iv) enforce, as Collateral Agent, all of the Liens and security
interests created pursuant to the Security Documents.

                  Section 10.  Definitions and Accounting Terms.
                               --------------------------------

                  10.01 Defined Terms. As used in this Agreement,  the following
terms shall have the following  meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):

                  "Acquisitions" shall mean (i) the U.S. Online Acquisition and
(ii) the GMAC Acquisition.

                                       55

<PAGE>
                  "Adjusted  Consolidated  EBITDA" for any period shall mean
Consolidated  EBITDA adjusted by adding thereto the amount of Corporate Overhead
Expenditures for such period.

                  "Adjusted  Consolidated  Net Income" for any period shall mean
Consolidated  Net Income for such  period  plus the sum of the amount of all net
non-cash charges  (including,  without limitation,  depreciation,  amortization,
deferred tax expense,  non-cash  interest  expense and other  non-cash  charges)
included in arriving at Consolidated  Net Income for such period less the sum of
the amount of all net non-cash gains or losses  (exclusive of items reflected in
Adjusted  Working  Capital) and gains or losses from sales of assets (other than
sales of inventory in the ordinary  course of business)  included in arriving at
Consolidated Net Income for such period.

                  "Adjusted  Working  Capital" shall mean  Consolidated  Current
Assets  (excluding  cash  and  Cash  Equivalents)  minus  Consolidated   Current
Liabilities.

                  "Administrative  Agent"  shall mean Paribas in its capacity as
Administrative Agent for the Banks hereunder, and shall include any successor to
the Administrative Agent appointed pursuant to Section 11.09.

                  "Affected Eurodollar Loans" shall have the meaning provided in
Section 3.02(B)(b).

                  "Affiliate" shall mean, with respect to any Person,  any other
Person  directly or  indirectly  controlling  (including  but not limited to all
directors  and  officers  of such  Person),  controlled  by, or under  direct or
indirect common control with, such Person; provided,  however, that for purposes
of Section 4.05 and 8.07, an Affiliate of Holdings shall include any Person that
directly or indirectly  (including  through  limited  partner or general partner
interests)  owns more than 5% of any class of the capital  stock of Holdings and
for all purposes of this Agreement,  neither the Agents,  the Collateral  Agent,
any Bank or any of their respective Affiliates, shall be considered an Affiliate
of Holdings or the Borrower or any of its Subsidiaries. A Person shall be deemed
to control another Person if such Person possesses,  directly or indirectly, the
power to direct or cause the  direction of the  management  and policies of such
other Person, whether through the ownership of voting securities, by contract or
otherwise.

                  "Affiliate  Contracts"  shall  have the  meaning  provided  in
Section 4.05.

                  "Agents"  shall  mean  each  of  the   Administrative   Agent,
Collateral Agent, Syndication Agent and Documentation Agent.

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

                  "Annualized Adjusted Consolidated EBITDA" for any period shall
mean Adjusted Consolidated EBITDA for such period times a fraction the numerator
of which is four and the  denominator  which is the number of fiscal quarters of
Holdings and its Subsidiaries in such period.

                                       56

<PAGE>


                  "Annualized  Consolidated  EBITDA"  for any period  shall mean
Consolidated  EBITDA for such period times a fraction the  numerator of which is
four and the denominator  which is the number of fiscal quarters of Holdings and
its Subsidiaries in such period.

                  "Applicable  Commitment Commission Percentage" shall mean, for
any day, a percentage  per annum equal to (i) if the  Unutilized  Commitment  on
such day is greater than or equal to 662/3% of the Total  Commitment  (as of the
Effective Date),  1.25%,  (ii) if the Unutilized  Commitment on such day is less
than 662/3% of the Total  Commitment (as of the Effective Date) and greater than
or equal to 331/3% of the Total  Commitment (as of the Effective  Date),  1.00%,
and (iii) if the  Unutilized  Commitment  on such day is less than 331/3% of the
Total Commitment (as of the Effective Date), 0.50% of the Unutilized Commitment.

                  "Applicable  Margin"  shall mean a percentage  per annum equal
to: (i) in the case of Loans which are maintained as Base Rate Loans, 2.75% less
the  applicable  Leverage  Reduction  Discount,  if any, and (ii) in the case of
Loans  which are  maintained  as  Eurodollar  Loans,  3.75% less the  applicable
Leverage Reduction Discount, if any.

                  "Bank"  shall  mean  each  financial   institution  listed  on
Schedule I, as well as any institution which becomes a "Bank" hereunder pursuant
to Section 13.04.

                  "Bank  Default" shall mean (i) the refusal (which has not been
retracted)  of a Bank to make  available  its portion of any Borrowing or (ii) a
Bank having  notified in writing the Borrower  and/or the  Administrative  Agent
that it does not  intend to comply  with its  obligations  under  Section  1.01,
including  in  either  case as a  result  of any  takeover  of such  Bank by any
regulatory authority or agency.

                  "Bankruptcy  Code" shall have the meaning  provided in Section
9.05.

                  "Base  Rate"  shall mean the higher of (i) 1/2 of 1% in excess
of the Federal Funds Rate and (ii) the Prime Lending Rate.

                  "Base Rate  Loan"  shall  mean any Loan  designated  or deemed
designated  as such by the  Borrower  at the time of the  incurrence  thereof or
conversion thereto.

                  "Borrower"  shall  have  the  meaning  provided  in the  first
paragraph of this Agreement.

                  "Borrowing"  shall mean the borrowing of one Type of Loan from
all the  Banks  having  Commitments  on a pro  rata  basis  on a given  date (or
resulting  from a conversion or  conversions on such date) having in the case of
Eurodollar  Loans the same  Interest  Period;  provided  that  Base  Rate  Loans
incurred  pursuant to Section  1.10(b) shall be  considered  part of the related
Borrowing of Eurodollar Loans.

                  "Borrowing  Base"  shall  mean,  as at any date on  which  the
amount  thereof  is being  determined,  an  amount  equal to the sum of (x) $675
multiplied by the number of Cable Television Subscribers and (y) $450 multiplied
by the number of Telephony  Subscribers,  less (z) any outstanding  Indebtedness
(exclusive of Loans).

                                       57

<PAGE>


                  "Borrowing Base  Certificate"  shall have the meaning provided
in Section 7.01(k).

                  "Borrowing  Base  Deficiency"  shall  mean,  at any time,  the
amount, if any, by which the aggregate  outstanding principal amount of Loans at
such time exceeds the Borrowing Base then in effect.

                  "Business  Day" shall mean (i) for all purposes  other than as
covered by clause (ii) below, any day except Saturday,  Sunday and any day which
shall be in New York City a legal holiday or a day on which banking institutions
are authorized or required by law or other  government  action to close and (ii)
with respect to all notices and  determinations in connection with, and payments
of principal and interest on,  Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Eurodollar market.

                  "Cable Passings" shall mean the number of dwelling units which
the Borrower and its Subsidiaries  (other than Residentclub) has the opportunity
to provide cable television  services to pursuant to the ROE Agreements  whether
or not all such dwelling units subscribe to such cable television services.

                  "Cable Television Debt" shall mean the following:

                       Period                                         Amount

         Closing Date - December 31, 2001                              $675
         January 1, 2002 - December 31, 2002                           $600
         January 1, 2003 - December 31, 2003                           $500
         Thereafter                                                    $400

                  "Cable  Television  Subscribers"  shall  mean  the  number  of
dwelling units which the Borrower and its Subsidiaries (other than Residentclub)
provide cable television service (as evidenced by a written agreement),  who are
not more than 60 days past due on the payment of their cable television bill.

                  "Calculation Period" shall mean the period of four consecutive
fiscal  quarters  (taken as one accounting  period) most recently ended prior to
the date of a Permitted Acquisition.

                  "Capital  Lease,"  as applied  to any  Person,  shall mean any
lease of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with generally accepted accounting principles, is accounted
for as a capital lease on the balance sheet of that Person.

                  "Capitalized  Lease  Obligations" of any Person shall mean all
rental  obligations  under  Capital  Leases,  in each case  taken at the  amount
thereof accounted for as Indebtedness in accordance with such principles.

                  "Cash   Equivalents"   shall  mean,  as  to  any  Person,  (i)
securities  issued or  directly  and fully  guaranteed  or insured by the United
States or any agency or  instrumentality  thereof  (provided that the full faith
and credit of the United States is pledged in support thereof) having maturities

                                       58

<PAGE>

of not more than six months from the date of acquisition, (ii) time deposits and
certificates  of deposit of any commercial  bank organized under the laws of the
United States, any State thereof or the District of Columbia having, or which is
the principal  banking  subsidiary of a bank holding company organized under the
laws of the United  States,  any State  thereof,  or the  District  of  Columbia
having,  capital,  surplus  and  undivided  profits  aggregating  in  excess  of
$200,000,000 and having a long-term unsecured debt rating of at least "A" or the
equivalent  thereof from  Standard & Poor's  Corporation  ("S&P") or "A2" or the
equivalent  thereof from  Moody's  Investors  Service,  Inc.  ("Moody's"),  with
maturities  of not more than six  months  from the date of  acquisition  by such
Person, (iii) repurchase obligations with a term of not more than seven days for
underlying  securities  of the types  described in clause (i) above entered into
with any bank meeting the  qualifications  specified in clause (ii) above,  (iv)
commercial paper issued by any Person incorporated in the United States rated at
least A-1 or the  equivalent  thereof  by S&P or at least P-1 or the  equivalent
thereof by Moody's and in each case  maturing not more than six months after the
date of  acquisition  by such  Person,  (v)  investments  in money  market funds
substantially  all of whose  assets are  comprised  of  securities  of the types
described in clauses (i) through (iv) above.

                  "CERCLA" shall mean the Comprehensive  Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. ss. 9601 et seq.

                  "Change in Control" means the occurrence of one or more of the
following:  (i)  Holdings  shall cease to directly  own 100% on a fully  diluted
basis of the outstanding capital stock of the Borrower,  (ii) the Borrower shall
cease  to own  100%  of  all of the  equity  of  its  Subsidiaries  (other  than
Residentclub),  (iii) any  Person,  entity or  "group"  (within  the  meaning of
Section  13(d) or 14(d) of the  Securities  Exchange  Act) shall  have  acquired
beneficial ownership of 51% or more of any outstanding class of capital stock of
Holdings,  having ordinary voting power in the election of directors or (iv) the
Board of Directors of Holdings shall cease to consist of Continuing Directors.

                  "Change  in Law" shall have the  meaning  provided  in Section
9.06.

                  "Claims" shall have the meaning  provided in the definition of
"Environmental Claims."

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
amended  from time to time,  and the  regulations  promulgated  and the  rulings
issued thereunder.  Section references to the Code are to the Code, as in effect
at the date of this  Agreement,  and to any  subsequent  provision  of the Code,
amendatory thereof, supplemental thereto or substituted therefor.

                  "Collateral"   shall  mean  all  property   (whether  real  or
personal)  with  respect to which any security  interests  have been granted (or
purport to be granted)  pursuant to any Security  Document,  including,  without
limitation,  all Pledge Agreement Collateral,  all Security Agreement Collateral
and all cash and Cash  Equivalents  delivered  as  collateral  pursuant  to this
Agreement or any other Credit Document.

                                       59

<PAGE>


                  "Collateral Agent" shall mean the Administrative  Agent acting
as  collateral  agent  for  the  Secured  Creditors  pursuant  to  the  Security
Documents.

                  "Collective  Bargaining  Agreements"  shall  have the  meaning
provided in Section 4.05.

                  "Commitment"  shall mean,  for each Bank, the amount set forth
opposite  such  Bank's  name on  Schedule  I hereto  directly  below the  column
entitled  "Commitment,"  as same may be (x) reduced or  terminated  from time to
time pursuant to Section 2.02,  2.03, 3.02 and/or 9 or (y) adjusted from time to
time as a result of assignments to or from such Bank pursuant to Section 1.12 or
13.04.

                  "Commitment  Commission"  shall have the  meaning  provided in
Section 2.01(a).

                  "Concentration  Account"  shall mean a separate  account which
shall be established and maintained with the Concentration  Account Bank for the
benefit of the Secured Creditors by Holdings and each of its Subsidiaries (other
than  Residentclub)  and in which the Collateral  Agent has a security  interest
pursuant to the Concentration Account Consent Letter.

                  "Concentration Account Bank" shall mean Norwest Bank Texas, NA
or such other bank that may become a  Concentration  Account Bank in  accordance
with the provisions of the Security Agreement.

                  "Concentration  Account Consent Letter" shall have the meaning
provided in Section 7.18.

                  "Consolidated  Current  Assets"  shall  mean the  consolidated
current assets of the Holdings and its Subsidiaries (other than Residentclub).

                  "Consolidated Current Liabilities" shall mean the consolidated
current  liabilities of Holdings and its Subsidiaries (other than Residentclub),
but excluding  the current  portion of any  long-term  Indebtedness  which would
otherwise be included therein.

                  "Consolidated   EBIT"   shall  mean,   for  any  period,   the
Consolidated  Net Income before interest income,  Consolidated  Interest Expense
and provision for taxes and without giving effect to any extraordinary  gains or
losses or gains or losses from sales of assets (other than inventory sold in the
ordinary course of business).

                  "Consolidated  EBITDA" for any period shall mean  Consolidated
EBIT,  adjusted by adding thereto the amount of all  amortization of intangibles
and  depreciation  that were deducted in arriving at Consolidated Net Income for
such period.

                  "Consolidated  Indebtedness"  shall  mean,  at any  time,  all
Indebtedness  of  Holdings  and  its  Subsidiaries   (other  than  Residentclub)
determined on a  consolidated  basis  (excluding  all  Indebtedness  of the type
described  in clause  (vii) of the  definition  thereof,  except  to the  extent
amounts are owing with respect  thereto upon the  termination  of the respective
agreement  constituting  such  Indebtedness)  plus any original  issue  discount
attributable to such Indebtedness.


                                       60

<PAGE>

                  "Consolidated  Interest  Expense"  shall mean, for any period,
the total  consolidated  cash interest  expense of Holdings and its Subsidiaries
(other than  Residentclub)  for such period  (calculated  without  regard to any
limitations on the payment thereof) payable during such period in respect of all
Indebtedness of Holdings and its Subsidiaries  (other than  Residentclub),  on a
consolidated  basis,  for such  period  (including,  without  duplication,  that
portion of Capitalized Lease Obligations of Holdings and its Subsidiaries (other
than  Residentclub)  representing  the  interest  factor for such period and all
commitment and similar fees payable with respect to any Indebtedness).

                  "Consolidated  Net  Income"  shall mean,  for any period,  net
income of  Holdings  and its  Subsidiaries  (other than  Residentclub)  for such
period determined on a consolidated basis (after provision for taxes); provided,
however,  the  net  income  of  any  Subsidiary  of  Holdings,  which  is  not a
Wholly-Owned  Subsidiary  and for which the  investment  of Holdings  therein is
accounted  for by the  equity  method of  accounting,  shall have its net income
included in the Consolidated Net Income of Holdings and its Subsidiaries only to
the  extent  of the  amount  of cash  dividends  or  distributions  paid by such
Subsidiary to Holdings.

                  "Contingent  Obligation"  shall mean,  as to any  Person,  any
obligation   of  such  Person   guaranteeing   or  intended  to  guarantee   any
Indebtedness,  leases,  dividends,  distributions or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly,  including,  without limitation,  any obligation of such
Person,  whether or not contingent,  (i) to purchase any such primary obligation
or any  property  constituting  direct or indirect  security  therefor,  (ii) to
advance or supply  funds (x) for the  purchase  or  payment of any such  primary
obligation or (y) to maintain  working  capital or equity capital of the primary
obligor or  otherwise  to  maintain  the net worth or  solvency  of the  primary
obligor,  (iii) to purchase  property,  securities or services primarily for the
purpose of assuring the owner of any such primary  obligation  of the ability of
the primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the holder of such primary obligation against loss in
respect thereof;  provided,  however, that the term Contingent Obligation should
not  include  endorsements  of  instruments  for  deposit or  collection  in the
ordinary course of business.  The amount of any Contingent  Obligation  shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation  in respect of which such  Contingent  Obligation  is made or, if not
stated or determinable,  the maximum reasonably anticipated liability in respect
thereof  (assuming such Person is required to perform  thereunder) as determined
by such Person in good faith.

                  "Continuing Directors" shall mean the directors of a Person on
the Effective Date and each other director,  if such other directors  nomination
for  election  to the Board of  Directors  of such  Person is  recommended  by a
majority of the then Continuing Directors.

                  "Conversion Date" shall mean December 31, 2001.

                  "Corporate Overhead Expenditures" shall mean for any period of
determination  all  expenses  of  Holdings  and  its  Subsidiaries  (other  than
Residentclub)  related  to  corporate  and  headquarters  operations;  provided,
however, that Corporate Overhead Expenditures do not include any direct expenses
related  to the  provision  of cable,  telephony  or  Internet  services,  field

                                       61


<PAGE>

operations  expenses  at  individual  markets  (including  technical,  sales and
marketing and maintenance expenses incurred at the market level),  royalties and
commissions, bad debt expenses and customer service expenses.

                  "Credit Documents" shall mean this Agreement,  each Note, each
Notice of Borrowing,  each Notice of Conversion,  the Subsidiaries  Guaranty and
each Security Document.

                  "Credit   Party"   shall  mean   Holdings   and  each  of  its
Subsidiaries (other than Residentclub).

                  "Debt  Agreements"  shall have the meaning provided in Section
4.05.

                  "Debt  Base"  shall  mean,  as at any date on which the amount
thereof is being determined,  an amount equal to the sum of (x) Cable Television
Subscribers  multiplied by Cable  Television Debt and (y) Telephony  Subscribers
multiplied by Telephone Debt, less (z) any Indebtedness outstanding.

                  "Debt  Termination  Documents" shall have the meaning provided
in Section 4.16(c).

                  "Default"  shall mean any event,  act or condition  which with
notice or lapse of time, or both, would constitute an Event of Default.

                  "Defaulting  Bank" shall mean any Bank with respect to which a
Bank Default is then in effect.

                  "Deutsche  Bank" shall mean Deutsche Bank AG, New York Branch,
the New York State licensed branch of a German banking organization.

                  "Dividend"  with  respect to any  Person  shall mean that such
Person has  declared or paid a  dividend,  distribution  or returned  any equity
capital  to its  stockholders  or  authorized  or made any  other  distribution,
payment or delivery of property  (other  than common  stock or  preferred  stock
(with the same terms as the preferred  stock  outstanding on the Effective Date)
of such Person) or cash to its stockholders,  in their capacity as stockholders,
or redeemed,  retired, purchased or otherwise acquired,  directly or indirectly,
for a consideration  any shares of any class of its capital stock outstanding or
partnership interests on or after the Effective Date (or any options or warrants
issued by such Person with respect to its capital stock), or set aside any funds
for  any  of  the  foregoing  purposes,  or  shall  have  permitted  any  of its
Subsidiaries to purchase or otherwise  acquire for a consideration any shares of
any  class of the  capital  stock of such  Person  outstanding  on or after  the
Effective Date (or any options or warrants issued by such Person with respect to
its capital stock). Without limiting the foregoing,  "Dividends" with respect to
any Person shall also include all cash  payments  made or required to be made by
such  Person  with  respect  to any stock  appreciation  rights,  Plans,  equity
incentive plans,  achievement plans or any similar plans or setting aside of any
funds for the foregoing purposes.

                  "Documentation Agent" shall mean Deutsche Bank in its capacity
as Documentation Agent for the Banks hereunder.


                                       62

<PAGE>

                  "Documents" shall mean the Credit Documents, and the Debt
Termination Documents.

                  "Dollars"  and the sign "$" shall  each  mean  freely  trans-
ferable  lawful  money of the  United States.

                  "Effective  Date" shall have the  meaning  provided in Section
13.10.

                  "Eligible  Transferee"  shall  mean and  include a  commercial
bank,  financial  institution,   other  "accredited  investor"  (as  defined  in
Regulation  D of the  Securities  Act) other than  individuals,  or a "qualified
institutional buyer" as defined in Rule 144A of the Securities Act.

                  "Employee  Benefit  Plans" shall have the meaning  provided in
Section 4.05.

                  "Employment  Agreements"  shall have the  meaning  provided in
Section 4.05.

                  "Environmental  Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands,  demand letters,  claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any violation of, or liability  under, any  Environmental  Law or any
permit  issued,  or  any  approval  given,  under  any  such  Environmental  Law
(hereafter,  "Claims"), including, without limitation, (a) any and all Claims by
governmental  or  regulatory  authorities  for  enforcement,  cleanup,  removal,
response,  remedial  or other  actions or  damages  pursuant  to any  applicable
Environmental  Law,  and (b)  any and all  Claims  by any  third  party  seeking
damages,   contribution,   indemnification,   cost  recovery,   compensation  or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.

                  "Environmental Law" shall  mean any  Federal,  state,  foreign
or local statute,  law, rule,  regulation,  ordinance,  code, policy and rule of
common law now or hereafter in effect (including,  without  limitation,  the EPA
guidance on asbestos abatement and removal) and in each case as amended, and any
judicial or  administrative  interpretation  thereof,  including any judicial or
administrative  order, consent decree or judgment,  relating to the environment,
health, safety or Hazardous Materials,  including,  without limitation,  CERCLA;
RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C.ss.  1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C.ss. 2601 et seq.; the Clean Air
Act, 42 U.S.C.ss.  7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.ss.  3803
et  seq.;  the Oil  Pollution  Act of  1990,  33  U.S.C.ss.  2701 et  seq.;  the
Occupational  Safety and Health Act, 29 U.S.C.ss.651 et seq.; and any applicable
state and local or foreign counterparts or equivalents.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974,  as amended  from time to time,  and the  regulations  promulgated  and
rulings  issued  thereunder.  Section  references  to ERISA are to ERISA,  as in
effect at the date of this Agreement, and to any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

                  "ERISA  Affiliate"  shall  mean each  person  (as  defined  in
Section 3(9) of ERISA) which  together with Holdings or a Subsidiary of Holdings
would be deemed to be a "single  employer"  (i)  within  the  meaning of Section

                                       63

<PAGE>

414(b),  (c),  (m) or (o) of the  Code or  (ii) as a  result  of  Holdings  or a
Subsidiary of Holdings being or having been a general partner of such person.

                  "Eurodollar  Loan" shall mean each Loan  designated as such by
the Borrower at the time of the incurrence thereof or conversion thereto.

                  "Event of Default" shall have the meaning  provided in Section
9.

                  "Excess Cash Flow" shall mean,  for any period,  the remainder
of (i) the sum of (a) Adjusted  Consolidated Net Income for such period, and (b)
the decrease, if any, in Adjusted Working Capital from the first day to the last
day of  such  period,  minus  (ii)  the sum of (a) the  amount  of cash  Capital
Expenditures (to the extent not financed with Indebtedness), made by Holdings on
a  consolidated  basis (other than  Residentclub)  during such  period,  (b) the
amount of permanent  principal  payments of  Indebtedness  for borrowed money of
Holdings and its Subsidiaries  (other than Residentclub)  (other than repayments
of Loans);  provided that  repayments of Loans shall be deducted in  determining
Excess  Cash  Flow if such  repayments  were  applied  to  Scheduled  Repayments
required to be made during such period, were made as a voluntary prepayment with
internally  generated funds (but in the case of a voluntary  prepayment of Loans
prior to the  Conversion  Date,  only to the extent  accompanied  by a voluntary
reduction to the Total Commitment) during such period, and (c) the increase,  if
any,  in  Adjusted  Working  Capital  from the first day to the last day of such
period.

                  "Excess  Cash Flow Payment  Period"  shall mean (a) the period
commencing on the Conversion  Date and ending on the last day of the fiscal year
in which the Conversion Date occurs and (b) each fiscal year thereafter.

                  "Existing  Indebtedness"  shall have the  meaning  provided in
Section 6.22.

                  "Facility"  shall mean the credit facility  established  under
this Agreement.

                  "Federal Funds Rate" shall mean for any period,  a fluctuating
interest  rate equal for each day during such period to the weighted  average of
the rates on overnight  Federal Funds  transactions  with members of the Federal
Reserve System arranged by Federal Funds Brokers, as published for such day (or,
if such day is not a Business Day, for the next  preceding  Business Day) by the
Federal  Reserve Bank of New York,  or, if such rate is not so published for any
day which is a Business Day, the average of the  quotations for such day on such
transactions  received  by the  Administrative  Agent from three  Federal  Funds
brokers of recognized standing selected by the Administrative Agent.

                  "Fees" shall mean all amounts payable  pursuant to or referred
to in Section 3.01.

                  "Firstlink" shall mean Firstlink Communications, Inc., an
Oregon corporation.

                  "Firstlink  Merger" shall mean the merger of Holdings with and
into Firstlink with Firstlink as the surviving corporation.

                                       64

<PAGE>


                  "Firstlink  Merger Agreement" shall mean the Merger Agreement,
dated as of July 21, 1999 between Holdings and Firstlink.

                  "Firstlink  Merger  Documents" shall mean the Firstlink Merger
Agreement and all other  documents  entered into or delivered in connection with
the  Firstlink  Merger as the same may be  supplemented,  modified,  amended  or
restated from time to time.

                  "Fixed  Charge  Coverage  Ratio" for any period shall mean the
ratio of (x)  Consolidated  EBITDA  less the amount of all  Maintenance  Capital
Expenditures,   made  by  Holdings  or  any  of  its  Subsidiaries  (other  than
Residentclub) for such period to (y) Fixed Charges for such period.

                  "Fixed  Charges"  for any  period  shall  mean  the sum of (i)
Consolidated  Interest  Expense for such period,  (ii) the  aggregate  principal
amount of all  scheduled  payments  of  Indebtedness  (including  the  principal
portion of rentals under Capitalized Lease Obligations but excluding  repayments
of Loans prior to the Conversion Date not  accompanied by a permanent  reduction
to the Total  Commitment)  of  Holdings or any of its  Subsidiaries  (other than
Residentclub)  required  to be made  during  such period and (iii) taxes paid by
Holdings and its Subsidiaries (other than Residentclub) during such period.

                  "GMAC"  shall mean GMAC  Tenant  Division,  a division of GMAC
Commercial Mortgage Corporation.

                  "GMAC  Acquisition"  shall mean the  acquisition of all of the
assets of GMAC by the Borrower on July 21, 1999.

                  "Guaranties"   shall  mean  the  Holdings   Guaranty  and  the
Subsidiaries Guaranty.

                  "Guarantor" shall mean each of Holdings and each Subsidiary of
Holdings.

                  "Guaranty"  shall  mean  and  include  each of the  Subsidiary
Guaranties  executed by the  Subsidiaries  of Holdings (other than the Borrower)
and the Holdings Guaranty.

                  "Hazardous   Materials"   means  (a)  petroleum  or  petroleum
products,  radioactive  materials,  asbestos in any form that is  friable,  urea
formaldehyde  foam  insulation,  transformers  or other  equipment that contain,
dielectric fluid containing levels of polychlorinated  biphenyls, and radon gas;
(b) any  chemicals,  materials  or  substances  defined  as or  included  in the
definition of "hazardous  substances," "hazardous waste," "hazardous materials,"
"extremely   hazardous   substances,"   "restricted   hazardous  waste,"  "toxic
substances,"  "toxic  pollutants,"  "contaminants," or "pollutants," or words of
similar meaning and regulatory effect,  under any applicable  Environmental Law;
and (c) any  other  chemical,  material  or  substance,  exposure  to  which  is
prohibited, limited or regulated under applicable Environmental Laws.

                  "Holdings"  shall  have  the  meaning  provided  in the  first
paragraph of this Agreement.


                                       65

<PAGE>

                  "Holdings  Common  Stock"  shall  mean  the  common  stock  of
Holdings as set forth on Schedule V.

                  "Holdings  Guaranty"  shall  mean  the  guaranty  of  Holdings
contained in Section 12.

                  "Indebtedness"   shall  mean,   as  to  any  Person,   without
duplication,  (i) all  indebtedness  (including  principal,  interest,  fees and
charges) of such Person for borrowed money or for the deferred purchase price of
property or services other than trade payables and accrued  expenses  arising in
the ordinary course of business,  (ii) the maximum amount  available to be drawn
under all letters of credit issued for the account of such Person and all unpaid
drawings in respect of such  letters of credit,  (iii) all  Indebtedness  of the
types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property  owned by such  Person,  whether or not such
Indebtedness  has  been  assumed  by such  Person,  (iv) all  Capitalized  Lease
Obligations  of  such  Person,  (v) all  obligations  of  such  person  to pay a
specified  purchase  price for goods or  services,  whether or not  delivered or
accepted,  i.e.,  take-or-pay  and  similar  obligations,  (vi)  all  Contingent
Obligations  of such Person and (vii) all  obligations  under any Interest  Rate
Protection  or Other  Hedging  Agreement  or under any similar type of agreement
entered into with a Person not a Bank.

                  "Indemnified  Matters"  shall  have the  meaning  provided  in
Section 13.01.

                  "Indemnitees"  shall  have the  meaning  provided  in  Section
13.01.

                  "Initial  Borrowing  Date"  shall  mean the date on which  the
initial Loan is made.

                  "Intellectual  Property"  shall have the  meaning  provided in
Section 6.21.

                  "Interest  Determination Date" shall mean, with respect to any
Eurodollar  Loan,  the  second  Business  Day prior to the  commencement  of any
Interest Period relating to such Eurodollar Loan.

                  "Interest  Period" shall have the meaning  provided in Section
1.09.

                  "Interest Rate Protection or Other Hedging  Agreements"  shall
have the meaning provided in the Security Documents.

                  "Internet  Passings"  shall mean the number of dwelling  units
which the  Borrower  and its  Subsidiaries  (other  than  Residentclub)  has the
opportunity to provide Internet service to pursuant to ROE Agreements whether or
not all such dwelling units subscribe to such internet services.

                  "Leaseholds"  of any  Person  means all the  right,  title and
interest of such Person as lessee or licensee in, to and under leases, easements
or licenses of land,  improvements  and/or fixtures and all rights incidental or
appurtenant  thereto,  including  without  limitation,  all  rights  of entry or
easement  to install  and  maintain  Collateral  within or on Real  Property  of
others.

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<PAGE>


                  "Leverage Reduction Discount" shall mean as follows:

                 (i) on the  Initial  Borrowing  Date and  during  any period in
         which clause (ii) below does not apply, the Leverage Reduction Discount
         shall be 0%;

                (ii) from and after the Start Date to and including the End Date
         and subject to (iii) below, the following percentage, to the extent but
         only to the extent  that as of the last day of the most  recent  fiscal
         quarter  ending  immediately  prior  to such  Start  Date  for  which a
         certificate  has  been  delivered  to the  Banks  pursuant  to the next
         succeeding sentence hereinafter the ratio of Consolidated  Indebtedness
         as of the most recent fiscal quarter ending  immediately  prior to such
         Start Date to Annualized  Consolidated  EBITDA for the preceding fiscal
         quarter shall be as set forth below:

                                                   Consolidated Indebtedness to
            Basis Points                          Annualized Consolidated EBITDA
            ------------                          ------------------------------
                 25                               Equal  to or  greater  than
                                                  5.00:1.00  but  less  than
                                                  6.00:1.00

                 50                               Less than 5.00:1.00

               (iii) notwithstanding (ii) above, if at any time (a) a Default or
         Event of Default shall exist,  or (b) the  Consolidated  EBITDA for the
         most recent  fiscal  quarter  shall be less than or equal to zero,  the
         Leverage Reduction Discount shall be 0%.

                  The Leverage  Reduction  Discount  shall be  determined by the
delivery of a  certificate  of the  Borrower,  certified by the Chief  Financial
Officer of the Borrower,  together with the financial  statements required to be
delivered  pursuant  to  Section  7.01(b)  or (c),  as the  case  may be,  which
certificate  shall set forth the Leverage  Reduction  Discount  arising from the
calculation of the ratio of Consolidated Indebtedness to Annualized Consolidated
EBITDA of the Borrower for the fiscal  quarter ending with the fiscal quarter or
fiscal year with respect to which such  certificate  is being  delivered and the
basis for such calculations. The Leverage Reduction Discount so determined shall
apply,  except as set forth  above,  to the  period  beginning  on the date such
financial statements are delivered and ending on the earlier of (the "End Date")
(i) the next date of actual delivery of the financial  statements required to be
delivered  pursuant  to  Section  7.01(b)  or (c) or (ii) the date on which such
financial  statements  are required to be delivered (the day of delivery of such
financial  statements on which such period commences being herein referred to as
the "Start Date").

                  "Lien"  shall  mean  any  mortgage,   pledge,   hypothecation,
assignment,  deposit  arrangement,   encumbrance,  lien  (statutory  or  other),
preference,  priority  or  other  security  agreement  of  any  kind  or  nature
whatsoever (including,  without limitation,  any conditional sale or other title
retention  agreement,  any financing or similar  statement or notice filed under
the UCC or any other similar  recording or notice statute,  and any lease having
substantially the same effect as any of the foregoing).

                  "Loan" shall have the meaning provided in Section 1.01(b).

                                       67

<PAGE>


                  "Maintenance Capital Expenditures" shall mean, for any period,
the amount of Capital  Expenditures of Holdings and its Subsidiaries (other than
Residentclub)  during  such  period  less the  amount  of  Capital  Expenditures
utilized to effect the new construction of Cable Passings, Internet Passings and
Telephone Passings.

                  "Management  Agreements"  shall have the  meaning  provided in
Section 4.05.

                  "Margin  Stock" shall have the meaning  provided in Regulation
U.

                  "Material  Contracts"  shall  have  the  meaning  provided  in
Section 4.05.

                  "Maturity Date" shall mean December 31, 2006.

                  "Minimum Borrowing Amount" shall mean $250,000.

                  "Net  Consolidated  Interest  Expense" shall mean Consolidated
Interest Expense paid by Holdings and its Subsidiaries (other than Residentclub)
less cash interest  income earned by Holdings and its  Subsidiaries  (other than
Residentclub).

                  "Net Sale  Proceeds"  shall mean for any sale of  assets,  the
gross cash  proceeds  (including  any cash  received by way of deferred  payment
pursuant to a promissory  note,  receivable or  otherwise,  but only as and when
received)  received  from  such  sale,  net  of  reasonable   transaction  costs
(including, without limitation,  attorneys' fees), the amount of such gross cash
proceeds  required to be used to  permanently  repay any  Indebtedness  which is
secured by the  respective  assets which were sold,  and the estimated  marginal
increase  in income  taxes and any stamp tax which will be payable by  Holdings'
consolidated group as a result of such sale.

                  "Notes" shall have the meaning provided in Section 1.05(a).

                  "Notice of  Borrowing"  shall  have the  meaning  provided  in
Section 1.03(a).

                  "Notice of  Conversion"  shall have the  meaning  provided  in
Section 1.06.

                  "Notice  Office"  shall mean the office of the  Administrative
Agent located at 787 Seventh Avenue, New York, New York 10019,  Attention:  Salo
Aizenberg,  or such  other  office as the  Administrative  Agent  may  hereafter
designate in writing as such to the other parties hereto.

                  "Obligations"  shall mean all amounts owing to the Agents, the
Collateral  Agent or any Bank  pursuant  to the terms of this  Agreement  or any
other Credit Document.

                  "Paribas"  shall mean Paribas,  a French banking  organization
acting through its New York Branch.

                  "Payment  Office" shall mean the office of the  Administrative
Agent located at 787 Seventh Avenue, New York, New York 10019,  Attention:  Salo
Aizenberg,  or such  other  office as the  Administrative  Agent  may  hereafter
designate in writing as such to the other parties hereto.

                                       68

<PAGE>


                  "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.

                  "Percentage"  of any Bank at any time prior to the  Conversion
Date shall mean a fraction (expressed as a percentage) the numerator of which is
the  Commitment  of such Bank at such time and the  denominator  of which is the
Total Commitment at such time, provided that if the Percentage of any Bank is to
be  determined  after  the  Total  Commitment  has  been  terminated,  then  the
Percentages  of the Banks shall be  determined  immediately  prior (and  without
giving effect) to such termination.

                  "Permitted  Acquisitions"  shall have the meaning  provided in
Section 8.02(viii).

                  "Permitted  Business"  shall mean a line of  business in which
Holdings  and its  Subsidiaries  is engaged on the  Initial  Borrowing  Date and
reasonably related extensions thereof.

                  "Permitted  Liens" shall have the meaning  provided in Section
8.01.

                  "Person"  shall  mean  any  individual,  partnership,  limited
liability company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency,  department
or instrumentality thereof.

                  "Plan" shall mean any pension plan, as defined in Section 3(2)
of ERISA,  which is  maintained  or  contributed  to by (or to which there is an
obligation  to  contribute  of)  Holdings,  a Subsidiary of Holdings or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which  Holdings,  a Subsidiary of Holdings or an ERISA  Affiliate
maintained, contributed to or had an obligation to contribute to such plan.

                  "Pledge  Agreement" shall have the meaning provided in Section
4.06.

                  "Pledge  Agreement  Collateral" shall mean all "Collateral" as
defined in the Pledge Agreement.

                  "Pledged Securities" shall have the meaning assigned that term
in the Pledge Agreement.

                  "Prime  Lending  Rate"  shall  mean the rate  which  The Chase
Manhattan  Bank announces from time to time as its prime lending rate, the Prime
Lending Rate to change when and as such prime  lending rate  changes.  The Prime
Lending Rate is a reference rate and does not  necessarily  represent the lowest
or best rate actually  charged to any customer by Paribas or The Chase Manhattan
Bank,  who may make  commercial  loans or other loans at rates of  interest  at,
above or below the Prime Lending Rate.

                  "Projections" shall have the meaning provided in Section 4.15.

                  "Quarterly  Payment  Date" shall mean the last Business Day of
each December, March, June and September of each fiscal year.

                                       69

<PAGE>


                  "Quoted  Rate"  shall  mean  (a)  the  offered   quotation  to
first-class   banks  in  the  New  York  interbank   Eurodollar  market  by  the
Administrative  Agent  for  U.S.  dollar  deposits  of  amounts  in  immediately
available funds comparable to the outstanding principal amount of the Eurodollar
Loan of the  Administrative  Agent  for  which an  interest  rate is then  being
determined with maturities  comparable to the Interest Period applicable to such
Eurodollar Loan determined as of 10:00 A.M. (New York time) on the date which is
two Business Days prior to the  commencement  of such Interest  Period,  divided
(and  rounded  upward  to  the  next  whole  multiple  of  1/16  of 1%) by (b) a
percentage  equal to 100%  minus the then  stated  maximum  rate of all  reserve
requirements   (including,   without   limitation,   any  marginal,   emergency,
supplemental,  special or other  reserves)  applicable to any member bank of the
Federal  Reserve  System in respect of  Eurocurrency  funding or  liabilities as
defined  in  Regulation  D (or  any  successor  category  of  liabilities  under
Regulation D).

                  "RCRA" shall mean the Resource  Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.

                  "Real Property" of any Person shall mean all the right,  title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds and all rights incidental or appurtenant  thereto,  including without
limitation,  all rights of entry or easement to install and maintain  Collateral
within or on Real Property of others.

                  "Recovery  Event"  shall mean the  receipt by  Holdings or any
Subsidiary  of the  Holdings  (other than  Residentclub)  of any cash  insurance
proceeds or condemnation awards payable:  (i) by reason of theft, loss, physical
destruction,  damage or taking or any other event with respect to any properties
or  assets  of  Holdings  or  any  Subsidiary  of  Holdings  (including  without
limitation,  business  interruption  insurance);  and,  (ii) under any policy of
insurance required to be maintained under Section 7.03.

                  "Refinanced  Indebtedness"  shall have the meaning provided in
Section 4.16(b).

                  "Register" shall have its meaning provided in Section 7.16.

                  "Regulation  D"  shall  mean  Regulation  D of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.

                  "Regulation  T"  shall  mean  Regulation  T of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.

                  "Regulation  U"  shall  mean  Regulation  U of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.

                  "Regulation  X"  shall  mean  Regulation  X of  the  Board  of
Governors of the Federal  Reserve  System as from time to time in effect and any
successor to all or a portion thereof.

                                       70

<PAGE>


                  "Related Fund" shall mean,  with respect to any Bank that is a
fund that invests in loans,  any other fund that invests in loans and is managed
by the  same  investment  advisor  as  such  Bank  or by an  Affiliate  of  such
investment advisor.

                  "Release" means disposing,  discharging,  injecting, spilling,
pumping, leaking, leaching,  dumping,  emitting,  escaping,  emptying,  seeping,
placing,  pouring  and the  like,  into or upon any  land or  water  or air,  or
otherwise entering into the environment.

                  "Replaced  Bank"  shall have the  meaning  provided in Section
1.12.

                  "Replacement  Bank" shall have the meaning provided in Section
1.12.

                  "Reportable  Event"  shall mean an event  described in Section
4043(c)  of ERISA  with  respect  to a Plan that is subject to Title IV of ERISA
other than those  events as to which the 30-day  notice  period is waived  under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

                  "Required Banks" shall mean Banks the sum of whose outstanding
Loans,  Commitments  (or after the termination  thereof,  the sum of outstanding
Loans), represent an amount greater than 51% of the sum of all outstanding Loans
and the Total Commitment (or after the termination  thereof, the sum of the then
total outstanding Loans).

                  "Residentclub" shall mean The Residentclub.com, Inc., a
Delaware corporation.

                  "Returns" shall have the meaning provided in Section 6.09.

                  "ROE Agreement" shall mean all agreements  making the Borrower
or any of its Subsidiaries  (other than  Residentclub) the exclusive provider of
cable  television/video  services  and/or the  preferred  provider of  telephony
services to the residents of multiple dwelling units.

                  "ROE  Agreement  Standard  Form"  shall  mean  the form of ROE
Agreement  delivered to the Banks within 120 days of the  Effective  Date and in
form and substance reasonably satisfactory to the Required Banks.

                  "Scheduled  Repayment"  shall  have the  meaning  provided  in
Section 3.02(A)(a).

                  "SEC" shall have the meaning provided in Section 7.01(h).

                  "Section  3.04(b)(ii)  Certificate"  shall  have  the  meaning
provided in Section 3.04(b)(ii).

                  "Secured  Creditors" shall mean (x) the Banks, the Agents, the
Collateral  Agent and (y) any Bank which on the date hereof is, or  subsequently
becomes, party to any Interest Rate Protection or Other Hedging Agreement.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended, and the rules and regulations promulgated thereunder.


                                       71

<PAGE>

                  "Securities  Exchange Act" shall mean the Securities  Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.

                  "Security  Agreement"  shall  have  the  meaning  provided  in
Section 4.07.

                  "Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.

                  "Security  Documents"  shall  mean the Pledge  Agreement,  the
Security Agreement, and the Concentration Account Consent Letter.

                  "Shareholders'  Agreements" shall have the meaning provided in
Section 4.05.

                  "Subscriber  Penetration  Report"  shall  mean a report on the
number of Cable Passings,  Internet Passings and Telephony Passings,  the number
of Subscribers, Capital Expenditures, marketing plans and such other information
as  requested  by the  Administrative  Agent or  Required  Banks,  all in a form
acceptable to the Administrative Agent and the Required Banks.

                  "Subscribers"  shall mean the total number of  subscribers  to
the  services  of  Holdings  and its  Subsidiaries  (other  than  Residentclub),
including both cable television, Internet and telephony subscribers.

                  "Subsidiaries  Guaranty"  shall have the  meaning  provided in
Section 4.08.

                  "Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary  voting power to elect a majority of the directors of such  corporation
(irrespective  of  whether  or not at the time  stock of any class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any  contingency) is at the time owned by such Person and/or one or
more  Subsidiaries of such Person and (ii) any partnership,  association,  joint
venture or other entity in which such Person and/or one or more  Subsidiaries of
such Person has more than a 50% equity interest at the time.

                  "Syndication  Agent"  shall mean  Paribas in its  capacity  as
Syndication  Agent for the Banks  hereunder,  and shall include any successor to
the Syndication Agent appointed pursuant to Section 11.09.

                  "Syndication  Termination  Date" shall mean the earlier of (x)
120 days after the  Effective  Date or (y) the date on which the  Administrative
Agent, in its sole  discretion,  determines (and notifies the Borrower) that the
primary  syndication  (and  the  resultant  addition  of  institutions  as Banks
pursuant to Section 12.04) has been completed.

                  "Tax Sharing  Agreements"  shall have the meaning  provided in
Section 4.05.

                  "Taxes" shall have the meaning provided in Section 3.04(a).

                                       72

<PAGE>


                  "Telephone Debt" shall mean the following:

                       Period                                          Amount

         Closing Date - December 31, 2001                               $450
         January 1, 2002 - December 31, 2002                            $400
         January 1, 2003 - December 31, 2003                            $300
         Thereafter                                                     $200


                  "Telephony  Passings"  shall mean the number of dwelling units
which the Borrower has the opportunity to provide telephony services to pursuant
to an ROE Agreement  regardless of whether all such dwelling units  subscribe to
such telephony services.

                  "Telephony  Subscribers"  shall  mean the  number of  dwelling
units which the Borrower and its Subsidiaries (other than Residentclub)  provide
telephone service (as evidenced by a written agreement) who are not more than 60
days past due on payment of their telephone bill.

                  "Total  Commitment"  shall mean,  at any time,  the sum of the
Commitments of each of the Banks.

                  "Total Unutilized Commitment" shall mean, at any time, the sum
of the Unutilized Commitments of each of the Banks.

                  "Transaction"  shall mean collectively,  (i) the incurrence of
Loans  hereunder  on the Initial  Borrowing  Date,  (ii) the issuance of capital
stock of Holdings in connection with the transactions contemplated hereby, (iii)
the  repayment  of  all  Refinanced  Indebtedness,  together  with  all  accrued
interest,   premiums,   fees,  commissions  and  expenses  owing  in  connection
therewith,  and the termination of all commitments thereunder,  (iv) the payment
of the  Transaction  Fees  and  Expenses  in  connection  therewith  and (v) the
Acquisitions.

                  "Transaction  Fees  and  Expenses"  shall  mean  all  fees and
expenses  incurred in connection with and arising out of the Transaction and the
transactions  contemplated  thereby  and  hereby;  provided,  however,  that the
aggregate amount of such fees and expenses shall not exceed an amount acceptable
to the Required Banks.

                  "Type"  shall mean the type of Loan determined  with regard to
the interest  option  applicable  thereto,  i.e.,  whether a Base Rate Loan or a
Eurodollar Loan.

                  "UCC" shall mean the Uniform  Commercial  Code as from time to
time in effect in the relevant jurisdiction.

                  "Unfunded  Current  Liability"  of any  Plan  shall  mean  the
amount,  if any, by which the value of the  accumulated  plan benefits under the
Plan  determined  on a plan  termination  basis  in  accordance  with  actuarial
assumptions  at such  time  consistent  with  those  prescribed  by the PBGC for

                                       73
<PAGE>

purposes of Section  4044 of ERISA,  exceeds  the fair market  value of all plan
assets  allocable to such  liabilities  under Title IV of ERISA  (excluding  any
accrued but unpaid contributions).

                  "United States" and "U.S." shall each mean the United States
of America.

                  "Unutilized  Commitment" for any Bank, at any time, shall mean
the Commitment of such Bank at such time less the aggregate  principal amount of
Loans made by such Bank and then outstanding.

                  "U.S. Online Acquisition" shall  mean the  acquisition  of all
of the assets of U.S.  Online  Communications,  Inc. by the Borrower on July 21,
1999.

                  "U.S.  Online  Communications,  Inc." shall mean U.S.  Online
Communications,  Inc.,  a Delaware corporation.

                  "Wholly-Owned  Subsidiary"  shall mean, as to any Person,  (i)
any corporation  100% of whose capital stock is at the time owned by such Person
and/or  one or more  Wholly-Owned  Subsidiaries  of such  Person  and  (ii)  any
partnership,  association,  joint  venture or other  entity in which such Person
and/or one or more  Wholly-Owned  Subsidiaries  of such Person has a 100% equity
interest at such time.

                  Section 11.  The Agents.
                               ----------

                  11.01  Appointment.  The Banks  hereby  designate  Paribas  as
Administrative  Agent (for purposes of this Section 11, the term "Administrative
Agent" shall include Paribas in its capacity as Collateral Agent pursuant to the
Security  Documents),  Paribas as  Syndication  Agent,  and  Deutsche  Bank,  as
Documentation  Agent,  in each case to act as specified  herein and in the other
Credit Documents.  Each Bank hereby irrevocably  authorizes,  and each holder of
any  Note  by the  acceptance  of such  Note  shall  be  deemed  irrevocably  to
authorize,  the  Administrative  Agent  and the  Syndication  Agent to take such
action on its behalf under the  provisions of this  Agreement,  the other Credit
Documents and any other instruments and agreements referred to herein or therein
and to exercise such powers and to perform such duties  hereunder and thereunder
as are specifically delegated to or required of the Administrative Agent and the
Syndication  Agent by the terms  hereof and thereof and such other powers as are
reasonably  incidental  thereto.  Each  of  the  Administrative  Agent  and  the
Syndication  Agent may  perform  any of its duties  hereunder  by or through its
officers, directors, agents or employees.

                  11.02 Nature of Duties. The Administrative Agent shall have no
duties or  responsibilities  except those  expressly set forth in this Agreement
and the Security  Documents.  The Syndication Agent and the Documentation  Agent
shall not have any  duties  or  responsibilities  under  this  Agreement  or any
Security  Document or any other document or matter related thereto.  None of the
Administrative  Agent, the Syndication Agent, the Documentation Agent and any of
their respective  officers,  directors,  agents or employees shall be liable for
any action  taken or omitted by it or them  hereunder  or under any other Credit
Document or in connection  herewith or therewith,  unless caused by its or their
gross negligence or willful misconduct.  The duties of the Administrative  Agent
and the Syndication Agent shall be mechanical and  administrative in nature; the

                                       74

<PAGE>

Administrative  Agent, the Syndication Agent and the  Documentation  Agent shall
not have by reason of this  Agreement or any other  Credit  Document a fiduciary
relationship  in respect of any Bank or the holder of any Note;  and  nothing in
this Agreement or any other Credit Document,  expressed or implied,  is intended
to or shall be so  construed  as to impose upon the  Administrative  Agent,  the
Syndication Agent or the Documentation  Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein.

                  11.03  Lack  of  Reliance  on the  Administrative  Agent,  the
Syndication  Agent  and  the  Documentation  Agent.  Independently  and  without
reliance  upon  the   Administrative   Agent,  the  Syndication  Agent  and  the
Documentation  Agent,  each Bank and the holder of each  Note,  to the extent it
deems  appropriate,  has made and shall continue to make (i) its own independent
investigation  of the  financial  condition  and  affairs  of  Holdings  and its
Subsidiaries  in connection with the making and the continuance of the Loans and
the taking or not taking of any action in  connection  herewith and (ii) its own
appraisal of the  creditworthiness  of Holdings and its Subsidiaries and, except
as  expressly  provided  in  this  Agreement,   the  Administrative  Agent,  the
Syndication   Agent  and  the   Documentation   Agent  shall  have  no  duty  or
responsibility,  either initially or on a continuing  basis, to provide any Bank
or the  holder of any Note with any  credit or other  information  with  respect
thereto,  whether coming into its possession before the making of the Loans, the
participation  in the  Letters  of  Credit  or at any time or times  thereafter.
Neither the  Administrative  Agent, the Syndication  Agent nor the Documentation
Agent  shall  be  responsible  to any  Bank or the  holder  of any  Note for any
recitals,  statements,  information,  representations or warranties herein or in
any document,  certificate or other writing delivered in connection  herewith or
for  the  execution,   effectiveness,   genuineness,  validity,  enforceability,
perfection,  priority  or  sufficiency  of this  Agreement  or any other  Credit
Document  or the  financial  condition  of Holdings  or its  Subsidiaries  or be
required to make any inquiry  concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other Credit
Document,  or the  financial  condition of Holdings or its  Subsidiaries  or the
existence or possible existence of any Default or Event of Default.

                  11.04  Certain  Rights  of  the   Administrative   Agent,  the
Syndication Agent and the Documentation  Agent. If the  Administrative  Agent or
the Syndication  Agent shall request  instructions  from the Required Banks with
respect to any act or action (including  failure to act) in connection with this
Agreement  or  any  other  Credit  Document,  the  Administrative  Agent  or the
Syndication  Agent,  as the case may be,  shall be entitled to refrain from such
act or taking such action unless and until the  Administrative  Agent shall have
received  instructions from the Required Banks; and the Administrative  Agent or
the  Syndication  Agent,  as the case may be,  shall not incur  liability to any
Person by reason of so refraining.  Without  limiting the foregoing,  no Bank or
the  holder of any Note shall have any right of action  whatsoever  against  the
Administrative  Agent,  the Syndication  Agent or the  Documentation  Agent as a
result of the Administrative Agent acting or refraining from acting hereunder or
under any other  Credit  Document in  accordance  with the  instructions  of the
Required Banks.

                  11.05 Reliance.  The Administrative  Agent and the Syndication
Agent shall be entitled to rely, and shall be fully  protected in relying,  upon
any note, writing, resolution, notice, statement,  certificate,  telex, teletype
or facsimile message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by any Person that the Administrative  Agent or the

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Syndication  Agent  believed to be the proper  Person,  and, with respect to all
legal matters pertaining to this Agreement and any other Credit Document and its
duties  hereunder  and  thereunder,  upon  advice  of  counsel  selected  by the
Administrative  Agent and the  Syndication  Agent  (which may be counsel for the
Credit Parties).

                  11.06  Indemnification.  (a) To the extent the  Administrative
Agent,  the  Syndication  Agent  or the  Documentation  Agent  or  any of  their
respective  Affiliates is not  reimbursed and  indemnified by the Borrower,  the
Banks will reimburse and indemnify the  Administrative  Agent,  the  Syndication
Agent or the  Documentation  Agent,  as the case may be,  in  proportion  to its
respective  "percentages"  as used in determining  the Required  Banks,  for and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
claims,  actions,   judgments,   suits,  costs,  expenses  or  disbursements  of
whatsoever kind or nature which may be imposed on, asserted  against or incurred
by the Administrative  Agent, the Syndication Agent or the Documentation  Agent,
as the case may be, in performing their respective duties hereunder or under any
other Credit  Document,  in any way relating to or arising out of this Agreement
or any other  Credit  Document;  provided  that no Bank  shall be liable for any
portion of such liabilities,  obligations,  losses, damages, penalties, actions,
judgments,   suits,  costs,   expenses  or  disbursements   resulting  from  the
Administrative Agent's, the Syndication Agent's or the Documentation Agent's, as
the case may be, gross negligence or willful misconduct.

                  (b) The  Administrative  Agent, the Syndication  Agent and the
Documentation  Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Credit Document  (except actions  expressly
required to be taken by it  hereunder or under the Credit  Documents)  unless it
shall first be indemnified to its satisfaction by the Banks pro rata against any
and all  liability,  cost and  expense  that it may incur by reason of taking or
continuing to take any such action.

                  11.07 The Administrative  Agent, the Syndication Agent and the
Documentation  Agent  in  Their  Individual  Capacities.  With  respect  to  its
obligation to make Loans under this Agreement, each of the Administrative Agent,
the  Syndication  Agent and the  Documentation  Agent  shall have the rights and
powers specified herein for a "Bank" and may exercise the same rights and powers
as though it were not  performing  the  duties  specified  herein;  and the term
"Banks," "Required Banks," "holders of Notes" or any similar terms shall, unless
the context clearly otherwise indicates,  include the Administrative  Agent, the
Syndication  Agent and the Documentation  Agent in their individual  capacities.
Each of the  Administrative  Agent, the Syndication  Agent and the Documentation
Agent may accept deposits from, lend money to, and generally  engage in any kind
of banking,  trust or other  business  with any Credit Party or any Affiliate of
any Credit Party as if they were not performing the duties specified herein, and
may accept fees and other  consideration  from the  Borrower or any other Credit
Party for services in connection  with this  Agreement and may purchase and hold
equity  interests in the Borrower or any other  Credit Party  without  having to
account for the same to the Banks and  otherwise  without  having to account for
the same to the Banks.

                  11.08 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes  hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the case
may be,  shall have been  filed  with the  Administrative  Agent.  Any  request,

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authority  or consent of any Person who,  at the time of making such  request or
giving such authority or consent,  is the holder of any Note shall be conclusive
and binding on any subsequent holder,  transferee,  assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.

                  11.09 Resignation by the Agent. (a) The  Administrative  Agent
may resign from the performance of all its functions and duties hereunder and/or
under the other  Credit  Documents at any time by giving  fifteen (15)  Business
Days' prior written notice to the Borrower and the Banks. Such resignation shall
take effect upon the appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below.

                  (b) Upon any such notice of  resignation,  the Required  Banks
shall appoint a successor Administrative Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably  acceptable to the Borrower (it
being  understood  and agreed  that any Bank is deemed to be  acceptable  to the
Borrower).

                  (c) If a successor Administrative Agent shall not have been so
appointed  within such fifteen  (15)  Business  Day period,  the  Administrative
Agent,  with the  consent  of the  Borrower,  shall  then  appoint  a  successor
Administrative  Agent who  shall  serve as  Administrative  Agent  hereunder  or
thereunder   until  such  time,  if  any,  as  the  Banks  appoint  a  successor
Administrative Agent as provided above.

                  (d) If no successor  Administrative  Agent has been  appointed
pursuant to clause (b) or (c) above by the 30th Business Day after the date such
notice of resignation was given by the Administrative  Agent, the Administrative
Agent's  resignation  shall  become  effective  and the Banks  shall  thereafter
perform all the duties of the  Administrative  Agent hereunder  and/or under any
other Credit  Document until such time, if any, as the Banks appoint a successor
Administrative Agent as provided above.

                  Section 12.  Guaranty.
                               --------

                  12.01 The Guaranty. In order to induce the Banks to enter into
this  Agreement and to extend credit  hereunder and in recognition of the direct
benefits to be received by  Holdings  from the  proceeds of the Loans,  Holdings
hereby agrees with the Banks as follows:  Holdings  hereby  unconditionally  and
irrevocably  guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all  indebtedness  of the Borrower to the Banks under this Agreement and
the other Credit  Documents  and under each  Interest  Rate  Protection or Other
Hedging  Agreement  entered  into by a Bank or an  affiliate  of a Bank with the
Borrower. If any or all of the indebtedness of the Borrower to the Banks becomes
due and payable  hereunder or under such other Credit Documents or Interest Rate
Protection or Other Hedging Agreements, Holdings unconditionally promises to pay
such  indebtedness to the Banks, or order, on demand,  together with any and all
expenses  which may be incurred by the Agents or the Banks in collecting  any of
the indebtedness. The word "indebtedness" is used in this Section 12 in its most
comprehensive  sense and  means any and all  advances,  debts,  obligations  and
liabilities  of the Borrower  arising in connection  with this  Agreement or any
other Credit  Documents or under any Interest  Rate  Protection or Other Hedging
Agreement  with a Bank or an  affiliate of the Bank,  in each case,  heretofore,

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now,  or  hereafter   made,   incurred  or  created,   whether   voluntarily  or
involuntarily, absolute or contingent, liquidated or unliquidated, determined or
undetermined,  whether or not such indebtedness is from time to time reduced, or
extinguished and thereafter  increased or incurred,  whether the Borrower may be
liable  individually  or jointly with others,  whether or not recovery upon such
indebtedness  may be or hereafter  become barred by any statute of  limitations,
and  whether  or not such  indebtedness  may be or  hereafter  become  otherwise
unenforceable.

                  12.02 Bankruptcy.  Additionally,  Holdings unconditionally and
irrevocably  guarantees the payment of any and all  indebtedness of the Borrower
to the Banks whether or not due or payable by the Borrower  upon the  occurrence
of any of  the  events  specified  in  Section  9.05,  and  unconditionally  and
irrevocably promises to pay such indebtedness to the Banks, or order, on demand,
in lawful money of the United States.

                  12.03 Nature of Liability. The liability of Holdings hereunder
is  exclusive  and  independent  of any  security  for or other  guaranty of the
indebtedness of the Borrower whether  executed by Holdings,  any other guarantor
or by any other  party,  and the  liability of Holdings  hereunder  shall not be
affected or impaired by (a) any  direction as to  application  of payment by the
Borrower or by any other party,  or (b) any other  continuing or other guaranty,
undertaking or maximum  liability of a guarantor or of any other party as to the
indebtedness of the Borrower,  or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution,  termination or increase,
decrease or change in personnel by the Borrower,  or (e) any payment made to the
Agents or the Banks on the indebtedness which the Agents or such Banks repay the
Borrower pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief  proceeding,  and Holdings waives any right to
the deferral or modification of its obligations  hereunder by reason of any such
proceeding.

                  12.04  Guaranty  Absolute.  No  invalidity,   irregularity  or
unenforceability of all or any part of the indebtedness  guaranteed hereby or of
any security therefor shall affect, impair or be a defense to this Guaranty, and
this Guaranty shall be primary,  absolute and unconditional  notwithstanding the
occurrence of any event or the existence of any other  circumstances which might
constitute  a legal or  equitable  discharge  of a surety  or  guarantor  except
payment in full of the indebtedness guaranteed herein.

                  12.05  Independent  Obligation.  The  obligations  of Holdings
hereunder  are  independent  of the  obligations  of any other  guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted against
Holdings  whether or not action is brought  against any other  guarantor  or the
Borrower and whether or not any other guarantor or the Borrower be joined in any
such action or actions. Holdings waives, to the fullest extent permitted by law,
the benefit of any statue of  limitations  affecting its liability  hereunder or
the enforcement thereof. Any payment by the Borrower or other circumstance which
operates to toll any statute of  limitations as to the Borrower shall operate to
toll the statute of limitations as to Holdings.

                  12.06  Authorization.  Holdings  authorizes the Agents and the
Banks without notice or demand, and without affecting or impairing its liability
hereunder, from time to time to:


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                  (a) change the manner,  place or terms of payment  of,  and/or
change or extend the time of payment of, renew,  increase,  accelerate or alter,
any of the  indebtedness  (including  any  increase  or  decrease in the rate of
interest thereon),  any security therefor, or any liability incurred directly or
indirectly in respect  thereof,  and the Guaranty herein made shall apply to the
indebtedness as so changed, extended, renewed or altered;

                  (b) take and hold security for the payment of the indebtedness
and sell, exchange, release,  surrender,  realize upon or otherwise deal with in
any manner and in any order any  property by  whomsoever  at any time pledged or
mortgaged to secure, or howsoever securing,  the indebtedness or any liabilities
(including any of those  hereunder)  incurred  directly or indirectly in respect
thereof or hereof, and/or any offset thereagainst;

                  (c)  exercise  or refrain from  exercising any rights against
the Borrower or others or otherwise act or refrain from acting;

                  (d)  release  or  substitute  any  one or more  endorsers,
guarantors, the Borrower or other obligors;

                  (e) settle or compromise any of the indebtedness, any security
therefor or any liability  (including any of those hereunder)  incurred directly
or indirectly in respect  thereof or hereof,  and may subordinate the payment of
all or any part thereof to the payment of any liability  (whether due or not) of
the Borrower to its creditors other than the Banks;

                  (f) apply any sums by whomsoever paid or howsoever realized to
any  liability or  liabilities  of the Borrower to the Banks  regardless of what
liability or liabilities of Holdings or the Borrower remain unpaid;

                  (g) consent to or waive any breach of, or any act, omission or
default under,  this Agreement or any of the instruments or agreements  referred
to herein,  or otherwise  amend,  modify or supplement  this Agreement or any of
such other instruments or agreements; and/or

                  (h)  take  any  other  action  which  would,  under  otherwise
applicable principles of common law, give rise to a legal or equitable discharge
of Holdings from its liabilities under this Section 12.

                  12.07  Reliance.  It is not  necessary  for the  Agents or the
Banks to inquire into the capacity or powers of the Borrower or its Subsidiaries
or the  officers,  directors,  partners or agents acting or purporting to act on
its behalf,  and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.

                  12.08  Subordination.  Any indebtedness of the Borrower now or
hereafter held by Holdings is hereby  subordinated  to the  indebtedness  of the
Borrower to the Agents and the Banks;  and such  indebtedness of the Borrower to
Holdings, if the Agents (at the direction of the Required Banks), after an Event
of Default has occurred, so requests, shall be collected,  enforced and received
by Holdings as trustee for the Banks and be paid over to the Banks on account of
the  indebtedness  of the  Borrower  to the  Banks,  but  without  affecting  or
impairing in any manner the liability of Holdings under the other  provisions of
this  Guaranty.  Prior to the  transfer by  Holdings  of any note or  negotiable

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instrument  evidencing any  indebtedness  of the Borrower to Holdings,  Holdings
shall mark such note or  negotiable  instrument  with a legend  that the same is
subject to this subordination.

                  12.09  Waiver.  (a)  Holdings  waives any right to require the
Agents or the Banks to (i) proceed against the Borrower,  any other guarantor or
any other  party,  (ii) proceed  against or exhaust any  security  held from the
Borrower,  any other  guarantor  or any other  party or (iii)  pursue  any other
remedy in the  Agents'  or the  Banks'  power  whatsoever.  Holdings  waives any
defense  based on or  arising  out of any  defense  of the  Borrower,  any other
guarantor  or any other  party  other than  payment in full of the  indebtedness
(other than payment),  including,  without  limitation,  any defense based on or
arising out of the disability of the Borrower,  any other guarantor or any other
party, or the  unenforceability of the indebtedness or any part thereof from any
cause,  or the cessation  from any cause of the liability of the Borrower  other
than to the extent of payment  in full of the  indebtedness.  The Agents and the
Banks may, in accordance with the Credit Documents, at their election, foreclose
on any security held by the Agents,  the Collateral Agent or the Banks by one or
more judicial or nonjudicial sales, whether or not every aspect of any such sale
is  commercially  reasonable (to the extent such sale is permitted by applicable
law),  or  exercise  any other right or remedy the Agents and the Banks may have
against the Borrower or any other party, or any security,  without  affecting or
impairing in any way the  liability of Holdings  hereunder  except to the extent
the indebtedness  has been paid.  Holdings waives any defense arising out of any
such election by the Agents and the Borrower, even though such election operates
to impair or extinguish any right of reimbursement or subrogation or other right
or remedy of Holdings against the Borrower or any other party or any security.

                  (b)  Except  as  otherwise  specifically  required  hereunder,
Holdings waives all presentments, demands for performance, protests and notices,
including,  without limitation,  notices of nonperformance,  notices of protest,
notices of dishonor,  notices of acceptance of this Guaranty, and notices of the
existence,  creation or incurring of new or  additional  indebtedness.  Holdings
assumes  all  responsibility  for  being  and  keeping  itself  informed  of the
Borrower's  financial  condition  and  assets,  and of all  other  circumstances
bearing upon the risk of non-payment of the indebtedness  and the nature,  scope
and extent of the risks which Holdings assumes and incurs hereunder,  and agrees
that  the  Agents  and the  Banks  shall  have no duty  to  advise  Holdings  of
information known to them regarding such circumstances or risks.

                  12.10 Guaranty  Continuing.  This Guaranty is a continuing one
and all  liabilities  to which it  applies or may apply  under the terms  hereof
shall be  conclusively  presumed  to have been  created in reliance  hereon.  No
failure  or  delay  on the  part  of any  Bank,  of any  holder  of any  Note in
exercising  any right,  power or privilege  hereunder  shall operate as a waiver
thereof;  nor shall any  single  or  partial  exercise  of any  right,  power or
privilege  hereunder  preclude  any other or  further  exercise  thereof  or the
exercise of any other right, power or privilege.  The rights and remedies herein
expressly  specified are  cumulative and not exclusive of any rights or remedies
which any Bank or any  subsequent  holder of a Note  would  otherwise  have.  No
notice to or demand on Holdings in any case shall entitle  Holdings to any other
or further  notice or demand in similar or other  circumstances  or constitute a
waiver of the  rights of the Bank or any  holder,  creator or  purchaser  to any
other or further action in any circumstances without notice or demand.

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                  12.11 Binding  Nature of  Guaranties.  This Guaranty  shall be
binding  upon  Holdings  and its  successors  and assigns and shall inure to the
benefit of the Bank and their successors and assigns.

                  12.12 Judgments Binding.  If claim is ever made upon any Bank,
any  subsequent  holder of a Note for  repayment  or  recovery  of any amount or
amounts  received in payment or on account of any of the indebtedness and any of
the  aforesaid  payees  repays  all or part of said  amount by reason of (a) any
judgment,   decree  or  order  of  any  court  or  administrative   body  having
jurisdiction  over such payee or any of its property,  or (b) any  settlement or
compromise  of any such claim  effected  by such  payee  with any such  claimant
(including the Borrower)  then and in such event  Holdings  agrees that any such
judgment,  decree,  order,  settlement  or  compromise  shall  be  binding  upon
Holdings, notwithstanding any revocation hereof or the cancellation of any Note,
or other instrument evidencing any liability of the Borrower, and Holdings shall
be and remain liable to the aforesaid  payees hereunder for the amount so repaid
or  recovered  to the same  extent as if such amount had never  originally  been
received by any such payee.

                  Section 13.  Miscellaneous.
                               -------------

                  13.01  Payment of  Expenses,  etc.  Holdings  and the Borrower
hereby  jointly  and  severally  agree to: (i)  whether or not the  transactions
herein contemplated are consummated,  pay all reasonable out-of-pocket costs and
expenses of the Agents (including,  without limitation,  the reasonable fees and
disbursements of White & Case LLP and local counsel and any outside  consultants
hired by the Agents) in connection with the preparation,  execution and delivery
of  this  Agreement  and the  other  Credit  Documents  and  the  documents  and
instruments referred to herein and therein and any amendment,  waiver or consent
relating  hereto or thereto,  of the Agents in connection  with its  syndication
efforts with  respect to this  Agreement  (including,  without  limitation,  the
reasonable  fees and  disbursements  of White & Case LLP) and of the  Agents and
each of the Banks in connection  with the  enforcement of this Agreement and the
other Credit Documents and the documents and instruments  referred to herein and
therein (including, without limitation, the reasonable fees and disbursements of
counsel for the Agents and for each of the Banks); (ii) pay and hold each of the
Banks harmless from and against any and all present and future stamp, excise and
other similar  taxes with respect to the foregoing  matters and save each of the
Banks  harmless  from and against  any and all  liabilities  with  respect to or
resulting from any delay or omission  (other than to the extent  attributable to
such Bank) to pay such taxes;  and (iii)  defend,  protect,  indemnify  and hold
harmless  the  Agents and each Bank,  and each of their  respective  Affiliates,
officers,   directors,   employees,   representatives,   attorneys   and  agents
(collectively   called  the   "Indemnitees")   from  and  against  any  and  all
liabilities,  obligations  (including  removal  or  remedial  actions),  losses,
damages  (including  foreseeable  and  unforeseeable  consequential  damages and
punitive damages), penalties, claims, actions, judgments, suits, costs, expenses
and  disbursements  (including  reasonable  attorneys' and consultants' fees and
disbursements) of any kind or nature whatsoever that may at any time be incurred
by, imposed on or assessed against the Indemnitees  directly or indirectly based
on, or arising or resulting  from, or in any way related to, or by reason of (a)
any  investigation,  litigation or other proceeding  (whether or not the Agents,
the Collateral  Agent or any Bank is a party thereto and whether or not any such

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investigation,  litigation  or other  proceeding is between or among the Agents,
the Collateral  Agent,  any Bank, the Borrower or any third person or otherwise)
related to the entering into and/or  performance  of this Agreement or any other
Credit  Document or the proceeds of any Loans  hereunder or the  consummation of
any  transactions  contemplated  herein  (including,   without  limitation,  the
Transaction)  or in any other  Credit  Document or the  exercise of any of their
rights or remedies provided herein or in the other Credit Documents; or, (b) the
actual or alleged  generation,  presence or Release of Hazardous Materials on or
from, or the transportation of Hazardous Materials to or from, any Real Property
owned or at any time operated by Holdings or any of its Subsidiaries or; (c) any
Environmental  Claim relating to Holdings or any of its Subsidiaries or any Real
Property  owned or at any time  operated by Holdings or any of its  Subsidiaries
or;  (d) the  exercise  of the rights of the Agents and of any Bank under any of
the  provisions  of this  Agreement  or any other  Credit  Document or any Loans
hereunder;  or (e)  the  consummation  of any  transaction  contemplated  herein
(including, without limitation, the Transaction) or in any other Credit Document
(the "Indemnified  Matters")  regardless of when such Indemnified Matter arises;
but  excluding  any such  Indemnified  Matter to the  extent  based on the gross
negligence  or willful  misconduct  of the  Indemnitee  seeking  indemnification
hereunder.

                  13.02  Right of  Setoff.  In  addition  to any  rights  now or
hereafter  granted  under  applicable  law  or  otherwise,  and  not  by  way of
limitation of any such rights, upon the occurrence and during the continuance of
an Event of Default,  each Bank is hereby authorized at any time or from time to
time, without  presentment,  demand,  protest or other notice of any kind to any
Credit Party or to any other  Person,  any such notice  being  hereby  expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special)  and any  other  Indebtedness  at any time  held or owing by such  Bank
(including,  without limitation,  by branches and agencies of such Bank wherever
located) to or for the credit or the account of each Credit Party against and on
account of the  Obligations  and  liabilities  of such Credit Party to such Bank
under this  Agreement  or under any of the other  Credit  Documents,  including,
without limitation, all interests in Obligations purchased by such Bank pursuant
to Section 13.06(b),  and all other claims of any nature or description  arising
out  of  or  connected  with  this  Agreement  or  any  other  Credit  Document,
irrespective  of whether  or not such Bank shall have made any demand  hereunder
and although said  Obligations,  liabilities or claims, or any of them, shall be
contingent or unmatured.

                  13.03 Notices.  Except as otherwise expressly provided herein,
all notices and other communications  provided for hereunder shall be in writing
(including  telegraphic,  telex,  facsimile or cable  communication) and mailed,
telegraphed,  telexed,  telecopied,  cabled or delivered:  if to Holdings or the
Borrower, at its address specified opposite its signature below; if to any Bank,
at its address specified  opposite its name below; and if to the  Administrative
Agent,  at its Notice Office;  or, as to any Credit Party or the  Administrative
Agent,  at such other  address as shall be designated by such party in a written
notice to the other  parties  hereto and, as to each Bank, at such other address
as shall be designated by such Bank in a written notice to each Borrower and the
Administrative  Agent. All such notices and  communications  shall, when mailed,
telegraphed,  telexed,  facsimiled,  or cabled or sent by overnight courier,  be
effective  3 Business  Days after  deposited  in the  mails,  certified,  return
receipt requested, when delivered to the telegraph company, cable company or one
day following delivery to an overnight  courier,  as the case may be, or sent by
telex or  facsimile  device,  except  that  notices  and  communications  to the
Administrative Agent shall not be effective until received by the Administrative
Agent.

                                       82

<PAGE>


                  13.04  Benefit  of  Agreement.  (a)  This  Agreement  shall be
binding upon and inure to the benefit of and be  enforceable  by the  respective
successors and assigns of the parties hereto; provided, however, no Credit Party
may assign or transfer any of its rights,  obligations or interest  hereunder or
under any other Credit Document  without the prior written consent of the Banks;
and  provided  further,  that  although any Bank may  transfer,  assign or grant
participations in its rights hereunder,  such Bank shall remain a "Bank" for all
purposes  hereunder  (and may not  transfer  or assign all or any portion of its
Commitments or Loans hereunder  except as provided in Section  13.04(b)) and the
transferee,  assignee or participant, as the case may be, shall not constitute a
"Bank" hereunder; and provided further, that no Bank shall transfer or grant any
participation  under  which the  participant  shall have  rights to approve  any
amendment to or waiver of this Agreement or any other Credit  Document except to
the  extent  such  amendment  or waiver  would (i)  extend  the final  scheduled
maturity  of any Loan or Note in which such  participant  is  participating,  or
reduce  the rate or extend  the time of  payment  of  interest  or Fees  thereon
(except  in  connection  with a  waiver  of  applicability  of any  post-default
increase in interest rates) or reduce the principal amount thereof,  or increase
the  Commitments  in which such  participant  is  participating  over the amount
thereof  then in effect  (it being  understood  that a waiver of any  Default or
Event of Default or of a mandatory  reduction in the Total  Commitment shall not
constitute a change in the terms of any Commitment,  and that an increase in any
Commitment  shall be  permitted  without the consent of any  participant  if the
participant's  participation is not increased as a result thereof), (ii) consent
to the  assignment  or  transfer  by any  Credit  Party of any of its rights and
obligations  under this Agreement or (iii) release all or  substantially  all of
the Collateral under all of the Security Documents (except as expressly provided
in  the  Credit  Documents)   supporting  the  Loans  hereunder  in  which  such
participant  is  participating.  In the  case  of any  such  participation,  the
participant  shall not have any rights under this  Agreement or any of the other
Credit Documents (the participant's  rights against such Bank in respect of such
participation  to be those set forth in the  agreement  executed by such Bank in
favor of the  participant  relating  thereto)  and all  amounts  payable  by the
Borrower  hereunder  shall be  determined  as if such  Bank  had not  sold  such
participation.

                  (b)  Notwithstanding  the  foregoing,  any  Bank  (or any Bank
together with one or more other Banks) may (x) (A) pledge its Loans and/or Notes
hereunder to a Federal  Reserve Bank in support of borrowings  made by such Bank
from such  Federal  Reserve  Bank or (B) assign all or a portion of its Loans or
Commitments and related outstanding Obligations hereunder to its parent company,
principal  office  and/or any Affiliate of such Bank which is at least 50% owned
by such Bank or its parent company or to one or more other Banks or to a Related
Fund or (y) assign all or a portion equal to at least $5,000,000,  of such Loans
or  Commitments  and related  outstanding  Obligations  hereunder to one or more
Eligible  Transferees  each of  which  assignees  shall  become  a party to this
Agreement as a Bank by  execution  of an  assignment  and  assumption  agreement
substantially in the form of Exhibit L (appropriately completed); provided that:
(i) at such time Schedule I shall be deemed  modified to reflect the Commitments
of such new Bank and of the  existing  Banks;  (ii) new Notes  will be issued to
such new Bank and to the  assigning  Bank upon the  request  of such new Bank or
assigning  Bank,  such new Notes to be in conformity  with the  requirements  of
Section 1.05 to the extent needed to reflect the revised Commitments;  (iii) the
consent of the  Administrative  Agent,  which consent shall not be  unreasonably
withheld,  shall  be  required  in  connection  with any  assignment  (provided,

                                       83

<PAGE>


however,  that no such consent by the Administrative  Agent shall be required in
the case of any  assignment  to another  Bank,  any Bank's  Affiliate or Related
Fund); and (iv) the Administrative  Agent shall receive at the time of each such
assignment,  from the assigning Bank, the payment of a non-refundable assignment
fee of  $3,000.  To the  extent  of any  assignment  pursuant  to  this  Section
13.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its  assigned  Commitments.  No  transfer  or  assignment  under this
Section 13.04(b) will be effective until recorded by the Administrative Agent on
the Register  pursuant to Section 7.16. At the time of each assignment  pursuant
to this Section  13.04(b) to a Person which is not already a Bank  hereunder and
which  is not a United  States  person  (as  such  term is  defined  in  Section
7701(a)(30)  of the  Code) for  Federal  income  tax  purposes,  the  respective
assignee  Bank  shall  provide  to the  Borrower,  as the case  may be,  and the
Administrative  Agent the  appropriate  Internal  Revenue Service Forms (and, if
applicable, a Section 3.04(b)(ii) Certificate) required by Section 3.04(b).

                  13.05 No Waiver;  Remedies Cumulative.  No failure or delay on
the part of the  Administrative  Agent or any Bank or any  holder of any Note in
exercising  any right,  power or  privilege  hereunder or under any other Credit
Document and no course of dealing  between  Holdings,  the Borrower or any other
Credit Party and the Administrative  Agent or any Bank or the holder of any Note
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any right,  power or  privilege  hereunder  or under any other  Credit  Document
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or  privilege  hereunder  or  thereunder.  The rights,  powers and
remedies  herein  or  in  any  other  Credit  Document  expressly  provided  are
cumulative  and not  exclusive  of any  rights,  powers  or  remedies  which the
Administrative Agent or any Bank or the holder of any Note would otherwise have.
No notice to or demand on any Credit Party in any case shall  entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Administrative  Agent or any Bank or
the  holder of any Note to any  other or  further  action  in any  circumstances
without notice or demand.

                  13.06 Payments Pro Rata. (a) The  Administrative  Agent agrees
that promptly  after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations hereunder,  it shall distribute such payment
to the Banks  pro rata  based  upon  their  respective  shares,  if any,  of the
Obligations with respect to which such payment was received.

                  (b) Each of the Banks  agrees that,  if it should  receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by  counterclaim  or cross
action,  by  the  enforcement  of any  right  under  the  Credit  Documents,  or
otherwise),  which is applicable to the payment of the principal of, or interest
on, the Loans,  Bank Commitment  Commission or Fees, of a sum which with respect
to the  related sum or sums  received by other Banks is in a greater  proportion
than the total of such  Obligation  then owed and due to such Bank  bears to the
total of such Obligation then owed and due to all of the Banks immediately prior
to such receipt, then such Bank receiving such excess payment shall purchase for
cash  without  recourse  or  warranty  from the other  Banks an  interest in the
Obligations of the respective Credit Party to such Banks in such amount as shall
result in a proportional participation by all the Banks in such amount; provided
that if all or any portion of such excess  amount is thereafter  recovered  from
such Bank,  such purchase  shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.


                                       84


<PAGE>


                  13.07 Calculations; Computations. (a) The financial statements
to be  furnished  to the Banks  pursuant  hereto  shall be made and  prepared in
accordance with generally  accepted  accounting  principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes  thereto or as otherwise  disclosed in writing by Holdings or the Borrower
to the Banks);  provided that, except as otherwise specifically provided herein,
all computations of Excess Cash Flow and all computations determining compliance
with Sections 8.04 and 8.08 through 8.13,  inclusive,  including the definitions
used therein,  shall utilize  accounting  principles  and policies in conformity
with those used to prepare the historical  financial statements delivered to the
Banks pursuant to Section 4.14.

                  (b) All  computations of interest,  Commitment  Commission and
Fees  hereunder  shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest, Commitment Commission or Fees are payable.

                  13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL.  (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND  OBLIGATIONS  OF THE  PARTIES  HEREUNDER  AND  THEREUNDER  SHALL,  EXCEPT AS
OTHERWISE  PROVIDED IN THE  MORTGAGES,  BE CONSTRUED IN  ACCORDANCE  WITH AND BE
GOVERNED  BY THE LAW OF THE STATE OF NEW YORK.  ANY LEGAL  ACTION OR  PROCEEDING
WITH RESPECT TO THIS  AGREEMENT  OR ANY OTHER CREDIT  DOCUMENT MAY BE BROUGHT IN
THE  COURTS OF THE STATE OF NEW YORK OR OF THE UNITED  STATES  FOR THE  SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,  EACH OF
HOLDINGS AND THE BORROWER HEREBY  IRREVOCABLY  ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY,  GENERALLY AND UNCONDITIONALLY,  THE EXCLUSIVE  JURISDICTION OF
THE  AFORESAID  COURTS.  EACH OF HOLDINGS  AND THE BORROWER  HEREBY  IRREVOCABLY
DESIGNATE,  APPOINT AND EMPOWER CT  CORPORATION  SYSTEM WITH OFFICES ON THE DATE
HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THEIR DESIGNEE,  APPOINTEE
AND AGENT TO  RECEIVE,  ACCEPT AND  ACKNOWLEDGE  FOR AND ON ITS  BEHALF,  AND IN
RESPECT OF ITS PROPERTY,  SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES
AND DOCUMENTS  WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING.  IF FOR ANY
REASON SUCH DESIGNEE,  APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS
SUCH, AND EACH OF HOLDINGS AND THE BORROWER  AGREES TO DESIGNATE A NEW DESIGNEE,
APPOINTEE  AND  AGENT  ON THE  TERMS  AND FOR  THE  PURPOSES  OF THIS  PROVISION
SATISFACTORY  TO THE  AGENT  UNDER  THIS  AGREEMENT.  EACH OF  HOLDINGS  AND THE
BORROWER FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED  COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED  MAIL,  POSTAGE  PREPAID,  TO HOLDINGS OR THE
BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURES BELOW, SUCH SERVICE TO
BECOME  EFFECTIVE 30 DAYS AFTER SUCH  MAILING.  NOTHING  HEREIN SHALL AFFECT THE

                                       85


<PAGE>

RIGHT OF THE ADMINISTRATIVE  AGENT UNDER THIS AGREEMENT,  ANY BANK OR THE HOLDER
OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL  PROCEEDINGS  OR OTHERWISE  PROCEED  AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.

                  (b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVE
ANY OBJECTION  WHICH IT MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID  ACTIONS OR  PROCEEDINGS  ARISING OUT OF OR IN CONNECTION  WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER  IRREVOCABLY  WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT  THAT ANY SUCH  ACTION OR  PROCEEDING  BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                  (c) EACH OF THE PARTIES TO THIS AGREEMENT  HEREBY  IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,  PROCEEDING  OR  COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT,  THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

                  13.09  Counterparts.  This  Agreement  may be  executed in any
number  of  counterparts  and  by  the  different  parties  hereto  on  separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts  executed  by all the  parties  hereto  shall  be  lodged  with the
Borrower and the Administrative Agent.

                  13.10 Effectiveness.  This Agreement shall become effective on
the date (the "Effective Date") on which (a) Holdings,  the Borrower and each of
the Banks shall have signed a copy hereof (whether the same or different copies)
and shall  have  delivered  the same to the  Administrative  Agent at its Notice
Office  or, in the case of the Banks,  shall  have  given to the  Administrative
Agent  telephonic  (confirmed  in writing),  written or  facsimile  transmission
notice (actually  received) in accordance with Section 13.03 at such office that
the same has been signed and mailed to it and (b) all fees and expenses owing to
the Agents pursuant to any agreements  between the Borrower and the Agents shall
have been paid.

                  13.11  Headings  Descriptive.  The  headings  of  the  several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.

                  13.12 Amendment or Waiver.  (a) Neither this Agreement nor any
other Credit  Document  nor any terms hereof or thereof may be changed,  waived,
discharged or terminated unless such change, waiver, discharge or termination is
in  writing  signed by the  respective  Credit  Parties  party  thereto  and the
Required Banks; provided that no such change,  waiver,  discharge or termination
shall,  without the  consent of each Bank (with  Obligations  of the  respective
types being directly affected thereby): (i) extend the scheduled maturity of any

                                       86

<PAGE>


Loan or Note or extend any required  amortization under Section  3.02(A)(a),  or
reduce  the rate or extend  the time of  payment  of  interest  or Fees  thereon
(except  in  connection  with a  waiver  of  applicability  of any  post-default
increase in interest rates), or reduce the principal amount thereof, or increase
the  Commitments  of any Bank over the amount  thereof  then in effect (it being
understood  that a waiver of any  Default or Event of Default or of a  mandatory
reduction in the Total Commitment or a mandatory prepayment shall not constitute
an increase of the Commitment of any Bank, and that an increase in the available
portion of any  Commitment  of any Bank shall not  constitute an increase in the
Commitment  of  such  Bank);  (ii)  release  all  or  substantially  all  of the
Collateral  (except as  expressly  provided in the relevant  Credit  Documents);
(iii) amend,  modify or waive any provision of this Section  13.12;  (iv) reduce
the  percentage  specified in, or otherwise  modify,  the definition of Required
Banks (it  being  understood  that,  with the  consent  of the  Required  Banks,
additional  extensions of credit  pursuant to this  Agreement may be included in
the  determination of the Required Banks on substantially  the same basis as the
extensions of Loans and Commitments are included on the Effective  Date); or (v)
consent to the  assignment  or transfer by the Borrower of any of its rights and
obligations under this Agreement; provided further, that no such change, waiver,
discharge or termination  shall:  (w) increase the  Commitments of any Bank over
the  amount  thereof  then in effect (it being  understood  that a waiver of any
conditions precedent, covenants, Defaults or Events of Default or of a mandatory
reduction  in the  Total  Commitment  or of a  mandatory  prepayment  shall  not
constitute an increase of the  Commitment  of any Bank,  and that an increase in
the  available  portion of any  Commitment  of any Bank shall not  constitute an
increase in the  Commitment  of such Bank)  without the consent of such Bank; or
(x) without the consent of the Agents,  amend,  modify or waive any provision of
Section 11 or any other  provision  relating to the rights or obligations of the
Agents;  or (y) without the consent of the Collateral  Agent,  amend,  modify or
waive any provision of Section 11 or any other provision  relating to the rights
or obligations of the Collateral Agent; or (z) amend, modify or waive any of the
definition of Conversion Date.

                  (b) If,  in  connection  with  any  proposed  change,  waiver,
discharge  or  termination  to  any of  the  provisions  of  this  Agreement  as
contemplated  by clause (a)(i) through (v),  inclusive,  of the first proviso to
Section 13.12(a),  the consent of the Required Banks is obtained but the consent
of one or more of such other  Banks whose  consent is required is not  obtained,
then the Borrower shall have the right to replace each such  non-consenting Bank
or Banks (so long as all non-consenting  Banks are so replaced) with one or more
Replacement  Banks  pursuant  to  Section  1.12 so  long as at the  time of such
replacement, each such Replacement Bank consents to the proposed change, waiver,
discharge or termination, provided that the Borrower shall not have the right to
replace a Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to clauses (w) or (x)
of the second proviso to Section 13.12(a).

                  (c)  Notwithstanding  anything to the contrary contained above
in this Section 13.12, the Collateral Agent may (i) enter into amendments to the
Subsidiaries  Guaranty  and the  Security  Documents  for the  purpose of adding
additional Subsidiaries of Holdings (or other Credit Parties) as parties thereto
and (ii) enter into security  documents to satisfy the  requirements  of Section
7.17, in each case without the consent of the Required Banks.

                                       87

<PAGE>


                  13.13 Survival.  All  indemnities set forth herein  including,
without limitation,  in Sections 1.10, 1.11, 3.04, 11.06 and 13.01 shall survive
the  execution  and delivery of this  Agreement and the Notes and the making and
repayment of the Loans.

                  13.14  Domicile  of Loans.  Each Bank may  transfer and carry
its Loans at, to or for the account of any office,  Subsidiary  or  Affiliate of
such Bank.

                  13.15  Post-Closing  Obligations.   (a)  The  Borrower  hereby
acknowledges that in connection with certain  assignments  hereof, the Agents or
any of the Banks may be  required  to  obtain a rating  of the  Obligations  and
Commitments  hereunder of the Borrower and the Borrower  hereby  consent to such
Agent  or Bank  providing  to the  respective  rating  agency  such  information
regarding the Obligations and  creditworthiness  of the Borrower as is customary
practice of such rating agency.

                  (b) Notwithstanding anything to the contrary contained in this
Agreement,  it is agreed that all Schedules and Exhibits to this  Agreement will
be completed,  be  satisfactory  to the Agents and the Required Banks and become
part of this Agreement on or prior to the Initial Borrowing Date.

                                       88
<PAGE>




                  IN WITNESS WHEREOF,  the parties hereto have caused their duly
authorized  officers to execute and deliver this  Agreement as of the date first
above written.

Address:

10300 Metric Boulevard                     USOL HOLDINGS, INC.
Austin, Texas  78758
Attention:  Jeffrey Sperber
Telephone: (512) 651-3806                  By: ___________________________
Facsimile:   (512) 651-6177                    Title:


10300 Metric Boulevard                     USOL, INC.
Austin, Texas  78758
Attention:  Jeffrey Sperber
Telephone: (512) 651-3806                  By: ___________________________
Facsimile:   (512) 651-6177                    Title:

787 Seventh Avenue                         PARIBAS,
New York, New York  10019                     Individually and as Administrative
Attention:  Salo Aizenberg                    Agent and Syndication Agent
Telephone: (212) 841-2000
Facsimile:  (212) 841-2369
                                            By:___________________________
                                               Title:


                                            By:___________________________
                                               Title:


<PAGE>



31 West 52nd Street                         DEUTSCHE BANK AG, NEW YORK
New York, New York  10019                   BRANCH,
Attention:  Jon Storck                      as Documentation Agent
Telephone: (212) 469-5000
Facsimile:  (212)  469-3713
                                            By:___________________________
                                               Title:


                                            By:___________________________
                                               Title:

31 West 52nd Street                         DEUTSCHE BANK AG, NEW YORK
New York, New York  10019                      AND/OR CAYMAN ISLANDS
Attention:  Jon Storck                         BRANCHES
Telephone: (212) 469-5000
Facsimile:  (212)  469-3713
                                            By:___________________________
                                               Title:


                                            By:___________________________
                                               Title:





<PAGE>
                                                                      Schedule I
                                                                      ----------

                                   COMMITMENTS
                                   -----------


          Bank                 Commitment

------------------------- ----------------------
Paribas                     $17,500,000.00
------------------------- ----------------------
Deutsche Bank AG, New       $17,500,000.00
York and/or Cayman
Islands Branches

------------------------- ----------------------
Total                       $35,000,000.00
------------------------- ----------------------


<PAGE>


                                                                     Schedule II
                                                                     -----------

                                    INSURANCE
                                    ---------

                       [ALL SCHEDULES (EXCEPT SCHEDULE I)
                           TO BE PROVIDED BY BORROWER]



<PAGE>


                                                                    Schedule III
                                                                    ------------

                                      ERISA
                                      -----

<PAGE>

                                                                     Schedule IV
                                                                     -----------

                                  REAL PROPERTY
                                  -------------

<PAGE>

                                                                      Schedule V
                                                                      ----------


                                 CAPITALIZATION
                                 --------------

<PAGE>
                                                                     Schedule VI
                                                                     -----------


                                  SUBSIDIARIES
                                  ------------



<PAGE>

                                                                    Schedule VII
                                                                    ------------


                              EXISTING INDEBTEDNESS
                              ---------------------

<PAGE>

                                                                   Schedule VIII
                                                                   -------------

                               MATERIAL CONTRACTS
                               ------------------


<PAGE>

                                                                     Schedule IX
                                                                     -----------

                                 EXISTING LIENS
                                 --------------


<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS
                                -----------------
                                                                                                               Page
<S>                                                                                                             <C>
Section 1.  Amount and Terms of Credit............................................................................1

         1.01  The Commitments....................................................................................1
         1.02  Minimum Amount of Each Borrowing...................................................................1
         1.03  Notice of Borrowing................................................................................1
         1.04  Disbursement of Funds..............................................................................2
         1.05  Notes..............................................................................................2
         1.06  Conversions........................................................................................3
         1.07  Pro Rata Borrowings................................................................................4
         1.08  Interest...........................................................................................4
         1.09  Interest Periods...................................................................................5
         1.10  Increased Costs, Illegality, etc...................................................................6
         1.11  Compensation.......................................................................................8
         1.12  Replacement of Banks...............................................................................8
         1.13  Change of Lending Office...........................................................................9

Section 2.  Fees; Reductions of Commitment........................................................................9

         2.01  Fees...............................................................................................9
         2.02  Voluntary Termination of Unutilized Commitments...................................................10
         2.03  Mandatory Reduction of Commitments................................................................10

Section 3.  Prepayments; Payments; Taxes.........................................................................11

         3.01 Voluntary Prepayments..............................................................................11
         3.02  Mandatory Repayments and Commitment Reductions....................................................11
         3.03  Method and Place of Payment.......................................................................15
         3.04  Net Payments......................................................................................15

Section 4.  Conditions Precedent to Loans on the Initial Borrowing Date..........................................17

         4.01  Execution of Agreement; Notes.....................................................................17
         4.02  Officer's Certificate.............................................................................17
         4.03  Opinions of Counsel...............................................................................17
         4.04  Corporate Documents; Proceedings..................................................................17
         4.05  Plans; Shareholders' Agreements; Management Agreements; Employment Agreements; Collective
                  Bargaining Agreements; Debt Agreements; Affiliate Contracts; Tax Sharing Agreements and
                  Material Contracts.............................................................................18
         4.06  Pledge Agreement..................................................................................19
         4.07  Security Agreement................................................................................19
         4.08  Subsidiaries Guaranty.............................................................................20
         4.09  Consent Letter....................................................................................20


                                                                 (i)

<PAGE>

                                                                                                               Page
                                                                                                               ----

         4.10  Material Adverse Change, etc......................................................................20
         4.11  Litigation........................................................................................20
         4.12  Fees, etc.........................................................................................20
         4.13  Solvency Certificate; Insurance Analyses..........................................................20
         4.14  Approvals.........................................................................................21
         4.15  Financial Statements; Projections; Management Letter Reports......................................21
         4.16  Refinancing.......................................................................................22

Section 5.  Conditions Precedent to All Credit Events............................................................22

         5.01  No Default; Representations and Warranties........................................................23
         5.02  Notice of Borrowing...............................................................................23
         5.03  Pro Forma Compliance..............................................................................23
         5.04  ROE Agreements....................................................................................23

Section 6.  Representations, Warranties and Agreements...........................................................23

         6.01  Corporate Status..................................................................................24
         6.02  Corporate Power and Authority.....................................................................24
         6.03  No Violation......................................................................................24
         6.04  Governmental Approvals............................................................................24
         6.05  Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc..............25
         6.06  Litigation........................................................................................26
         6.07  True and Complete Disclosure......................................................................26
         6.08  Use of Proceeds; Margin Regulations...............................................................26
         6.09  Tax Returns and Payments..........................................................................26
         6.10  Compliance with ERISA.............................................................................27
         6.11  The Security Documents............................................................................28
         6.12  Representations and Warranties in Documents.......................................................28
         6.13  Properties........................................................................................28
         6.14  Capitalization....................................................................................29
         6.15  Subsidiaries......................................................................................29
         6.16  Compliance with Statutes, etc.....................................................................29
         6.17  Investment Company Act............................................................................29
         6.18  Public Utility Holding Company Act................................................................29
         6.19  Environmental Matters.............................................................................29
         6.20  Labor Relations...................................................................................30
         6.21  Patents, Licenses, Franchises and Formulas........................................................31
         6.22  Indebtedness......................................................................................31
         6.23  Restrictions on or Relating to Subsidiaries.......................................................31
         6.24  The Transaction...................................................................................32
         6.25  Material Contracts................................................................................32
         6.26  Year 2000 Reprogramming...........................................................................32

                                                                          (ii)

<PAGE>


                                                                                                               Page
                                                                                                               ----

Section 7.  Affirmative Covenants................................................................................32

         7.01  Information Covenants.............................................................................32
         7.02  Books, Records and Inspections....................................................................35
         7.03  Maintenance of Property, Insurance................................................................36
         7.04  Corporate Franchises..............................................................................36
         7.05  Compliance with Statutes, etc.....................................................................37
         7.06  Compliance with Environmental Laws................................................................37
         7.07  ERISA.............................................................................................37
         7.08  End of Fiscal Years; Fiscal Quarters..............................................................39
         7.09  Performance of Obligations........................................................................39
         7.10  Payment of Taxes..................................................................................39
         7.11  Interest Rate Protection..........................................................................39
         7.12  Use of Proceeds...................................................................................39
         7.13  UCC Searches......................................................................................39
         7.14  Intellectual Property Rights......................................................................39
         7.15  Year 2000 Reporting...............................................................................40
         7.16  Registry..........................................................................................40
         7.17  Further Actions...................................................................................41
         7.18  Concentration Account.............................................................................41
         7.19.  Asset Transfer...................................................................................42
         7.20  Landlord Agreements; UCC Fixture Filings..........................................................42

Section 8.  Negative Covenants...................................................................................42

         8.01  Liens.............................................................................................42
         8.02  Consolidation, Merger, Purchase or Sale of Assets, etc............................................44
         8.03  Dividends.........................................................................................46
         8.04  Leases............................................................................................46
         8.05  Indebtedness......................................................................................46
         8.06  Advances, Investments and Loans...................................................................47
         8.07  Transactions with Affiliates......................................................................48
         8.08  Capital Expenditures..............................................................................48
         8.09  Fixed Charge Coverage Ratio.......................................................................49
         8.10  Interest Coverage.................................................................................49
         8.11  Leverage Ratios...................................................................................50
         8.12  Corporate Overhead Expenditures...................................................................51
         8.13  Debt Base.........................................................................................51
         8.14  Limitation on Voluntary Payments and Modification; Limitation on Modifications of
                  Certificate of Incorporation, By-Laws and Certain Other Agreements; etc........................51
         8.15  Limitation on Certain Restrictions on Subsidiaries................................................52
         8.16  Limitation on Issuance of Capital Stock...........................................................52
         8.17  Business..........................................................................................52
         8.18  Limitation on Creation of Subsidiaries............................................................52
         8.19  Concentration Account.............................................................................52


                                                                        (iii)

<PAGE>

                                                                                                               Page
                                                                                                               ----

Section 9.  Events of Default....................................................................................52

         9.01  Payments..........................................................................................52
         9.02  Representations, etc..............................................................................53
         9.03  Covenants.........................................................................................53
         9.04  Default Under Other Agreements....................................................................53
         9.05  Bankruptcy, etc...................................................................................53
         9.06  ERISA.............................................................................................54
         9.07  Security Documents................................................................................54
         9.08  Guaranties........................................................................................55
         9.09  Judgments.........................................................................................55
         9.10  Change in Control.................................................................................55

Section 10.  Definitions and Accounting Terms....................................................................55

         10.01  Defined Terms....................................................................................55

Section 11.  The Agents..........................................................................................74

         11.01  Appointment......................................................................................74
         11.02  Nature of Duties.................................................................................74
         11.03  Lack of Reliance on the Administrative Agent, the Syndication Agent and the Documentation
                  Agent..........................................................................................75
         11.04  Certain Rights of the Administrative Agent, the Syndication Agent and the Documentation
                  Agent..........................................................................................75
         11.05  Reliance.........................................................................................75
         11.06  Indemnification..................................................................................76
         11.07  The Administrative Agent, the Syndication Agent and the Documentation Agent in Their
                  Individual Capacities..........................................................................76
         11.08  Holders..........................................................................................76
         11.09  Resignation by the Agent.........................................................................77

Section 12.  Guaranty............................................................................................77

         12.01  The Guaranty.....................................................................................77
         12.02  Bankruptcy.......................................................................................78
         12.03  Nature of Liability..............................................................................78
         12.04  Guaranty Absolute................................................................................78
         12.05  Independent Obligation...........................................................................78
         12.06  Authorization....................................................................................78
         12.07  Reliance.........................................................................................79
         12.08  Subordination....................................................................................79
         12.09  Waiver...........................................................................................80
         12.10  Guaranty Continuing..............................................................................80
         12.11  Binding Nature of Guaranties.....................................................................81
         12.12  Judgments Binding................................................................................81


                                                                         (iv)

                                                                                                               Page
                                                                                                               ----

Section 13.  Miscellaneous.......................................................................................81

         13.01  Payment of Expenses, etc.........................................................................81
         13.02  Right of Setoff..................................................................................82
         13.03  Notices..........................................................................................82
         13.04  Benefit of Agreement.............................................................................83
         13.05  No Waiver; Remedies Cumulative...................................................................84
         13.06  Payments Pro Rata................................................................................84
         13.07  Calculations; Computations.......................................................................85
         13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL...........................85
         13.09  Counterparts.....................................................................................86
         13.10  Effectiveness....................................................................................86
         13.11  Headings Descriptive.............................................................................86
         13.12  Amendment or Waiver..............................................................................86
         13.13  Survival.........................................................................................88
         13.14  Domicile of Loans................................................................................88
         13.15  Post-Closing Obligations.........................................................................88


SCHEDULE I                 Commitments
SCHEDULE II                Insurance
SCHEDULE III               ERISA
SCHEDULE IV                Real Property
SCHEDULE V                 Capitalization
SCHEDULE VI                Subsidiaries
SCHEDULE VII               Existing Indebtedness
SCHEDULE VIII              Material Contracts
SCHEDULE IX                Existing Liens


EXHIBIT A-1.......         Notice of Borrowing
EXHIBIT A-2.......         Notice of Conversion
EXHIBIT B.........         Promissory Note
EXHIBIT C.........         Section 3.04(b)(ii) Certificate
EXHIBIT D.........         Form of Opinion of Jenkens & Gilchrist, P.C.
EXHIBIT E.........         Officers' Certificate of Credit Parties
EXHIBIT F.........         Pledge Agreement
EXHIBIT G.........         Security Agreement
EXHIBIT H.........         Subsidiaries Guaranty
EXHIBIT I.........         Consent Letter
EXHIBIT J.........         Solvency Certificate
EXHIBIT K.........         Borrowing Base Certificate
EXHIBIT L.........         Bank Assignment and Assumption Agreement


                                                            (v)
</TABLE>


<PAGE>

                                                                     EXHIBIT A-1

                               NOTICE OF BORROWING

Paribas, as Administrative Agent
  for the Banks party to the
  Credit Agreement referred
  to below
787 Seventh Avenue
New York, New York  10019

Attention:  Salo Aizenberg

Ladies and Gentlemen:

     The  undersigned,  USOL,  Inc.  (the  "Borrower"),  refers  to  the  Credit
Agreement,  dated as of December  30, 1999 (as  amended  from time to time,  the
"Credit  Agreement,"  the terms  defined  therein  being used  herein as therein
defined),   among  USOL  Holdings,   Inc.,  the  Borrower,   certain   financial
institutions   from  time  to  time  party  thereto  (the   "Banks"),   you,  as
Administrative Agent and Syndication Agent for such Banks, and Deutsche Bank AG,
New  York  Branch,  as  Documentation   Agent,  and  hereby  gives  you  notice,
irrevocably,  pursuant  to  Section  1.03  of the  Credit  Agreement,  that  the
undersigned hereby requests a Borrowing under the Credit Agreement,  and in that
connection  sets forth below the  information  relating to such  Borrowing  (the
"Proposed Borrowing") as required by Section 1.03 of the Credit Agreement:

(i)  The Business Day of the Proposed Borrowing is ______________. (1)

(ii) The aggregate principal amount of the Proposed Borrowing is $________.

(iii)The Loans to be made pursuant to the Proposed  Borrowing shall be initially
     maintained as [Base Rate Loans][Eurodollar Loans].(2)

<PAGE>

[(iv)The initial  Interest  Period for the  Proposed  Borrowing  is a one,  two,
     three, or six month period.](3)

     The undersigned hereby certifies that the following  statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:

(A)  the  representations  and warranties  contained in the Credit Agreement and
     the other Credit Documents are and will be true and correct in all material
     respects,  before and after giving effect to the Proposed  Borrowing and to
     the application of the proceeds thereof (except for any  representation and
     warranty  that speaks only as of a specific  date,  which shall be true and
     correct in all material  respects as of such date),  as though made on such
     date; [and]

(B)  no Default or Event of Default has  occurred  and is  continuing,  or would
     result from such Proposed Borrowing or from the application of the proceeds
     thereof.

                                Very truly yours,

                                USOL, INC.


                                By:________________________________
                                   Title:



1    Shall be a Business  Day at least one Business Day in the case of Base Rate
     Loans and three  Business  Days in the case of  Eurodollar  Loans,  in each
     case, after the date hereof.

2    Eurodollar  Loans may not be incurred prior to the Syndication  Termination
     Date.

3     To be included for a Proposed Borrowing of Eurodollar Loans.

<PAGE>

                                                                     EXHIBIT A-2

                              NOTICE OF CONVERSION

Paribas, as Administrative Agent
   for the Banks party to the
   Credit Agreement referred
   to below
787 Seventh Avenue
New York, New York  10019

Attention:  Salo Aizenberg

Ladies and Gentlemen:

     The  undersigned,  USOL,  Inc.  (the  "Borrower"),  refers  to  the  Credit
Agreement,  dated as of December  30, 1999 (as  amended  from time to time,  the
"Credit  Agreement,"  the terms  defined  therein  being used  herein as therein
defined),   among  USOL  Holdings,   Inc.,  the  Borrower,   certain   financial
institutions   from  time  to  time  party  thereto  (the   "Banks"),   you,  as
Administrative Agent and Syndication Agent for such Banks, and Deutsche Bank AG,
New  York  Branch,  as  Documentation   Agent,  and  hereby  gives  you  notice,
irrevocably,  pursuant  to  Section  1.06  of the  Credit  Agreement,  that  the
undersigned  hereby requests a conversion of a Loan under the Credit  Agreement,
and in that  connection  sets  forth  below  the  information  relating  to such
Conversion (the "Proposed Conversion") as required by Section 1.06 of the Credit
Agreement:

(i)  The Business Day of the Proposed Conversion is _______________.(1)

(ii) The   aggregate   principal   amount   of  the   Proposed   Conversion   is
     $_______________.

(iii)The  Borrowing[s]  pursuant  to which the  Loan[s] in clause (ii) were made
     [is/are] currently outstanding as [Base Rate/Eurodollar] Loans and [is/are]
     hereby requested to be converted into [Eurodollar/Base  Rate] Loans and was
     made on _________ ___.

<PAGE>

[(iv)The Loan[s] to be converted into  Eurodollar  Loans shall initially have an
     Interest Period of a one, two, three or six month period.](2)

     [The undersigned  hereby certifies that on the date hereof, and on the date
of the Proposed  Conversion,  no Default or Event of Default has occurred and is
continuing,   or  would  result  from  such  Proposed  Conversion  or  from  the
application of the proceeds thereof.](2)


                                 Very truly yours,


                                 USOL, INC.



                                 By:_________________________________
                                    Title:




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



1    Shall be a Business Day at least three  Business  Days after the earlier of
     (i) the date hereof and (ii) the date on which telephonic  notice was given
     (which telephonic notice was promptly confirmed in writing).

2    To be included in the event the Loan is to be  converted  into a Eurodollar
     Loan.

<PAGE>

                                                                       EXHIBIT B


                                 PROMISSORY NOTE
$__________                                                   New York, New York
                                                              ____________, 1999


                  FOR VALUE RECEIVED,  USOL, INC., a [Delaware] corporation (the
"Borrower"),  hereby promises to pay to the order of __________ (the "Bank"), in
lawful money of the United States of America in immediately  available funds, at
the office of  Paribas  (the  "Administrative  Agent")  located  at 787  Seventh
Avenue,  New York,  New York  10019,  on the  Maturity  Date (as  defined in the
Agreement  referred to below) the principal sum of  ____________  DOLLARS or, if
less,  the  then  unpaid  principal  amount  of all  Loans  (as  defined  in the
Agreement) made by the Bank pursuant to the Agreement.

                  The  Borrower  promises  also to pay  interest  on the  unpaid
principal  amount hereof in like money at said office from the date hereof until
paid at the rates and at the times  provided  in Section  1.08 of the  Agreement
referred to below.

                  This  Note  is one  of the  Notes  referred  to in the  Credit
Agreement,  dated as of  December  30,  1999,  among USOL  Holdings,  Inc.,  the
Borrower,  the financial institutions from time to time party thereto (including
the Bank) and the  Administrative  Agent  (as from time to time in  effect,  the
"Agreement") and is entitled to the benefits thereof. This Note is also entitled
to the benefits of the  Guaranties  (as defined in the Agreement) and is secured
by and  entitled to the benefits of the  Security  Documents  (as defined in the
Agreement).  As provided  in the  Agreement,  this Note is subject to  voluntary
prepayment  and mandatory  repayment  prior to the Maturity Date, in whole or in
part.

                  In case an Event of  Default  (as  defined  in the  Agreement)
shall occur and be  continuing,  the  principal of and accrued  interest on this
Note may be  declared  to be due and  payable  in the manner and with the effect
provided in the Agreement.

                  The Borrower  hereby waives  presentment,  demand,  protest or
notice of any kind in connection with this Note.

                  THIS  NOTE  SHALL  BE  CONSTRUED  IN  ACCORDANCE  WITH  AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

                                    USOL, INC.



                                    By:______________________________
                                     Title:

<PAGE>

                                                                       EXHIBIT C

                         Section 3.04(b)(ii) Certificate

                  Reference is hereby made to the Credit Agreement,  dated as of
December 30, 1999, among USOL Holdings,  Inc., USOL, Inc., the lenders from time
to time party thereto,  Paribas, as Administrative  Agent and Syndication Agent,
and Deutsche Bank AG, New York Branch, as Documentation Agent, as amended to the
date hereof (the  "Credit  Agreement").  Pursuant to the  provisions  of Section
3.04(b)(ii) of the Credit Agreement, the undersigned hereby certifies that it is
not a  "bank"  as such  term is used in  Section  881(c)(3)(A)  of the  Internal
Revenue Code of 1986, as amended.

                                      [NAME OF BANK]



                                       By:_________________________________
                                          Title:

Date:

<PAGE>

                                                                       EXHIBIT D

                            [FORM OF OPINION LETTER]


                                                                          [Date]


To the Agents, the Collateral Agent

and each of the Banks party to the
Credit Agreement referred to below

Gentlemen:

                  We have acted as counsel to USOL  Holdings,  Inc., an [Oregon]
corporation  ("Holdings") and USOL, Inc., a Delaware corporation (the "Borrower"
and together with Holdings and all Subsidiary Guarantors,  each a "Credit Party"
and  collectively,  the "Credit  Parties"),  in connection with the preparation,
execution  and delivery of the Credit  Agreement,  dated as of December 30, 1999
(the  "Credit  Agreement"),   among  Holdings,   the  Borrower,   the  financial
institutions  party  thereto  from  time  to time  (the  "Banks"),  Paribas,  as
Administrative  Agent (the  "Administrative  Agent") and Syndication  Agent (the
"Syndication  Agent"),  and Deutsche Bank AG, New York Branch,  as Documentation
Agent (the "Documentation  Agent" and together with the Administrative Agent and
Syndication  Agent,  the "Agents"),  and the transactions  contemplated  thereby
(including,  without  limitation,  the  Acquisitions).  Unless otherwise defined
herein,  terms used herein shall have the  respective  meanings set forth in the
Credit Agreement.

                  In connection with this opinion,  I have examined originals or
copies, certified or otherwise identified to my satisfaction,  of such documents
as I have deemed  necessary or appropriate as a basis for the opinions set forth
herein, including,  without limitation, the following: (a) the Credit Documents,
including  the UCC  financing  statements  referred to in our opinions set forth
herein, (b) the Debt Termination Documents, and (c) such other public, corporate
documents and records as we deem  necessary or  appropriate  in connection  with
this  opinion  (the  documents  referred  to in  clauses  (a)  through  (c)  are
collectively referred to herein as the "Documents").

                  This opinion is  delivered to you pursuant to Section  4.03(i)
of the Credit Agreement.

                  In rendering  our opinion we have assumed the  genuineness  of
all  signatures  (other  than  the  Credit  Parties),  the  authenticity  of all
documents submitted to us as originals,  the conformity to original documents of
all  documents  submitted  to us as  certified  or  photostatic  copies  and the
authenticity  of the  originals  of such  copies.  As to  questions  of fact not
independently   verified  by  us  we  have  relied,  to  the  extent  we  deemed
appropriate,  upon

<PAGE>

representations  and  certificates  of  officers of the Credit  Parties,  public
officials and other appropriate persons.

                  Based upon the foregoing, we are of the opinion that:

                  1. Each  Credit  Party  (i) is a duly  organized  and  validly
existing  corporation  in good  standing  under  the  laws of the  state  of its
incorporation,  (ii) has the  corporate  power and authority to own its property
and assets and to transact  the  business  in which it is engaged and  presently
proposes to engage and (iii) is duly  qualified and is authorized to do business
and is in good standing in each  jurisdiction  where the  ownership,  leasing or
operation  of  its  property  or  the  conduct  of its  business  requires  such
qualifications  except for failures to be so qualified  which, in the aggregate,
would not  reasonably  be  expected  to have a  material  adverse  effect on the
performance,  business,  assets,  nature  of  assets,  liabilities,  operations,
properties,  condition (financial or otherwise) or prospects of any Credit Party
or any Credit Party and its Subsidiaries taken as a whole.

                  2. Each Credit Party has the corporate  power and authority to
execute,  deliver and perform the terms and  provisions of each of the Documents
to which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Documents to which it is a party.
Each Credit Party has duly executed and delivered each of the Documents to which
it is a party,  and each of such  Documents  constitutes  the  legal,  valid and
binding  obligation  of such Credit Party  enforceable  in  accordance  with its
terms,  except as the  enforceability  thereof  may be  limited  by  bankruptcy,
reorganization,  moratorium or similar laws  relating to or limiting  creditors'
rights generally or by general equitable  principles  (regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law).

                  3.  Neither  the  execution,  delivery or  performance  by any
Credit Party of the Documents to which it is a party,  nor compliance by it with
the  terms  and  provisions  thereof,   nor  consummation  of  the  transactions
contemplated  therein,  (a) will  contravene any provision of any law,  statute,
rule or regulation (including, without limitation, Regulations T, U and X of the
Board of  Governors  of the Federal  Reserve  System and usury  laws),  (b) will
contravene  any order,  writ,  injunction  or decree known to us of any court or
governmental  instrumentality  applicable to any Credit Party, (c) will conflict
with or result in any  breach of, any of the  terms,  covenants,  conditions  or
provisions  of, or  constitute  a default  under,  or result in the  creation or
imposition of (or the obligation to create or impose) any Lien (except  pursuant
to the  Security  Documents)  upon any of the  property  or assets of any Credit
Party pursuant to the terms of any indenture,  mortgage,  deed of trust,  credit
agreement or loan agreement,  or any other Material Contract to which any Credit
Party is a party or by which it or any of its  property or assets is bound or to
which it may be subject or (d) will violate any provision of the  Certificate of
Incorporation  or By-Laws (or similar  organizational  documents)  of any Credit
Party.

                  4. To the best of our knowledge,  there are no actions,  suits
or  proceedings  pending or  threatened  (i) with respect to any Document or the
transactions  contemplated  thereby or (ii) that could  reasonably  be likely to
materially and adversely affect the performance,  operations,  business, assets,
nature of assets, liabilities,  operations,  properties, condition (financial

<PAGE>

or  otherwise)  or  prospects  of any Credit  Party or any Credit  Party and its
Subsidiaries taken as a whole.

                  5. No order, consent,  approval,  license,  authorization,  or
validation of, or filing,  recording or  registration  with (except as have been
obtained  or made prior to the date  hereof and are in full force and effect and
except for the additional  filing of financing  statements,  mortgages and other
documents  required by the Security  Documents as described below), or exemption
by, any governmental or public body or authority, or any subdivision thereof, is
required to authorize,  or is required in connection  with,  (a) the  execution,
delivery and performance of any Document,  (b) the legality,  validity,  binding
effect or enforceability of any such Document or (c) the Transaction.

                  6.   Neither   Holdings,   the   Borrower  nor  any  of  their
Subsidiaries  is  an  "investment  company"  or a  company  "controlled"  by  an
"investment  company," within the meaning of the Investment Company Act of 1940,
as amended.

                  7.   Neither   Holdings,   the   Borrower  nor  any  of  their
Subsidiaries  is a "holding  company," or a  "subsidiary  company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary  company"
of a "holding  company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

                  8.  The  Transaction  has  been  consummated  in all  material
respects in accordance with the terms and conditions of the respective Documents
and all  applicable  laws.  All  consents  and  approvals  of, and  filings  and
registrations  with,  and all other  actions  in respect  of,  all  governmental
agencies,  authorities or instrumentalities  and third parties required in order
to consummate each part of the Transaction have been obtained,  given,  filed or
taken and are in full force and effect.  All  applicable  waiting  periods  with
respect thereto have expired without,  in all such cases, any action being taken
by any  competent  authority  which  restrains,  prevents,  or imposes  material
adverse  conditions upon the consummation of the Transaction.  Additionally,  we
are not aware of any  judgment,  order or  injunction  prohibiting  or  imposing
material  adverse  conditions on the  consummation of the Transaction and we are
not aware of any judgment,  order or injunction prohibiting or imposing material
adverse conditions upon the occurrence of any Credit Event or the performance by
Holdings,  the Borrower or any of their  Subsidiaries of their obligations under
the Documents.

                  9.  On  the  date  hereof  and  after  giving  effect  to  the
Transaction and the other transactions  contemplated thereby: (a) the authorized
capital  stock of  Holdings  consists  of (i)  ________  shares of common  stock
("Holdings Common Stock"), $______ par value par share, of which ________ shares
are issued and  outstanding and (ii) no shares of preferred  stock,  and (b) the
authorized  capital stock of the Borrower  consists of (i) __________  shares of
common stock,  $_____ par value per share,  of which ________  shares are issued
and outstanding and owned by Holdings  ("Borrower  Common Stock",  together with
the Holdings  Common Stock,  the "Common Stock") and (ii) no shares of preferred
stock.  All such Common Stock has been duly and validly  issued,  are fully paid
and  nonassessable and are free of preemptive  rights.  All such Common Stock is
owned of record by the  Persons  and in the  amounts  set forth on  Schedule  I.
Neither  Holdings nor any of its  Subsidiaries  has  outstanding  any securities
convertible into or

<PAGE>

exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase,  or any options for the purchase of, or any agreement providing for
the issuance  (contingent or otherwise) of, or any calls,  commitments or claims
of any character  relating to, its capital stock,  or any stock  appreciation or
similar right with respect thereto.

                  10. To the best of our knowledge, on the date hereof and after
giving effect to the  Transaction,  the entities  listed on Schedule VIII to the
Credit Agreement are the only Subsidiaries of each of Holdings and the Borrower.
To the best of our knowledge,  Schedule VIII to the Credit  Agreement  correctly
sets forth the direct and  indirect  ownership  interests  of  Holdings  and the
Borrower in each class of capital  stock of each of its  Subsidiaries  as of the
date hereof.

                  11. Each Credit Party that is a party to the Pledge  Agreement
is the  record  owner of all of the Stock  and  Notes  (as each  such  terms are
defined in the Pledge  Agreement) as listed on Annex B and Annex C to the Pledge
Agreement under such Credit Party's name. After giving effect to the delivery to
the Collateral  Agent of the Pledged Stock and the Pledged Notes listed on Annex
B and Annex C to the Pledge Agreement,  and assuming the continued possession at
all times  hereafter by the  Collateral  Agent of such Pledged Stock and Pledged
Notes (as  defined  in the  Pledge  Agreement)  in the  State of New  York,  the
security  interest  created in favor of the  Collateral  Agent  under the Pledge
Agreement  constitutes a valid and enforceable  perfected  security  interest in
such Pledged Securities and proceeds thereof in favor of the Pledgee (as defined
in the Pledge Agreement) for the benefit of the Secured Creditors, subject to no
security interest of any other person assuming that neither the Collateral Agent
nor any of the Banks has notice,  at or prior to the time of  delivery,  of such
Pledged  Securities to the Collateral Agent of any adverse claim, and no filings
or recordings  are required in order to perfect the security  interests  created
under the Pledge Agreement.

                  12. The  Security  Agreement  creates a valid and  enforceable
security  interest in favor of the Collateral  Agent in the  Collateral  therein
described  which  constitutes  property in which the  security  interest  can be
granted  under  the UCC as in  effect  in the  States  set forth on Annex A (the
"Relevant  States").  We have examined the financing  statements (the "Financing
Statements")  to be filed in the filing offices listed for each party on Annex B
attached hereto (the "Filing Offices") which are in proper form for filing,  and
upon the filing of the Financing Statements in the Filing Offices, assuming that
the  representations  made by each Credit Party in the Security  Agreement  with
respect to the location of its Collateral (as defined in the Security Agreement)
are and remain true and correct, the perfection of the security interest granted
by such Credit Party to the Collateral Agent under the Security Agreement,  with
respect  to all  Collateral  thereunder  will  have  been  accomplished  and the
security  interests  granted to the  Collateral  Agent  pursuant to the Security
Agreement  in and to such  Collateral  will  constitute  a valid and a perfected
security  interest  therein to the extent that such  Collateral  consists of the
type of  property  in which a security  interest  may be  perfected  by filing a
financing  statement  under the UCC as in effect in the  Relevant  States and no
further filings or recordings of any document or instrument or other action will
be  required  so to perfect  the  security  interests  except  for  continuation
statements.

                  13. Assuming that the representation made by each Credit Party
in Section 2.4 of the  Security  Agreement  with  respect to the location of its
chief  executive  office is and remains

<PAGE>

true and  correct  under the law of the State of New York,  the  perfection  and
priority of the  security  interests  granted by each such  Credit  Party in its
Receivables,  Contracts,  Contract Rights and General Intangibles (as defined in
the Security  Agreement) are governed by the laws of  ____________  [State where
such Credit Party's chief  executive  office is located] to the extent that said
Receivables,  Contracts,  Contract  Rights and  General  Intangibles  consist of
"accounts" and "general intangibles" as described in the New York UCC.

                  14. We have examined the Patent and Trademark Assignments (the
"Patent and Trademark  Filings") and the Copyright  Assignments  (the "Copyright
Filings") attached hereto as Annexes C and D,  respectively.  The recordation of
the Security Agreement and the Patent and Trademark Filings in the United States
Patent and Trademark Offices and the filing of the Financing Statements with the
Filing  Offices will be  effective,  under  federal law, to perfect the security
interest  granted to the Collateral  Agent in the trademarks and patents covered
by the  Security  Agreement,  and the filing of the Security  Agreement  and the
Copyright  Filing with the United States  Copyright Office and the filing of the
Financing Statements with the Filing Offices will be effective under federal law
to  perfect  the  security  interest  granted  to the  Collateral  Agent  in the
copyrights covered by the Security Agreement.

                  15. The submission by the Credit Parties to the  non-exclusive
jurisdiction  of the courts of New York or of the United States for the Southern
District of New York, as set forth in the Credit  Documents is valid and binding
on the Parties.

                  We are  members  of the Bar of the  State of  __________  and,
except  as  described  in the  following  sentence,  our  opinion  set  forth in
paragraphs 12 and 13 above (to the extent governed by law other than that of the
United States of America,  and the States of ___________  and Delaware) is based
upon my review of generally  available  compilations of the law relating to such
matters.  We do not hold ourselves out as being  conversant with, and express no
opinion  as to,  the laws of any  jurisdiction  other  than  those of the United
States of America, the State of ___________ and the general corporate law of the
State of  Delaware.  To the extent our  opinions are governed by laws other than
that of the United States of America,  _____________  and the general  corporate
law of the State of Delaware, we have assumed that the laws of such other states
are the same as those of _______________.

                  This  opinion  letter is solely for your  benefit  and for the
benefit  of each Bank from time to time  party to the  Credit  Agreement,  their
participants and assigns, and may not be relied upon by any other person without
our prior  written  consent.  This  opinion may not be relied upon for any other
purpose,  or  relied  upon by any  other  person,  firm or  corporation  for any
purpose, without our prior written consent.

                                                    Very truly yours,


                                                    [---------------]
                                                    Jenkins & Gilchrist

<PAGE>

                                                                       EXHIBIT E

                             [NAME OF CREDIT PARTY]

                              Officers' Certificate

                  I, the  undersigned,  [President/Vice  President]  of [Name of
Credit Party], a corporation  organized and existing under the laws of the State
of ________ (the "Company"), do hereby certify on behalf of the Company that:

                  1.  This  Certificate  is  furnished  pursuant  to the  Credit
Agreement,   dated  as  of  December  30,  1999,   among  USOL  Holdings,   Inc.
("Holdings"),  USOL, Inc. (the "Borrower"), the financial institutions from time
to time party thereto,  and Paribas,  as  Administrative  Agent and  Syndication
Agent,  and Deutsche  Bank AG, New York  Branch,  as  Documentation  Agent (such
Credit  Agreement,  as in effect on the date of this  Certificate,  being herein
called the "Credit  Agreement").  Unless otherwise  defined herein,  capitalized
terms used in this  Certificate  shall have the meanings set forth in the Credit
Agreement.

                  2. The following named individuals are elected officers of the
Company,  each holds the office of the Company set forth  opposite  his name and
has held such office as of the date of the signing of any Credit  Document.  The
signature  written  opposite  the name and  title of each  such  officer  is his
correct signature.

Name(1)                          Office                               Signature


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

                  3.  Attached  hereto as Exhibit A is a  certified  copy of the
Certificate  of  Incorporation  of the  Company  as filed in the  Office  of the
Secretary of State of the State of ____________ on _______,  19__, together with
all amendments thereto adopted through the date hereof.


                  4. Attached  hereto as Exhibit B is a true and correct copy of
the By-Laws of the Company,  together with all  amendments  thereto,  which were
duly adopted and are in full force and effect on the date hereof.

<PAGE>

                  5. Attached  hereto as Exhibit C is a true and correct copy of
resolutions  which were duly adopted on __________,  19__ [by unanimous  written
consent of the Board of  Directors of the Company] [by a meeting of the Board of
Directors  of the Company at which a quorum was present and acting  throughout],
and said  resolutions  have not been rescinded,  amended or modified.  Except as
attached  hereto as Exhibit C, no resolutions  have been adopted by the Board of
Directors of the Company which deal with the execution,  delivery or performance
of any of the Documents to which the Company is party.

                  [6.  Attached hereto as Exhibit D are true and correct copies
of all Employee Benefit Plans of Holdings and its Subsidiaries.

                  7. Attached hereto as Exhibit E are true and correct copies of
all  Shareholders'  Agreements with respect to the capital stock of Holdings and
its Subsidiaries.

                  8.  Attached hereto as Exhibit F are true and correct copies
of all Management Agreements of Holdings and its Subsidiaries.

                  9.  Attached hereto as Exhibit G are true and correct copies
of all Employment Agreements of Holdings and its Subsidiaries.

                  10.  Attached hereto as Exhibit H are true and correct copies
of all Collective Bargaining Agreements of Holdings and its Subsidiaries.

                  11.  Attached hereto as Exhibit I are true and correct copies
of all Debt Agreements of Holdings and its Subsidiaries.

                  12.  Attached  hereto as Exhibit J are true and correct copies
of  all  Tax  Sharing  Agreements  entered  into  by  Holdings  or  any  of  its
Subsidiaries.

                  13.  Attached hereto as Exhibit K are true and correct copies
of all Affiliate Contracts of Holdings or any of its Subsidiaries.

                  14.  Attached hereto as Exhibit K are true and correct copies
of all Material Contracts of Holdings or any of its Subsidiaries.

                  15.  Attached hereto as Exhibit M are true and correct copies
of the Debt Termination Documents.

                  [6.]  [16.]  On the  date  hereof,  all of the  conditions  in
Sections 4.10, 4.11, 4.14, 4.16, 5.01, 5.02 and 5.03 have been satisfied (except
to the  extent as to the  acceptability  of any items to the  Agent  and/or  the
Required  Banks or as to  whether  the  Agent  and/or  the  Required  Banks  are
satisfied with any of the matters described in said Sections).

                  [7.]  [17.]  On  the  date  hereof,  the  representations  and
warranties  contained in the Credit  Agreement and in the other Credit Documents
are true and correct in all  material  respects,

<PAGE>

both before and after  giving  effect to each Credit  Event to occur on the date
hereof and the application of the proceeds thereof.

                  [8.] [18.]  On the date hereof, no Default or Event of Default
has occurred and is continuing or would result from the Credit Events to occur
on the date hereof or from the application of the proceeds thereof.]

                  [9.] [19.]  There is no proceeding for the dissolution or
liquidation of the Company or threatening its existence.

                  IN WITNESS  WHEREOF,  I have hereunto set my hand this ___ day
of ____, 1999.

                                                [NAME OF CREDIT PARTY]



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

<PAGE>

I, the undersigned,  [Secretary/Assistant  Secretary] of the Company,  do hereby
certify that:

                  1.       [Name of Person making above certifications] is the
duly elected and qualified [President/Vice President] of the Company and the
signature above is his genuine signature.

                  2. The  certifications  made by [name of Person  making  above
certifications]  in Items 2, 3, 4, 5,  [11],  [17] and [19]  above  are true and
correct.

                  IN WITNESS  WHEREOF,  I have hereunto set my hand this ___ day
of ____, 1999.

                                                  [NAME OF CREDIT PARTY]



                                                  ------------------------------
                                                  Name:

<PAGE>

                                                                       EXHIBIT F

                                PLEDGE AGREEMENT

                  PLEDGE  AGREEMENT,  dated as of December __, 1999 (as amended,
modified or supplemented  from time to time, the  "Agreement"),  made by each of
the undersigned (each, a "Pledgor" and collectively the "Pledgors"), in favor of
PARIBAS,  as Collateral Agent (the "Pledgee"),  for the benefit of (x) the Banks
(as defined below) and the  Administrative  Agent (as defined below) under,  and
any other  lender  from time to time party to the Credit  Agreement  hereinafter
referred  to  (such  Banks,  the  Agent  and the  other  lenders,  if  any,  are
hereinafter  called the "Bank  Creditors")  and (y) if Paribas in its individual
capacity, any Bank or a syndicate of financial institutions organized by Paribas
or any such Bank or an  affiliate of Paribas or such Bank enter into one or more
(i) interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange
contracts,  currency swap agreements or other similar agreements or arrangements
designed to protect  against the  fluctuations  in currency  values and/or (iii)
other types of hedging agreements from time to time (collectively, the "Interest
Rate  Protection or Other  Hedging  Agreements"),  with,  or guaranteed  by, the
Borrower (as defined below),  Paribas,  any such Bank or an affiliate of Paribas
or such Bank  (even if  Paribas  or any such Bank  ceases to be a Bank under the
Credit Agreement for any reason) and any such  institution that  participates in
such Interest Rate Protection or Other Hedging  Agreements and their  subsequent
assigns  (collectively,  the  "Other  Creditors"  and,  together  with  the Bank
Creditors,  are herein  called the  "Secured  Creditors").  Except as  otherwise
defined herein,  terms used herein and defined in the Credit  Agreement shall be
used herein as therein defined.

                              W I T N E S S E T H :


                  WHEREAS,  USOL Holdings,  Inc.  ("Holdings"),  USOL, Inc. (the
"Borrower"), various financial institutions from time to time party thereto (the
"Banks"),  Paribas,  as Administrative  Agent (the  "Administrative  Agent") and
Syndication  Agent,  and  Deutsche  Bank AG, New York Branch,  as  Documentation
Agent,  have  entered  into a Credit  Agreement,  dated as of December 30, 1999,
providing for the making of Loans as contemplated  therein (as used herein,  the
term  "Credit  Agreement"  means the Credit  Agreement  described  above in this
paragraph, as the same may be amended,  modified,  extended,  renewed, replaced,
restated,  supplemented,  restructured  or  refinanced  from  time to time,  and
including any agreement  extending the maturity of, refinancing or restructuring
(including, but not limited to, the inclusion of additional borrowers thereunder
that are  Subsidiaries  of Holdings and whose  obligations are guaranteed by the
Borrower  thereunder or any increase in the amount  borrowed) all or any portion
of, the Indebtedness under such agreement or any successor agreements; provided,
that with respect to any agreement providing for the refinancing of Indebtedness
under the Credit Agreement,  such agreement shall only be treated as, or as part
of, the Credit Agreement  hereunder if (i) either (A) all obligations  under the
Credit  Agreement  being  refinanced  shall  be paid in full at the time of such
refinancing,  and all  commitments  issued  pursuant  to the  refinanced  Credit
Agreement  shall have  terminated  in  accordance  with  their  terms or (B) the
Required Banks shall have consented in writing to the  refinancing  Indebtedness
being treated,  along with their Indebtedness,  as Indebtedness  pursuant to the
Credit  Agreement,  (ii) the refinancing  Indebtedness

<PAGE>

shall be permitted to be incurred under the Credit  Agreement  being  refinanced
(if such Credit  Agreement is to remain  outstanding)  and (iii) a notice to the
effect that the  refinancing  Indebtedness  shall be treated as issued under the
Credit Agreement shall be delivered by the Borrower to the Collateral Agent);

                  WHEREAS,  pursuant  to the  Holdings  Guaranty,  Holdings  has
guaranteed to the Secured  Creditors the payment when due of all obligations and
liabilities  of the Borrower  under or with respect to the Credit  Documents and
each Interest Rate Protection or Other Hedging Agreements with one or more Other
Creditors;

                  WHEREAS,   pursuant  to  the   Subsidiaries   Guaranty,   each
Subsidiary  of  Holdings  other  than the  Borrower  (if any) have  jointly  and
severally  guaranteed the payment when due of all obligations and liabilities of
the Borrower  under or with respect to the Credit  Documents  and each  Interest
Rate Protection  Agreement or Other Hedging  Agreement  entered into with one or
more Other Creditors;

                  WHEREAS, the Borrower desires to incur Loans pursuant to the
Credit Agreement;

                  WHEREAS,  the  Borrower  may at any time and from time to time
enter into one or more Interest Rate Protection or Other Hedging Agreements with
one or more Other Creditors;

                  WHEREAS,  it is a  condition  to each  of the  above-described
extensions  of credit to the Borrower  that each Pledgor shall have executed and
delivered this Agreement to the Pledgee; and

                  WHEREAS,  each Pledgor  desires to execute  this  Agreement to
satisfy the conditions described in the preceding paragraph;

                  NOW,  THEREFORE,  in consideration of the benefits accruing to
each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor  hereby  makes  the  following  representations  and  warranties  to the
Pledgees  for the  benefit of the Secured  Creditors  and hereby  covenants  and
agrees with the Pledgee for the benefit of the Secured Creditors as follows:

                  1.  SECURITY  FOR  OBLIGATIONS.  This  Agreement  is made by
each  Pledgor for the benefit of the Secured Creditors to secure:

                  (i) the full and  prompt  payment  when  due  (whether  at the
stated   maturity,   by  acceleration  or  otherwise)  of  all  obligations  and
indebtedness  (including,  without  limitation,  indemnitees,  fees and interest
thereon) of the  Borrower  and such  Pledgor  owing to the Bank  Creditors,  now
existing or hereafter  incurred under,  arising out of or in connection with any
Credit  Document and the due performance and compliance by the Borrower and such
Pledgor with the terms of each such Credit  Document (all such  obligations  and
liabilities   under  this  clause  (i),  except  to  the  extent  consisting  of
obligations or  indebtedness  with respect to Interest Rate

<PAGE>

Protection or Other Hedging  Agreements,  being herein  collectively  called the
"Credit Document Obligations");

                  (ii) the full and  prompt  payment  when due  (whether  at the
stated   maturity,   by  acceleration  or  otherwise)  of  all  obligations  and
indebtedness  (including,  without  limitation,  indemnitees,  fees and interest
thereon) of the  Borrower  and such Pledgor  owing to the Other  Creditors,  now
existing or hereafter  incurred under,  arising out of or in connection with any
Interest Rate Protection or Other Hedging  Agreement  including,  in the case of
Holdings  and each  Subsidiary  Guarantor,  all  obligations  under the Holdings
Guaranty or the Subsidiaries  Guaranty in respect of Interest Rate Protection or
Other Hedging  Agreements  (all such  obligations  and  indebtedness  under this
clause (ii) being  herein  collectively  called the  "Interest  Rate  Protection
Obligations");

                  (iii) any and all sums  advanced  by the  Pledgee  in order to
preserve  the  Collateral  (as defined in Section  3.4  herein) or preserve  its
security interest in the Collateral;

                  (iv) in the  event of any  proceeding  for the  collection  or
enforcement of any  indebtedness,  obligations,  or  liabilities  referred to in
clauses (i), (ii) and (iii) above, after an Event of Default (such term, as used
in this Agreement, shall mean any Event of Default under, and as defined in, the
Credit  Agreement,  or any payment default under any Interest Rate Protection or
Other Hedging Agreement and shall in any event include, without limitation,  any
payment default on any of the  Obligations (as hereinafter  defined)) shall have
occurred  and be  continuing,  the  reasonable  expenses of  retaking,  holding,
preparing for sale or lease,  selling or otherwise disposing or realizing on the
Collateral, or of any exercise by the Pledgee of its rights hereunder,  together
with reasonable attorneys' fees and court costs; and

                  (v)      all  amounts  paid by any  Indemnitee  as to  which
such  Indemnitee  has the  right to reimbursement under Section 11 of this
Agreement;

all such  obligations,  liabilities,  sums and expenses set forth in clauses (i)
through  (v)  of  this   Section  1  being   herein   collectively   called  the
"Obligations";   provided,   that  it  is  acknowledged   and  agreed  that  the
"Obligations"  shall include  extensions of credit of the types described above,
whether  outstanding on the date of this Agreement or extended from time to time
after the date of this Agreement.

     2.  DEFINTIONS;   ANNEXES.   (a)  Unless  otherwise  defined  herein,   all
capitalized  terms used herein and defined in the Credit Agreement shall be used
herein as therein defined.  Reference to singular terms shall include the plural
and vice versa.

                  (b) The following capitalized terms used herein shall have the
definitions specified below:

                  "Administrative  Agent" shall have the meaning provided in the
preamble to this Agreement.

<PAGE>

                  "Adverse  Claim"  shall  have the  meaning  given such term in
Section 8-102(a)(1) of the UCC.

                  "Agreement" shall have the meaning provided in the preamble to
this Agreement.

                  "Bank  Creditors"  shall  have  the  meaning  provided  in the
preamble to this Agreement.

                  "Banks" shall have the meaning provided in the recitals to the
Agreement.

                  "Borrower" shall have the meaning provided in the recitals to
this Agreement

                  "Certificated Security" shall have the meaning given such term
in Section  8-102(a)(4)  of the UCC and shall in any event include all Stock and
Notes.

                  "Clearing  Corporation"  shall have the meaning provided such
term in Section  8-102(a)(5) of the UCC.

                  "Collateral" shall have the meaning provided in Section 3.1.

                  "Collateral  Accounts" means any and all accounts  established
and maintained by the Pledgee in the name of the Pledgor to which Collateral may
be credited.

                  "Credit  Agreement"  shall have the  meaning  provided  in the
recitals to this Agreement.

                  "Credit Document  Obligations" shall have the meaning provided
in Section 1 to this Agreement.

                  "Domestic  Corporation" shall have the meaning provided in the
definition of "Stock."

                  "Event of Default" shall have the meaning  provided in Section
1 to this Agreement.

                  "Foreign  Corporation"  shall have the meaning provided in the
definition of "Stock."

                  "Holdings"  shall have the meaning provided in the recitals to
this Agreement.

                  "Indemnitees" has the meaning set forth in Section 11 hereof.

                  "Interest Rate Protection or Other Hedging  Agreements"  shall
have the meaning provided in the preamble to this Agreement.

                  "Investment  Property"  has the  meaning  given  such  term in
Section 9-115(f) of the UCC.

<PAGE>

                  "Obligations"  shall have the meaning provided in Section 1 to
this Agreement.

                  "Other  Creditors"  shall  have the  meaning  provided  in the
preamble to this Agreement.

                  "Notes" means all  promissory  notes at any time issued to the
Pledgors by any its Subsidiaries or Affiliates or any other person.

                  "Pledged Notes" shall have the meaning provided in Section 3.5
to this Agreement.

                  "Pledged  Securities"  shall  have  the  meaning  provided  in
Section 3.5 to this Agreement.

                  "Pledged Stock" shall have the meaning provided in Section 3.5
to this Agreement.

                  "Pledgee"  shall have the meaning  provided in the preamble to
this Agreement.

                  "Pledgor"  shall have the meaning  provided in the preamble to
this Agreement.

                  "Proceeds"  shall  have  the  meaning  provided  such  term in
                  Section  9-306(l) of the UCC.  "Secured  Creditors" shall have
                  the meaning provided in the preamble to this Agreement.

                  "Securities Act" means the Securities Act of 1933, as amended,
as in effect from time to time.

                  "Security" and "Securities"  shall have the meaning given such
term in Section 8-102(a)(15) of the UCC and shall in any event include all Stock
(to the extent same  constitute  "Securities"  under Section  8-102(a)(15))  and
Notes.

                  "Security  Entitlement" shall have the meaning provided such
term in Section  8-102(a)(17) of the UCC.

                  "Stock"  means (x) with respect to  corporations  incorporated
under the laws of the United  States or any State or territory  thereof  (each a
"Domestic  Corporation"),  all of the issued and  outstanding  shares of capital
stock of any  corporation  at any  time  owned by the  Pledgor  of any  Domestic
Corporation and (y) with respect to corporations not Domestic Corporations (each
a "Foreign  Corporation"),  all of the issued and outstanding  shares of capital
stock at any time owned by the Pledgor of any Foreign Corporation.

                  "Termination  Date" has the  meaning  set forth in  Section 19
hereof to this Agreement.

<PAGE>

                  "UCC"  means the Uniform  Commercial  Code as in effect in the
State of New York from time to time.

                  "Uncertificated  Security" shall have the meaning  provided
such term in Section  8-102(a)(18) of the UCC.

                  3.  PLEDGE OF SECURITY INTEREST, ETC.

                  3.1 Pledge. To secure the Obligations now or hereafter owed or
to be  performed by the  Borrower,  the Pledgor  does hereby  grant,  pledge and
assign to the Pledgee  for the  benefit of the  Pledgee and the Banks,  and does
hereby  create a  continuing  security  interest in favor of the Pledgee for the
benefit of the Pledgee and the Banks,  all of the right,  title and  interest of
the  Pledgor in and to any and all of the  following,  whether  now  existing or
hereafter from time to time acquired (collectively, the "Collateral");

                  (a)      all Securities;

                  (b)      all Security Entitlements and

                  (c)      all Proceeds of any and all of the foregoing.

                  3.2 Procedures. (a) To the extent that the Pledgor at any time
or from time to time owns,  acquires or obtains any right,  title or interest in
any Collateral,  such Collateral shall  automatically (and without the taking of
any action by the respective Pledgor) be pledged pursuant to Section 3.1 of this
Agreement and, in addition  thereto,  such Pledgor shall (to the extent provided
below) take the following actions as set forth below (as promptly as practicable
and,  in any event,  within 10 days after it obtains  such  Collateral)  for the
benefit of the Pledgee and the Secured Creditors:

                  (i) with  respect to a  Certificated  Security  (other  than a
         Certificated Security credited on the books of a Clearing Corporation),
         the  respective  Pledgor  shall  physically  deliver such  Certificated
         Security  to the  Pledgee,  accompanied  by undated  stock  powers duly
         executed  in  blank,  or such  other  instruments  of  transfer  as are
         acceptable to the Pledgee;

                  (ii) with respect to an Uncertificated Security (other than an
         Uncertificated   Security   credited   on  the  books  of  a   Clearing
         Corporation),  the  respective  Pledgor  shall cause the issuer of such
         Uncertificated  Security to duly authorize and execute,  and deliver to
         the  Pledgee,  an  agreement  for the  benefit of the  Pledgee  and the
         Secured  Creditors   substantially  in  the  form  of  Annex  A  hereto
         (appropriately  completed to the  satisfaction  of the Pledgee and with
         such  modifications,  if any, as shall be  satisfactory to the Pledgee)
         pursuant  to  which  such  issuer  agrees  to  comply  with any and all
         instructions  originated by the Pledgee  without further consent by the
         registered  owner and not to comply with  instructions  regarding  such
         Uncertificated  Security  originated  by any other  Person other than a
         court of competent jurisdiction;

<PAGE>

                  (iii)   with   respect   to   a   Certificated   Security   or
         Uncertificated   Security,   credited   on  the  books  of  a  Clearing
         Corporation  (including  a Federal  Reserve  Bank,  Participants  Trust
         Company or The Depository  Trust  Company),  the Pledgor shall promptly
         take all actions  required (i) to comply with the  applicable  rules of
         such Clearing  Corporation and (ii) to perfect the security interest of
         the  Pledgee  under  applicable  law  (including,  in any event,  under
         Sections  9-115 (4)(a) and (b), 9-115 (1)(e) and 8-106 (d) of the UCC).
         The Pledgor  further  agrees to take such actions as the Pledgee  deems
         necessary or desirable to effect the foregoing;

                  (iv) with respect to a Security Entitlement, the Pledgor shall
         promptly take all actions required to perfect the security  interest of
         the  Pledgee  under  applicable  law  (including,  in any event,  under
         Sections 9-115(4)(a) and (b), 9-115(1)(e) and 8-106(d) of the UCC). The
         Pledgor  further  agrees  to take such  actions  as the  Pledgee  deems
         necessary or desirable to effect the foregoing; and

                  (v) with  respect  to a Note,  the  respective  Pledgor  shall
         physically deliver such Note to the Pledgee, duly endorsed in blank.

                  (b) In addition to the actions  required to be taken  pursuant
to proceeding  Section 3.2(a),  the Pledgor shall take the following  additional
actions with respect to the Collateral:

                  (i) with respect to all  Collateral of the Pledgor  whereby or
         with respect to which the Pledgee may obtain  "control"  thereof within
         the meaning of Section  8-106 of the UCC (or under any provision of the
         UCC as same may be amended or supplemented  from time to time, or under
         the laws of any relevant  State other than the State of New York),  the
         Pledgor shall take all actions as may be requested from time to time by
         the Pledgee so that "control" of such Collateral is obtained and at all
         times held by the Pledgee; and

                  (ii) the  Pledgor  shall from time to time  cause  appropriate
         financing  statements (on Form UCC-1 or other  appropriate  form) under
         the  Uniform  Commercial  Code as in  effect  in the  various  relevant
         States,  on form covering all  Collateral  hereunder  (with the form of
         such financing  statements to be  satisfactory  to the Pledgee),  to be
         filed in the relevant  filing  offices so that at all times the Pledgee
         has a security interest in all Investment Property and other Collateral
         which is perfected by the filing of such financing  statements (in each
         case to the maximum  extent  perfection by filing may be obtained under
         the laws of the relevant States, including, without limitation, Section
         9-115(4)(b) of the UCC).

                  3.3  Subsequently  Acquired  Collateral.  If the Pledgor shall
acquire (by purchase,  stock dividend or otherwise) any additional Collateral at
any time or from  time to time  after the date  hereof,  such  Collateral  shall
automatically  (and without any further  action  being  required to be taken) be
subject to the pledge and  security  interests  created  pursuant to Section 3.1
and,  furthermore,  the Pledgor will  promptly  thereafter  take (or cause to be
taken) all  action  with  respect  to such  Collateral  in  accordance  with the
procedures set forth in Section 3.2, and will promptly thereafter deliver to the
Pledgee (i) a  certificate  executed by a  principal  executive  officer of such
Pledgor  describing  such  Collateral and certifying that the same has been duly
pledged  in

<PAGE>

favor of the Pledgee (for the benefit of the Secured  Creditors)  hereunder  and
(ii)  supplements  to Annexes A, B and C hereto as are  necessary  to cause such
annexes to be complete and accurate at such time.

                  3.4 Transfer  Taxes.  Each pledge of Collateral  under Section
3.1 or Section 3.3 shall be  accompanied  by any transfer tax and other  revenue
stamps, acquired at the Pledgor's expense, affixed and cancelled, as required in
connection with the pledge of such Collateral.

                  3.5  Definition  of Pledged  Stock,  Pledged Notes and Pledged
Securities. All Stock at any time pledged or required to be pledged hereunder is
hereinafter  called  the  "Pledged  Stock,"  all  Notes at any time  pledged  or
required to be pledged hereunder are hereinafter called the "Pledged Notes." All
of the Pledged  Stock and Pledged  Notes  together  are  hereinafter  called the
"Pledged Securities."

                  3.6  Certain  Representations  and  Warranties  Regarding  the
Collateral.  The Pledgor represents and warrants that on the date hereof (i) the
Stock  held by such  Pledgor  consists  of the  number and type of shares of the
stock of the  corporations  as  described  in Annex B hereto;  (ii)  such  Stock
constitutes  that percentage of the issued and outstanding  capital stock of the
issuing  corporation as is set forth in Annex B hereto,  (iii) the Notes consist
of the  promissory  notes  described  in Annex C hereto;  (iv) the  Pledgor  has
complied with the respective  procedure set forth in Section 3.2(a) with respect
to each item of  Collateral  described  in Annex B hereto;  (v) it is the legal,
record and sole beneficial  owner of, and has good and marketable  title to, the
Stock and  Notes  described  in  Section 2 hereof  subject  to direct  ownership
thereof  as listed in Annex B and Annex C hereto  and there  exist no options or
preemptive  rights in respect  of any of the Stock and (vi) on the date  hereof,
such Pledgor owns no other Securities.

                  4. APPOINTMENT OF SUB-AGENTS;  ENDORSEMENTS,  ETC. The Pledgee
shall  have the right to  appoint  one or more  sub-agents  for the  purpose  of
retaining  physical  possession  of the  Collateral,  which  may be held (in the
discretion of the Pledgee) in the name of each Pledgor,  endorsed or assigned in
blank or in favor of the  Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee.

                  5. VOTING,  ETC., WHILE NO EVENT OF DEFAULT.  Unless and until
an Event of Default  shall have occurred and be  continuing  and written  notice
thereof shall be given by the Pledgee to the relevant Pledgor  (provided that if
any of the  Defaults  specified in Section  9.05 of the Credit  Agreement  shall
occur,  no such notice  should be  required),  each Pledgor shall be entitled to
exercise  any and all  voting  and other  consensual  rights  pertaining  to the
Collateral owned by it and to give consents, waivers or ratifications in respect
thereof;  provided,  that  no vote  shall  be cast  or any  consent,  waiver  or
ratification  given or any action taken which would  violate or be  inconsistent
with any of the  terms of this  Agreement,  any  other  Credit  Document  or any
Interest Rate Protection or Other Hedging Agreement (collectively,  the "Secured
Debt  Agreements"),  or which would have the effect of impairing the position or
interests  of the  Pledgee  or any  Secured  Creditor.  All such  rights of each
Pledgor to vote and to give consents,  waivers and ratifications  shall cease in
case an Event of Default  shall  occur and be  continuing,  and Section 7 hereof
shall become applicable.

<PAGE>

                  6.  DIVIDENDS  AND  OTHER  DISTRIBUTIONS.  Unless  an Event of
Default  shall  have  occurred  and be  continuing  (or would  occur as a result
thereof),  all cash  dividends  payable in respect of the Pledged  Stock and all
payments  in  respect  of the  Pledged  Notes  shall  be paid to the  respective
Pledgor;  provided,  that all cash  dividends  payable in respect of the Pledged
Stock which are determined by the Pledgee, in its sole discretion,  to represent
in whole or in part an  extraordinary,  liquidating  or  other  distribution  in
return of capital  shall be paid,  to the extent so  determined  to represent an
extraordinary,  liquidating or other  distribution in return of capital,  to the
Pledgee and retained by it as part of the Collateral.  The Pledgee shall also be
entitled to receive directly, and to retain as part of the Collateral:

                  (i) all  other or  additional  stock or  other  securities  or
property (including,  but not limited to, cash dividends other than as set forth
above) paid or  distributed  by way of dividend or  otherwise  in respect of the
Collateral;

                  (ii) all  other or  additional  stock or other  securities  or
property (including, but not limited to, cash) paid or distributed in respect of
the  Collateral by way of  stock-split,  spin-off,  split-up,  reclassification,
combination of shares or similar rearrangement;

                  (iii) all other or  additional  stock or other  securities  or
property  (including,  but not limited to, cash) which may be paid in respect of
the  Collateral  by  reason of any  consolidation,  merger,  exchange  of stock,
conveyance of assets, liquidation or similar corporate reorganization; and

                  (iv)     all  other  property  (other  than  cash)  paid or
distributed  by way of  dividend  or distribution in respect of the Collateral.

Nothing  contained  in this  Section 6 shall  limit or  restrict  in any way the
Pledgee's right to receive  proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor  contrary to the  provisions of this Section 6
and Section 7 shall be received in trust for the benefit of the  Pledgee,  shall
be  segregated  from  other  property  or funds  of such  Pledgor  and  shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).

                  7.  REMEDIES IN CASE OF EVENT OF DEFAULT.  In case an Event of
Default shall have occurred and be continuing,  the Pledgee shall be entitled to
exercise all of the rights,  powers and remedies  (whether  vested in it by this
Agreement  or by any other  Credit  Document or by law) for the  protection  and
enforcement  of its  rights in  respect of the  Collateral,  including,  without
limitation,  all the rights and remedies of a secured  party upon default  under
the Uniform  Commercial  Code of the State of New York, and the Pledgee shall be
entitled,  without  limitation,  to exercise the  following  rights,  which each
Pledgor hereby agrees to be commercially reasonable:

     (i) to receive all amounts payable in respect of the Collateral  payable to
such Pledgor under Section 6;

<PAGE>

     (ii) to transfer all or any part of the Collateral  into the Pledgee's name
or the name of its nominee or nominees;

     (iii) to accelerate any Pledged Note which may be accelerated in accordance
with its terms,  and take any other  action to  collect  upon any  Pledged  Note
(including, without limitation, to make any demand for payment thereon);

     (iv) to vote all or any part of the Collateral  (whether or not transferred
into the name of the Pledgee) and give all consents,  waivers and  ratifications
in respect of the Collateral and otherwise act with respect thereto as though it
were the outright  owner thereof (each Pledgor hereby  irrevocably  constituting
and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor,  with
full power of substitution to do so);

     (v) at any time or from time to time to sell, assign and deliver,  or grant
options to purchase, all or any part of the Collateral, or any interest therein,
at any public or private sale,  without demand of performance,  advertisement or
notice  of  intention  to sell or of the time or  place  of sale or  adjournment
thereof  or to  redeem or  otherwise  (all of which  are  hereby  waived by each
Pledgor),  for cash,  on credit or for other  property,  for immediate or future
delivery without any assumption of credit risk, and for such price or prices and
on such terms as the Pledgee in its absolute discretion may determine; provided,
that at least 10 days'  notice of the time and  place of any such sale  shall be
given to such  Pledgor.  The Pledgee shall not be obligated to make such sale of
Collateral  regardless of whether any such notice of sale has  theretofore  been
given.  Each  purchaser  at any  such  sale  shall  hold  the  property  so sold
absolutely  free  from any  claim or right on the part of the  Pledgor,  and the
Pledgor  hereby waives and releases to the fullest  extent  permitted by law any
right or equity of redemption with respect to the Collateral,  whether before or
after sale hereunder,  all rights, if any, of marshalling the Collateral and any
other security for the Obligations or otherwise, and all rights, if any, of stay
and/or  appraisal  which it now has or may at any time in the future  have under
rule of law or statute now  existing  or  hereafter  enacted.  At any such sale,
unless  prohibited  by  applicable  law,  the  Pledgee on behalf of all  Secured
Creditors  (or  certain  of  them)  may bid  for and  purchase  (by  bidding  in
Obligations  or otherwise)  all or any part of the  Collateral so sold free from
any such right or equity of  redemption.  Neither  the  Pledgee  nor any Secured
Creditor  shall be liable for  failure to collect or realize  upon any or all of
the  Collateral  or for any delay in so doing nor shall any of them be under any
obligation to take any action whatsoever with regard thereto; and

     (vi) to set-off any and all Collateral against any and all Obligations, and
to withdraw  any and all cash or other  Collateral  from any and all  Collateral
Accounts and to apply such cash and other  Collateral  to the payment of any and
all Obligations.

                  8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee  provided for in this Agreement or any other Credit  Document or now
or hereafter  existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right,  power or remedy.
The exercise or beginning of the exercise by

<PAGE>

the Pledgee or any Secured Creditor of any one or more of the rights,  powers or
remedies  provided for in this  Agreement or any other Secured Debt Agreement or
now or hereafter  existing at law or in equity or by statute or otherwise  shall
not preclude the  simultaneous  or later  exercise by the Pledgee or any Secured
Creditor of all such other rights,  powers or remedies,  and no failure or delay
on the part of the Pledgee or any Secured  Creditor to exercise  any such right,
power or remedy shall operate as a waiver thereof.  Unless otherwise required by
the Loan  Documents,  no notice to or demand on the  Pledgor  in any case  shall
entitle such Pledgor to any other or further  notice or demand in similar  other
circumstances  or constitute a waiver of any of the rights of the Pledgee or any
Secured  Creditor to any other or further  action in any  circumstances  without
demand or  notice.  The  Secured  Creditors  agree  that this  Agreement  may be
enforced  only by the action of the Agent or the  Pledgee,  in each case  acting
upon the  instructions  of the Required  Banks (or,  after the date on which all
Credit Document  Obligations have been paid in full, the holders of at least the
majority  of the  other  outstanding  Obligations)  and  that no  other  Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Agreement  or to  realize  upon the  security  to be  granted  hereby,  it being
understood  and agreed that such rights and  remedies  may be  exercised  by the
Administrative Agent or the Pledgee or the holders of at least a majority of the
other  outstanding  Obligations,  as the case  may be,  for the  benefit  of the
Secured  Creditors  upon  the  terms  of this  Agreement  and the  other  Credit
Documents.

                  9.  APPLICATION OF PROCEEDS.  (a) All moneys  collected by the
Pledgee upon any sale or other  disposition  of the  Collateral  pursuant to the
terms of this Agreement,  together with all other moneys received by the Pledgee
hereunder, shall be applied in the manner provided in the Security Agreement.

                  (b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency  between the amount
of the proceeds of the  Collateral  hereunder  and the  aggregate  amount of the
Obligations.

                  10. PURCHASERS OF COLLATERAL.  Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial  process or  otherwise),  the receipt of the Pledgee or the
officer  making the sale shall be a  sufficient  discharge  to the  purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the  application  of any part of the purchase  money paid
over  to the  Pledgee  or  such  officer  or be  answerable  in any  way for the
misapplication or nonapplication thereof.

                  11.  INDEMNITY.

                  11.1 Indemnity.  (a) Each Pledgor jointly and severally agrees
to indemnify,  reimburse and hold the Pledgee,  each Secured  Creditor and their
respective  successors,   permitted  assigns,  employees,  agents  and  servants
(hereinafter in this Section 11.1 referred to individually as "Indemnitee,"  and
collectively  as   "Indemnities")   harmless  from  any  and  all   liabilities,
obligations,  damages,  injuries,  penalties,  claims, demands,  actions, suits,
judgments and any and all costs, expenses or disbursements (including reasonable
out-of-pocket  attorneys'  fees and expenses and

<PAGE>

liabilities  for penalties) (for the purposes of this Section 11.1 the foregoing
are  collectively  called  "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnities in any way relating to or
arising out of this  Agreement,  any other Credit Document or any other document
executed in connection herewith and therewith or in any other way connected with
the  administration of the transactions  contemplated  hereby and thereby or the
enforcement of any of the terms of, or the  preservation of any rights under any
thereof,  the violation of the laws of any country,  state or other governmental
body or unit, any tort or contract claim; provided,  that no Indemnitee shall be
indemnified pursuant to this Section 11.1(a) for losses,  damages or liabilities
to the  extent  caused by the gross  negligence  or willful  misconduct  of such
Indemnitee;  and provided further that the Pledgor shall not be requested to pay
for the legal fees and expenses of more than one outside counsel for all persons
indemnified  under  this  Section  11 unless in the  written  opinion of outside
counsel  reasonably  satisfactory  to the  Pledgor,  representation  of all such
indemnified  persons would be inappropriate due to the existence of an actual or
potential  conflict of interest.  In no event shall any Indemnitee be liable for
any matter or thing in connection  with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. Each Pledgor
agrees that upon written  notice by any  Indemnitee  of the  assertion of such a
liability, obligation, damage, injury, penalty, claims, demand, action, judgment
or suit, such Pledgor shall assume full  responsibility for the defense thereof.
Each  Indemnitee  agrees to use its best efforts to promptly notify the relevant
Pledgor of any such assertion of which such Indemnitee has knowledge.

                  (b) Without limiting the application of Section 11.1(a),  each
Pledgor jointly and severally agrees to pay or reimburse the Pledgee for any and
all fees,  costs and expenses of whatever kind or nature  incurred in connection
with the creation,  preservation  or  protection of the Pledgee's  Liens on, and
security interest in, the Collateral,  including,  without limitation,  all fees
and  taxes in  connection  with the  recording  or  filing  of  instruments  and
documents in public offices,  payment or discharge of any taxes or Liens upon or
in  respect  of the  Collateral  and all  other  fees,  costs  and  expenses  in
connection  with  protecting,  maintaining  or preserving the Collateral and the
Pledgee's interest therein,  whether through judicial  proceedings or otherwise,
or in defending or prosecuting any actions,  suits or proceedings arising out of
or relating to the Collateral.

                  (c) If and to the extent that the  obligations  of any Pledgor
under this Section 11 are  unenforceable  for any reason,  such  Pledgor  hereby
agrees to make the maximum  contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.

                  11.2 Indemnity  Obligations  Secured by Collateral;  Survival.
Any amounts paid by any Indemnitee as to which such  Indemnitee has the right to
reimbursement  shall  constitute  Obligations  secured  by the  Collateral.  The
indemnity  obligations  of each  Pledgor  contained  in this  Section  11  shall
continue in full force and effect  notwithstanding  the full  payment of all the
Notes issued under the Credit  Agreement,  the  termination of all Interest Rate
Protection or Other Hedging  Agreements and the payment of all other Obligations
and notwithstanding the discharge thereof.

<PAGE>

                  12. FURTHER  ASSURANCES;  POWER-OF-ATTORNEY.  (a) Each Pledgor
agrees that it will join with the Pledgee in  executing  and, at such  Pledgor's
own  expense,   file  and  refile  under  the  UCC  such  financing  statements,
continuation  statements and other  documents in such offices as the Pledgee may
deem necessary or appropriate and wherever required or permitted by law in order
to perfect and preserve the Pledgee's  security  interest in the  Collateral and
hereby  authorizes  the  Pledgee to file  financing  statements  and  amendments
thereto  relative to all or any part of the Collateral  without the signature of
such  Pledgor  where  permitted  by law,  and agrees to do such further acts and
things and to execute and deliver to the Pledgee  such  additional  conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem advisable to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.

                  (b)  Each   Pledgor   hereby   appoints  the  Pledgee  as  its
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default,  in the Pledgee's  discretion
to take any lawful  action and to execute any  instrument  which the Pledgee may
reasonably  deem  necessary  or  advisable  to  accomplish  the purposes of this
Agreement.

                  13. THE PLEDGEE AS COLLATERAL  AGENT. The Pledgee will hold in
accordance  with this Agreement all items of the Collateral at any time received
under this  Agreement.  It is  expressly  understood  and agreed by the  parties
hereto and each Secured  Creditor,  by accepting the benefits of this Agreement,
acknowledges  and agrees  that the  obligations  of the Pledgee as holder of the
Collateral and interests  therein and with respect to the  disposition  thereof,
and otherwise under this  Agreement,  are only those expressly set forth in this
Agreement. The Pledgee shall act hereunder on the terms and conditions set forth
herein and under the Credit Agreement.

                  14.  TRANSFER BY  PLEDGORS.  No Pledgor will sell or otherwise
dispose of, grant any option with  respect to, or mortgage,  pledge or otherwise
encumber  any of  the  Collateral  or any  interest  therein  (except  as may be
permitted  in  accordance  with  the  terms  of this  Agreement  and the  Credit
Documents).

                  15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each
Pledgor represents, warrants and covenants that: (i) it is the legal, beneficial
and  record  owner of,  and has good and  marketable  title to,  all  Collateral
consisting of one or more Securities and that it has sufficient  interest in all
Collateral in which a security interest is purported to be created hereunder for
such security  interest to attach  (subject,  in each case, to no pledge,  lien,
mortgage,  hypothecation,  security interest,  charge,  option, Adverse Claim or
other encumbrance whatsoever, except the liens and security interests created by
this Agreement); (ii) it has the full corporate power, authority and legal right
to pledge all the  Securities  pledged by it pursuant to this  Agreement;  (iii)
this Agreement has been duly authorized,  executed and delivered by such Pledgor
and  constitutes  a  legal,   valid  and  binding  obligation  of  such  Pledgor
enforceable  in  accordance  with  its  terms,  except  to the  extent  that the
enforceability  hereof  may be  limited by  applicable  bankruptcy,  insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by equitable  principles  (regardless  of whether  enforcement  is sought in
equity

<PAGE>

or at law);  (iv) except to the extent  already  obtained or made, no consent of
any other party  (including,  without  limitation,  any stockholder,  limited or
general partners, member or creditor of the Pledgor or any of their Subsidiaries
or other entity in which the Pledgor owns any equity  interest)  and no consent,
license,  permit,  approval or authorization  of, exemption by, notice or report
to, or registration,  filing or declaration with, any governmental  authority is
required to be obtained by the  Pledgor in  connection  with (a) the  execution,
delivery or performance of this Agreement, (b) the validity or enforceability of
this Agreement  (except as set forth in clause (iii) above),  (c) the perfection
or  enforceability  of the Pledgee's  security interest in the Collateral or (d)
except for compliance with or as may be required by applicable  securities laws,
the  exercise by the Pledgee of any of its rights or remedies  provided  herein;
(v) the execution,  delivery and  performance of this Agreement does not violate
any provision of any  applicable  law or  regulation or of any order,  judgment,
writ,  award or decree  of any  court,  arbitrator  or  governmental  authority,
domestic  or  foreign,  or of the  certificate  of  incorporation  or by-laws or
limited  partnership  agreement or limited liability company  agreement,  as the
case may be, of such Pledgor or of any securities  issued by such Pledgor or any
of its  Subsidiaries,  or of any  mortgage,  indenture,  lease,  deed of  trust,
agreement,  instrument  or  undertaking  to  which  such  Pledgor  or any of its
Subsidiaries is a party or which purports to be binding upon such Pledgor or any
of its Subsidiaries or upon any of their  respective  assets and will not result
in the creation or  imposition  (or the  obligation  to create or impose) of any
lien  or  encumbrance  on  any of  the  assets  of  such  Pledgor  or any of its
Subsidiaries  except as contemplated  by this Agreement;  (vi) all the shares of
Stock have been duly and validly issued, are fully paid and nonassessable; (vii)
to the best knowledge of Pledgor,  each of its Pledged  Notes,  when executed by
the obligor  thereof,  will be the legal,  valid and binding  obligation of such
obligor, enforceable in accordance with its terms, except to the extent that the
enforceability  thereof  may be limited by  applicable  bankruptcy,  insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by equitable  principles  (regardless  of whether  enforcement  is sought in
equity or at law); and (viii) the pledge,  collateral assignment and delivery to
the Pledgee of the  Collateral  pursuant to this  Agreement  creates a valid and
perfected first priority security interest in such Collateral,  and the proceeds
thereof,  subject to no prior Lien or encumbrance or to any agreement purporting
to grant to any third party a Lien or  encumbrance  on the property or assets of
such Pledgor which would include the  Collateral  and the Pledgee is entitled to
all the rights,  priorities  and benefits  afforded by the UCC or other relevant
law as enacted in any relevant  jurisdiction  to perfect  security  interests in
respect of the  Collateral;  and (ix)  "control" (as defined in Section 8-106 of
the UCC) has been  obtained by the Pledgee  over all  Collateral  consisting  of
Securities  with  respect to which such  "control"  may be obtained  pursuant to
Section 8-106 of the UCC. Each Pledgor  covenants and agrees that it will defend
the  Pledgee's  right,  title and  security  interest  in and to the  Collateral
pledged by it pursuant to this  Agreement and the proceeds  thereof  against the
claims and demands of all persons  whomsoever,  and such Pledgor  covenants  and
agrees that it will have like title to and right to pledge any other property at
any time  hereafter  pledged to the  Pledgee as  Collateral  hereunder  and will
likewise defend the right thereto and security  interest  therein of the Pledgee
and the Secured  Creditors.  Each Pledgor covenants and agrees that it will take
no action which would violate any of the terms of any Credit Document.

                  16.  CHIEF  EXECUTIVE  OFFICE;  RECORDS.  The chief  executive
office of the Pledgor is located at the address specified in Annex D hereto. The
Pledgor will not move its chief executive  office except to such new location as
such Pledgor may establish in accordance  with the last sentence of this Section
16. The originals of all documents in the  possession of the Pledgor  evidencing
all  Collateral,  and the only  original  books of  account  and  records of the
Pledgor  relating  thereto  are,  and will  continue  to be,  kept at such chief
executive  office at the location  specified  in Annex C hereto,  or at such new
locations as the Pledgor may establish in  accordance  with the last sentence of
this Section 16. The Pledgor shall not establish a new location for such offices
until (i) it shall  have  given to the  Collateral  Agent not less than 30 days'
prior written  notice of its  intention so to do,  clearly  describing  such new
location and providing  such other  information  in connection  therewith as the
Collateral  Agent  may  reasonably  request  and (ii) with  respect  to such new
location, it shall have taken all action,  satisfactory to the Collateral Agent,
to maintain  the security  interest of the  Collateral  Agent in the  Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.  Promptly  after  establishing  a  new  location  for  such  offices  in
accordance with the immediately preceding sentence, the respective Pledgor shall
deliver to the Pledgee a supplement  to Annex D hereto so as to cause such Annex
D hereto to be complete and accurate.

                  17. PLEDGORS'  OBLIGATIONS  ABSOLUTE,  ETC. The obligations of
each Pledgor under this Agreement shall be absolute and  unconditional and shall
remain in full force and effect  without  regard to, and shall not be  released,
suspended, discharged,  terminated or otherwise affected by, any circumstance or
occurrence  whatsoever  (other than  termination of this  Agreement  pursuant to
Section  19),  including,   without  limitation:  (i)  any  renewal,  extension,
amendment or  modification  of or addition or supplement to or deletion from any
Credit Document or any other instrument or agreement referred to therein, or any
assignment  or transfer of any  thereof;  (ii) any waiver,  consent,  extension,
indulgence or other action or inaction under or in respect of any such agreement
or instrument or this Agreement; (iii) any furnishing of any additional security
to the Pledgee or its assignee or any  acceptance  thereof or any release of any
security  by the Pledgee or its  assignee;  (iv) any  limitation  on any party's
liability  or  obligations  under  any  such  instrument  or  agreement  or  any
invalidity or  unenforceability,  in whole or in part, of any such instrument or
agreement   or  any   term   thereof;   or  (v)  any   bankruptcy,   insolvency,
reorganization,  composition, adjustment, dissolution, liquidation or other like
proceeding  relating to such Pledgor or any  Subsidiary of such Pledgor,  or any
action  taken with respect to this  Agreement by any trustee or receiver,  or by
any court, in any such proceeding, whether or not such Pledgor shall have notice
or knowledge of any of the foregoing.

                  18.  REGISTRATION,  ETC. (a) If an Event of Default shall have
occurred and be continuing  and the Pledgor shall have received from the Pledgee
a written  request  or  requests  that  such  Pledgor  cause  any  registration,
qualification or compliance under any Federal or state securities law or laws to
be effected  with  respect to all or any part of the  Collateral  consisting  of
Securities,  such Pledgor as soon as practicable and at its expense will use its
best efforts to cause such  registration  to be effected (and be kept effective)
and will use its best efforts to cause such  qualification  and compliance to be
effected  (and be kept  effective) as may be so requested and as would permit or
facilitate  the  sale  and   distribution  of  such  Collateral   consisting  of
Securities,

<PAGE>

including, without limitation, registration under the Securities Act of 1933, as
then  in  effect  (or  any  similar   statute   then  in  effect),   appropriate
qualifications  under  applicable  blue sky or other state  securities  laws and
appropriate compliance with any other governmental requirements;  provided, that
the Pledgee shall furnish to such Pledgor such information regarding the Pledgee
as such  Pledgor may  request in writing and as shall be required in  connection
with any such registration,  qualification or compliance. The Pledgor will cause
the Pledgee to be kept reasonably  advised in writing as to the progress of each
such registration, qualification or compliance and as to the completion thereof,
will furnish to the Pledgee such number of prospectuses,  offering circulars and
other documents incident thereto as the Pledgee from time to time may reasonably
request, and will indemnify, to the extent permitted by law, the Pledgee and all
other Secured  Creditors  participating  in the  distribution of such Collateral
consisting of Securities  against all claims,  losses,  damages and  liabilities
caused by any untrue statement (or alleged untrue  statement) of a material fact
contained therein (or in any related registration statement, notification or the
like) or by any  omission  (or  alleged  omission)  to state  therein (or in any
related  registration  statement,  notification  or the  like) a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  except  insofar  as the same  may have  been  caused  by an  untrue
statement  or  omission  based  upon  information  furnished  in writing to such
Pledgor by the Pledgee expressly for use therein.

                  (b) If at  any  time  when  the  Pledgee  shall  determine  to
exercise  its  right  to sell all or any part of the  Collateral  consisting  of
Securities  pursuant to Section 7, and such Collateral or the part thereof to be
sold shall not, for any reason whatsoever,  be effectively  registered under the
Securities  Act of 1933,  as then in effect,  the  Pledgee  may, in its sole and
absolute  discretion,  sell such  Collateral  or part thereof by private sale in
such manner and under such  circumstances  as the Pledgee may deem  necessary or
advisable  in order  that  such  sale  may  legally  be  effected  without  such
registration.  Without  limiting the  generality of the  foregoing,  in any such
event the Pledgee, in its sole and absolute discretion:  (i) may proceed to make
such private sale notwithstanding that a registration  statement for the purpose
of registering  such Collateral or part thereof shall have been filed under such
Securities Act; (ii) may approach and negotiate with a single possible purchaser
to effect such sale;  and (iii) may restrict  such sale to a purchaser  who will
represent and agree that such purchaser is purchasing  for its own account,  for
investment,  and not with a view to the  distribution or sale of such Collateral
or part  thereof.  In the event of any such sale,  the  Pledgee  shall  incur no
responsibility  or liability for selling all or any part of the  Collateral at a
price which the Pledgee, in its sole and absolute discretion,  may in good faith
deem reasonable under the circumstances,  notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until the
registration as aforesaid.

                  19.  TERMINATION,  RELEASE.  (a) On the  Termination  Date (as
defined below),  this Agreement  shall terminate  (provided that all indemnities
set forth  herein  including,  without  limitation,  in Section 11 hereof  shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will execute and deliver to such Pledgor a proper instrument
or instruments  acknowledging the satisfaction and termination of this Agreement
(including,  without limitation,  UCC termination  statements and instruments of
satisfaction, discharge and/or reconveyance), and will duly assign, transfer and
deliver to such  Pledgor

<PAGE>

(without  recourse  and  without any  representation  or  warranty)  such of the
Collateral as may be in the possession of the Pledgee and as has not theretofore
been sold or otherwise applied or released pursuant to this Agreement,  together
with  any  moneys  at the  time  held by the  Pledgee  or any of its  sub-agents
hereunder  and, with respect to any Collateral  consisting of an  Uncertificated
Security  (other  than an  Uncertificated  Security  credited  on the books of a
Clearing Corporation),  a termination of the agreement relating thereto executed
and delivered by the issuer of such Uncertificated  Security pursuant to Section
3.2(a)(ii).  As used in this Agreement,  "Termination  Date" shall mean the date
upon which the Total  Commitment  and all  Interest  Rate  Protection  and Other
Hedging  Agreements have been terminated,  no Note is outstanding (and all Loans
have been paid in full), and all other  Obligations then owing have been paid in
full and there shall exist no outstanding  unsatisfied  claim for  reimbursement
that has been made by any Indemnitee pursuant to Section 11.2.

                  (b) In the event  that any part of the  Collateral  is sold or
otherwise  transferred in connection with a sale or other transfer  permitted by
the Credit  Agreement or is otherwise  released at the direction of the Required
Banks (or all the Banks if required by Section  13.12 of the Credit  Agreement),
and the  proceeds  of such sale or sales or from such  transfer  or release  are
applied in accordance  with the terms of the Credit  Agreement,  such Collateral
will be sold free and  clear of the  Liens  created  by this  Agreement  and the
Pledgee, at the request and expense of the respective Pledgor, will duly assign,
transfer  and  deliver  to  such  Pledgor  (without  recourse  and  without  any
representation  or warranty)  such of the  Collateral of such Pledgor as is then
being  (or has  been) so sold or  released  and as may be in  possession  of the
Pledgee and has not theretofore been released pursuant to this Agreement.

                  (c) At any time  that a Pledgor  desires  that  Collateral  be
released as provided in the foregoing  Section 19(a) or (b), it shall deliver to
the  Pledgee a  certificate  signed by its chief  financial  officer  or another
authorized senior officer stating that the release of the respective  Collateral
is  permitted  pursuant  to Section  19(a) or (b). If  requested  by the Pledgee
(although the Pledgee shall have no  obligation to make any such  request),  the
relevant Pledgor shall furnish  appropriate legal opinions (from counsel,  which
may be in-house counsel, reasonably acceptable to the Pledgee) to the effect set
forth in the immediately preceding sentence. The Pledgee shall have no liability
whatsoever to any Secured Creditor as the result of any release of Collateral by
it as permitted by this Section 19.

                  (d) The  Pledgee  shall have no  liability  whatsoever  to any
Secured  Creditor as the result of any release of Collateral by it in accordance
with this Section 19.

     20. NOTICES,  ETC. All notices and other communications  hereunder shall be
in  writing  (including  telegraphic,  telex,  facsimile  transmission  or cable
communication) and shall be delivered,  mailed, telegraphed,  telexed, facsimile
transmitted or cabled, addressed:

                  (a)  if to any Pledgor, at its address set forth opposite its
signature below;

                  (b)  if to the Pledgee, at:

                           Paribas
                           787 Seventh Avenue
                           New York, New York  10019
                           Attention:  Salo Aizenberg
                           Telephone No.:  (212) 841-2000
                           Facsimile No.:  (212) 841-2369;

                  (c) if to any Bank Creditor,  either (x) to the Administrative
Agent,  at the  address  of the  Administrative  Agent  specified  in the Credit
Agreement or (y) at such address as such Bank Creditor  shall have  specified in
the Credit Agreement;

                  (d) if to any Other Creditor,  to the  Representative  for the
Other Creditors, at such address as such Representative may have provided to the
Borrower  and  the  Pledgee  from  time  to  time,  or,  in  the  absence  of  a
Representative,  directly to the Other  Creditors  at such  address as the Other
Creditors shall have specified in writing to the Borrower and the Pledgee;

or at such other  address as shall have been  furnished in writing by any Person
described above to the party required to give notice hereunder. All such notices
and  communications  shall,  when  mailed,   telegraphed,   telexed,   facsimile
transmitted  or cabled or sent by overnight  courier,  be effective on the third
Business  Day  following  deposit  in  the  mails,  certified,   return  receipt
requested,  when delivered to the telegraph company, cable company or on the day
following delivery to an overnight courier, as the case may be, or sent by telex
or facsimile  device,  except that notices and  communications to the Collateral
Agent shall not be effective until received by the Collateral Agent.

                  21. THE PLEDGEE. The Pledgee will hold, directly or indirectly
in  accordance  with this  Agreement,  all items of the  Collateral  at any time
received by it under this Agreement.  It is expressly understood and agreed that
the obligations of the Pledgee with respect to the Collateral, interests therein
and the disposition thereof, and otherwise under this Agreement,  are only those
expressly set forth in the UCC and this Agreement.

                  22.  WAIVER;  AMENDMENT.  None of the terms and  conditions of
this  Agreement  may be  changed,  waived,  modified  or  varied  in any  manner
whatsoever unless in writing duly signed by the affected Pledgor and the Pledgee
(with the written consent of the Required Banks (or all the Banks if required by
Section  13.12 of the Credit  Agreement));  provided,  that any change,  waiver,
modification or variance affecting the rights and benefits of a single Class (as
defined below) of Secured  Creditors (and not all Secured Creditors in a like or
similar manner) shall require the written consent of the Requisite Creditors (as
defined  below) of such  Class.  For the  purpose  of this  Agreement,  the term
"Class"  shall  mean  each  class of  Secured  Creditors,  whether  (i) the Bank
Creditors  as  holders  of the  Credit  Document  Obligations  or (ii) the Other
Creditors  as holders  of the  Interest  Rate

<PAGE>

Protection Obligations.  For the purpose of this Agreement,  the term "Requisite
Creditors"  of any Class  shall  mean  each of (i) with  respect  to the  Credit
Document  Obligations,  the Required Banks and (ii) with respect to the Interest
Rate  Protection  Obligations,  the  holders  of at  least  a  majority  of  all
obligations  outstanding from time to time under the Interest Rate Protection or
Other Hedging Agreements.

                  23.  MISCELLANEOUS.  This Agreement  shall create a continuing
security  interest  in the  Collateral  and shall (i)  remain in full  force and
effect,  subject to release and/or  termination as set forth in Section 19, (ii)
be binding upon the Pledgor, its successors and assigns; provided, however, that
the Pledgor shall not assign any of its rights or obligations  hereunder without
the prior written  consent of the Pledgee (with the prior written consent of the
Required  Banks or all the Banks if  required  by  Section  13.12 of the  Credit
Agreement),  and (iii)  inure,  together  with the  rights and  remedies  of the
Pledgee  hereunder,  to the benefit of the Pledgee,  the Secured  Creditors  and
their respective  successors,  transferees and assigns.  THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAW OF THE STATE
OF NEW YORK.  The  headings  of the several  sections  and  subsections  in this
Agreement  are for purposes of reference  only and shall not limit or define the
meaning  hereof.  This Agreement may be executed in any number of  counterparts,
each of which shall be an original,  but all of which together shall  constitute
one instrument.

                  24.  WAIVER OF JURY  TRIAL.  The  Pledgor  hereby  irrevocably
waives all right to a trial by jury in any action,  proceeding  or  counterclaim
arising out of or relating to this  agreement or the  transactions  contemplated
hereby.

     25. RECOURSE.  This Agreement is made with full recourse to the Pledgor and
pursuant  to  and  upon  all  the  representations,  warranties,  covenants  and
agreements on the part of the Pledgor  contained  herein and in the other Credit
Documents and otherwise in writing in connection herewith or therewith.

                  26. LIMITED  OBLIGATIONS.  It is the desire and intent of each
Pledgor,  the Pledgee and the Secured  Creditors  that this  Agreement  shall be
enforced against each Pledgor to the fullest extent  permissible  under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If and to the extent that the  obligations  of each Pledgor under this Agreement
shall be adjudicated to be invalid or unenforceable  for any reason  (including,
without  limitation,  because of any applicable state or federal law relating to
fraudulent conveyances or transfers,  which laws would determine the solvency of
each Pledgor by reference to the full amount of the  Obligations  at the time of
the  execution  and  delivery  of  this  Agreement),  then  the  amount  of  the
Obligations of each Pledgor shall be deemed to be reduced and such Pledgor shall
pay the maximum amount of the Obligations  which would be permissible  under the
applicable law.

                  27.  SEVERABILITY.  Any provision of this  Agreement  which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

<PAGE>

                  28.  SUBSIDIARY AS PLEDGOR.  It is understood  and agreed that
any Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement  after  the  date  hereof  pursuant  to  the  Credit  Agreement  shall
automatically  become  a  Pledgor  hereunder  by  executing  a copy  hereof  and
delivering the same to the Pledgee.

                  29. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER.
(a) Nothing  herein shall be construed to make the Pledgee or any other  Secured
Creditor liable as a member of any limited  liability company or partnership and
neither the Pledgee nor any other Secured  Creditor by virtue of this  Agreement
or otherwise (except as referred to in the following sentence) shall have any of
the duties,  obligations  or  liabilities  of a member of any limited  liability
company or partnership.

                  (b) The Pledgee,  by accepting this Agreement,  did not intend
to become a member of any limited  liability company or partnership or otherwise
be deemed  to be a  co-venturer  with  respect  to the  Pledgor  or any  limited
liability  company  or  partnership  either  before or after an Event of Default
shall have  occurred.  The Pledgee shall have only those powers set forth herein
and the  Secured  Creditors  shall  assume none of the  duties,  obligations  or
liabilities of a member of any limited  liability  company or partnership or the
Pledgor.

                  (c) The Pledgee and the other Secured  Creditors  shall not be
obligated to perform or discharge  any  obligation of the Pledgor as a result of
the pledge hereby effected.

                  (d) The acceptance by the Pledgee of this Agreement,  with all
the rights,  powers,  privileges and authority so created, shall not at any time
or in any event  obligate  the  Pledgee  or any Bank to appear in or defend  any
action or proceeding  relating to the Collateral to which it is not a party,  or
to take any action hereunder or thereunder,  or to expend any money or incur any
expenses or perform or discharge  any  obligation,  duty or liability  under the
Collateral.

<PAGE>

                  IN WITNESS  WHEREOF,  each Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected  officers duly authorized as
of the date First above written.

Address:


                                                     USOL HOLDINGS, INC.,
                                                       as a Pledgor

Attention:
Telephone:
Facsimile:                                           By:________________________
                                                           Title:



                                                     USOL, INC.,
                                                       as a Pledgor

Attention:
Telephone:
Facsimile:                                           By:________________________
                                                           Title:



                                                     [SUBSIDIAIRIES],
                                                       as a Pledgor

Attention:
Telephone:
Facsimile:                                           By:________________________
                                                           Title:




<PAGE>


Accepted and Agreed to:


PARIBAS,
   not in its individual capacity but solely as
   Collateral Agent and Administrative Agent
   for the Banks and Pledgee

By:___________________________
     Title:



By:___________________________
     Title:

<PAGE>

                                                                         Annex A

              Form of Agreement Regarding Uncertificated Securities

                  AGREEMENT (as amended,  modified or supplemented  from time to
time,  this  "Agreement"),  dated as of December __, 1999 among the  undersigned
pledgor (the "Pledgor"),  Paribas,  not in its individual capacity but solely as
Collateral  Agent  (the  "Pledgee"),   and  [ISSUER],   as  the  issuer  of  the
Uncertificated Securities (as defined below) (the "Issuer").

                              W I T N E S S E T H :

                  WHEREAS,  the  Pledgor and the  Pledgee  are  entering  into a
Pledge  Agreement,  dated as of  December  __,  1999 (as  amended,  amended  and
restated,  modified or supplemented from time to time, the "Pledge  Agreement"),
under  which,  among  other  things,  in  order to  secure  the  payment  of the
Obligations (as defined in the Pledge Agreement), the Pledgor will pledge to the
Pledgee  for the  benefit of the  Secured  Creditors  (as  defined in the Pledge
Agreement),  and  grant a  security  interest  in favor of the  Pledgee  for the
benefit of the Secured  Creditors  in, all of the right,  title and  interest of
such Pledgor in and to any and all  "uncertificated  securities"  (as defined in
Section  8-102(a)(18) of the Uniform Commercial Code, as adopted in the State of
New York) ("Uncertificated  Securities"),  in each case issued from time to time
by the Issuer,  whether now existing or hereafter  from time to time acquired by
such  Pledgor  (with  all  of  such   Uncertificated   Securities  being  herein
collectively called the "Issuer Pledged Interests"); and

                  WHEREAS,  the  Pledgor  desires  the Issuer to enter into this
Agreement  in order to perfect the  security  interest of the Pledgee  under the
Pledge Agreement in the Issuer Pledged Interests, to vest in the Pledgee control
of the Issuer  Pledge  Interests  and to provide  for the rights of the  parties
under this Agreement;

                  NOW THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, and for other valuable  consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

                  1. The Pledgor hereby  irrevocably  authorizes and directs the
Issuer,  and the Issuer hereby agrees,  to comply with any and all  instructions
and orders originated by the Pledgee (and its successors and assigns)  regarding
any and all of the Issuer Pledged  Interests  without the further consent by the
registered  owner   (including  the  Pledgor),   and  not  to  comply  with  any
instructions  or orders  regarding  any or all of the Issuer  Pledged  Interests
originated  by any person or entity other than the Pledgee  (and its  successors
and assigns) or a court of competent jurisdiction.

                  2. The  Issuer  hereby  certifies  that (i) no  notice  of any
security  interest,  lien or other  encumbrance  or claim  affecting  the Issuer
Pledged  Interests  (other than the  security  interest of the Pledgee) has been
received  by it, and (ii) the  security  interest  of the  Pledgee in the Issuer
Pledged Interests has been registered in the books and records of the Issuer.

                  3. The Issuer  hereby  represents  and  warrants  that (i) the
pledge by the  Pledgors  of,  and the  granting  by the  Pledgors  of a security
interest in, the Issuer Pledged Interests to the

<PAGE>

Pledgee, for the benefit of the Secured Creditors, does not violate the charter,
by-laws,  partnership  agreement,  membership  agreement or any other  agreement
governing  the  Issuer or the  Issuer  Pledged  Interests,  and (ii) the  Issuer
Pledged Interests are fully paid and nonassessable.

                  4. The  Issuer  hereby  agrees  to (i) allow  the  Pledgee  to
exercise any and all withdrawal rights or other redemption rights of the Pledgor
without  the further  consent of the Pledgor or any other  Person and (ii) admit
the Pledgee (or any transferee of the Pledgee with respect to the Issuer Pledged
Interests)  as a member of the  Issuer,  provided  that,  the  Pledgee  (or such
transferee of the Pledgee)  satisfies  all  requirements  for  membership in the
Issuer contained in the Issuer's constituent documents.

                  5. The Pledgor  hereby  agrees not to exercise any  withdrawal
rights or other redemption  rights with respect to the Issuer Pledged  Interests
without the prior written  consent of the Pledgee,  and the Issuer hereby agrees
not to comply with any request by the Pledgor for exercise of withdrawal  rights
or other redemption  rights with respect to the Issuer Pledged Interests without
the prior written consent of the Pledgee.

                  6. All notices, statements of accounts, reports, prospectuses,
financial  statements and other  communications to be sent to the Pledgor by the
Issuer  in  respect  of the  Issuer  will  also be sent  to the  Pledgee  at the
following address:

                           Paribas
                           787 Seventh Avenue
                           New York, New York  10019
                           Attention:  Salo Aizenberg
                           Telephone:  (212) 841-2000
                           Telecopier:  (212) 841-2369

                  7. Until the Pledgee shall have  delivered  written  notice to
the Issuer that all of the Obligations have been paid in full and this Agreement
is  terminated,  the Issuer  will send any and all  redemptions,  distributions,
interest or other payments in respect of the Issuer  Pledged  Interests from the
Issuer for the account of the Pledgor only by wire  transfers  to the  following
address:

                           _____________________
                           _____________________
                           [Account Information]
                           ABA No.: ____________________
                           Account in the Name of:  ___________
                           Account No.:  ____________________

                  8. Except as expressly provided otherwise in Sections 6 and 7,
all notices, instructions,  orders and communications hereunder shall be sent or
delivered by mail,  telex,  telecopy or overnight  courier  service and all such
notices and communications  shall, when mailed,  telexed,  telecopied or sent by
overnight courier,  be effective when deposited in the mails or

<PAGE>

delivered to the overnight courier,  prepaid and properly addressed for delivery
on such or the next  Business Day, or sent by telex or  telecopier,  except that
notices and  communications to the Pledgee shall not be effective until received
by the  Pledgee.  All notices and other  communications  shall be in writing and
addressed as follows:

                  (b)      if to the Pledgor, at:

                           [Address]
                           Telephone:  __________
                           Telecopier:   __________
                           Attention:   __________;

                  (c)      if to the Pledgee, at:

                           Paribas
                           787 Seventh Avenue
                           New York, New York  10019
                           Attention:  Salo Aizenberg
                           Telephone:  (212) 841-2000
                           Telecopier:  (212) 841-2369

                  (d)      if to the Issuer, at:

                           [Address]
                           Attention:  ______________
                           Telephone:  ___________
                           Telecopier:  ___________

or at such other  address as shall have been  furnished in writing by any Person
described above to the party required to give notice hereunder.  As used in this
Section 8, "Business Day" means any day other than a Saturday,  Sunday, or other
day in which banks in New York are authorized to remain closed.

                  9. This  Agreement  shall be binding upon the  successors  and
assigns of the  Pledgor  and the Issuer and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. This Agreement may be
executed in any number of counterparts,  each of which shall be an original, but
all of which shall constitute one instrument. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable,  such provision shall
be deemed to be severable  from the other  provisions  of this  Agreement  which
shall remain binding on all parties hereto.  None of the terms and conditions of
this  Agreement  may be  changed,  waived,  modified  or  varied  in any  manner
whatsoever  except in writing signed by the Pledgee,  the Issuer and the Pledgor
which at such time owns any Issuer Pledged Interests.

                  10.  This  Agreement  shall be governed  by and  construed  in
accordance  with  the laws of the  State  of New  York,  without  regard  to its
principles of conflict of laws.

<PAGE>

                  IN WITNESS  WHEREOF,  the Pledgor,  the Pledgee and the Issuer
have caused this  Agreement to be executed by their duly elected  officers  duly
authorized as of the date first above written.

                                      [  PLEDGOR          ],
                                      as a Pledgor

                                      By:_____________________________
                                      Name:
                                      Title:

                                      Paribas,
                                       not in its individual capacity but solely
                                       as Collateral Agent and Administrative
                                       Agent for the Banks and Pledgee


                                      By:_____________________________
                                      Name:
                                      Title:

                                      [ISSUER           ],
                                      the Issuer

                                      By:_____________________________
                                      Name:
                                      Title:

                                      By:_____________________________
                                      Name:
                                      Title:


<PAGE>

                                                                         Annex B


                                  LIST OF STOCK

<TABLE>
<CAPTION>
<S>               <C>          <C>              <C>           <C>                <C>

Name of
Issuing        Type of     Number of       Certificate     Percentage     Sub-clause of Section 3.2(a)
Corporation      Shares       Shares             No.          Owned           of Pledge Agreement
-----------     --------   ------------     -------------   ----------  -----------------------------

</TABLE>

                                   [ALL ANNEXES TO BE COMPLETED BY THE BORROWER]

<PAGE>

                                                                         Annex C


                                  LIST OF NOTES


<PAGE>

                                                                         Annex D

                         LIST OF CHIEF EXECUTIVE OFFICES

<PAGE>

                                                                       EXHIBIT G

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






                               SECURITY AGREEMENT

                                      among

                              USOL HOLDINGS, INC.,

                                   USOL, INC.,

                              VARIOUS SUBSIDIARIES

                                       and

                                    PARIBAS,

                               as Collateral Agent

                          Dated as of December __, 1999

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

<PAGE>

                              SECURITY AGREEMENT

                  SECURITY AGREEMENT, dated as of December __, 1999 (as amended,
modified or supplemented from time to time, this "Agreement"), among each of the
undersigned (each an "Assignor" and collectively,  the "Assignors") and PARIBAS,
as Collateral Agent (the "Collateral  Agent"),  for the benefit of (x) the Banks
(as defined below) and the Agents (as defined below) under, and any other lender
from time to time party to the Credit  Agreement  hereinafter  referred to (such
Banks,  the Agents and the other  lenders,  if any, are  hereinafter  called the
"Bank Creditors") and (y) if Paribas in its individual  capacity,  any Bank or a
syndicate of financial  institutions organized by Paribas or any such Bank or an
affiliate  of  Paribas or such Bank  enter  into one or more (i)  interest  rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors,  collars and  similar  agreements),  (ii)  foreign  exchange  contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against the  fluctuations in currency values and/or (iii) other types of
hedging  agreements  from  time  to  time  (collectively,   the  "Interest  Rate
Protection or Other Hedging  Agreements"),  with, or guaranteed by, the Borrower
(as defined below) and/or Holdings (as defined below),  Paribas,  any such Bank,
any such syndicate of financial institutions or any such affiliate of Paribas or
any Bank (even if Paribas or the  respective  Bank ceases to be a Bank under the
Credit Agreement for any reason) and any such  institution that  participates in
such Interest Rate Protection or Other Hedging  Agreements and their  subsequent
assigns  (collectively,  the  "Other  Creditors"  and,  together  with  the Bank
Creditors,  are herein  called the  "Secured  Creditors").  Except as  otherwise
defined herein,  terms used herein and defined in the Credit  Agreement shall be
used herein as therein defined.

                              W I T N E S S E T H :


                  WHEREAS,  USOL Holdings,  Inc.  ("Holdings"),  USOL, Inc. (the
"Borrower"), various financial institutions from time to time party thereto (the
"Banks"),  Paribas,  as Administrative  Agent (the  "Administrative  Agent") and
Syndication  Agent (the  "Syndication  Agent")  and  Deutsche  Bank AG, New York
Branch, as Documentation Agent (the "Documentation Agent," and together with the
Administrative  Agent and Syndication Agent, the "Agents"),  have entered into a
Credit  Agreement,  dated as of December 30, 1999,  providing  for the making of
Loans as contemplated therein (as used herein, the term "Credit Agreement" means
the  Credit  Agreement  described  above in this  paragraph,  as the same may be
amended,  modified,   extended,  renewed,  replaced,   restated,   supplemented,
restructured  or  refinanced  from time to time,  and  including  any  agreement
extending the maturity of,  refinancing  or  restructuring  (including,  but not
limited  to,  the  inclusion  of  additional   borrowers   thereunder  that  are
Subsidiaries of Holdings and whose obligations are guaranteed by Holdings or the
Borrower  thereunder or any increase in the amount  borrowed) all or any portion
of, the Indebtedness under such agreement or any successor agreements; provided,
that with respect to any agreement providing for the refinancing of Indebtedness
under the Credit Agreement,  such agreement shall only be treated as, or as part
of, the Credit Agreement  hereunder if (i) either (A) all obligations  under the
Credit  Agreement  being  refinanced  shall  be paid in full at the time of such
refinancing,  and all commitments  pursuant to the refinanced  Credit  Agreement
shall have  terminated in accordance

<PAGE>

with their terms or (B) the  Required  Banks shall have  consented in writing to
the refinancing  Indebtedness being treated,  along with their Indebtedness,  as
Indebtedness pursuant to the Credit Agreement, (ii) the refinancing Indebtedness
shall be permitted to be incurred under the Credit  Agreement  being  refinanced
(if such Credit  Agreement is to remain  outstanding)  and (iii) a notice to the
effect that the  refinancing  Indebtedness  shall be treated as issued under the
Credit Agreement shall be delivered by the Borrower to the Collateral Agent);

                  WHEREAS,  pursuant  to the  Holdings  Guaranty,  Holdings  has
provided an  unconditional  guaranty of the payment when due of all  obligations
and  liabilities  of the  Borrower  under  and in  connection  with  the  Credit
Documents and each Interest Rate Protection Agreement or Other Hedging Agreement
entered into with one or more Other Creditors;

                  WHEREAS,   pursuant  to  the   Subsidiaries   Guaranty,   each
Subsidiary  of Holdings  other than the  Borrower  have  jointly  and  severally
guaranteed to the Secured  Creditors the payment when due of all obligations and
liabilities  of the Borrower  under or with respect to the Credit  Documents and
each Interest Rate Protection or Other Hedging  Agreement with one or more Other
Creditors;

                  WHEREAS, the Borrower desires to incur Loans pursuant to the
credit Agreement;

                  WHEREAS,  the  Borrower  may at any time and from time to time
enter into one or more Interest Rate Protection or Other Hedging Agreements with
one or more Other Creditors;

                  WHEREAS,  it is a condition  precedent to the  above-described
extensions  of  credit  that  each of the  Assignors  shall  have  executed  and
delivered to the Collateral Agent this Agreement; and

                  WHEREAS,  each Assignor  desires to execute this  Agreement to
satisfy the condition described in the preceding paragraph;

                  NOW,  THEREFORE,  in consideration of the benefits accruing to
each Assignor,  the receipt and  sufficiency  of which are hereby  acknowledged,
each Assignor hereby makes the following  representations  and warranties to the
Collateral  Agent and hereby  covenants and agrees with the Collateral  Agent as
follows:

                                    ARTICLE I

                               SECURITY INTERESTS

                  1.1.  Grant of Security  Interests.  (a) As  security  for the
prompt and complete  payment and performance when due of all of the Obligations,
each Assignor does hereby assign and transfer  unto the  Collateral  Agent,  and
does  hereby  grant to the  Collateral  Agent  for the  benefit  of the  Secured
Creditors,  a  continuing  security  interest of first  priority  in, all of the
right,  title  and  interest  of  such  Assignor  in,  to and  under  all of the
following,  whether now existing or hereafter  from time to time  acquired:  (i)
each and every Receivable, (ii) all Contracts, together with all Contract Rights
arising  thereunder,  (iii) all Inventory,  (iv) the Cash Collateral Account

<PAGE>

and any other cash  collateral  account  established  for any  Assignor  and all
moneys, securities and instruments deposited or required to be deposited in such
Cash  Collateral  Account and any such other cash  collateral  account,  (v) all
Equipment,  (vi) all Marks,  together  with the  registrations  and right to all
renewals thereof,  and the goodwill of the business of such Assignor  symbolized
by the Marks, (vii) all Patents and Copyrights,  (viii) all computer programs of
such  Assignor  and all  intellectual  property  rights  therein  and all  other
proprietary information of such Assignor,  including,  but not limited to, trade
secrets,  (ix) (1) the Concentration  Account, (2) all moneys,  checks,  drafts,
securities  and  instruments  deposited  or  required  to be  deposited  in  the
Concentration Account, (3) all investments and all certificates and instruments,
if any, from time to time  representing or evidencing  such  investments and (4)
all interest,  dividends, cash, investments and other property from time to time
received,  receivable or otherwise  distributed in respect of or in exchange for
any or all of the foregoing  items listed under  subclauses (1) through (3), (x)
the  Concentration  Account Consent Letter and each other agreement from time to
time entered into by any Assignor  with the  Concentration  Account Bank and all
rights of such Assignor under the Concentration  Account Consent Letter and each
other  agreement  from  time  to time  entered  into by any  Assignor  with  the
Concentration  Account  Bank with respect to the  Concentration  Account and all
rights of such Assignor under the Concentration Account Consent Letter, (xi) all
other Goods,  General  Intangibles,  Chattel  Paper,  Documents and  Instruments
(other than the Pledged  Securities)  and (xii) all Proceeds and products of any
and all of the foregoing  (all of the above,  collectively,  the  "Collateral"),
provided,  however, that if any Contract prohibits,  or requires the consent for
(in  accordance  with the terms thereof  after giving  effect to any  applicable
laws), the granting of a security interest therein, or in the event the granting
of a security  interest in any Contract shall violate  applicable  law, then the
security interest granted hereby shall be limited to the extent (and only to the
extent)  necessary  so that  such  Contract  may not be so  violated  or no such
violation of law shall exist, as the case may be.

                  (b) The security  interest of the Collateral  Agent under this
Agreement  extends to all  Collateral  of the kind which is the  subject of this
Agreement which any Assignor may acquire at any time during the  continuation of
this Agreement.

                  1.2. Power of Attorney.  Each Assignor hereby  constitutes and
appoints the Collateral  Agent its true and lawful attorney,  irrevocably,  with
full power after the  occurrence  of and during the  continuance  of an Event of
Default (in the name of such  Assignor or otherwise)  to act,  require,  demand,
receive,  compound  and give  acquittance  for any and all moneys and claims for
moneys  due or to  become  due to such  Assignor  under  or  arising  out of the
Collateral,  to endorse any checks or other  instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Collateral  Agent may deem to be necessary or advisable to protect the
interests of the Secured  Creditors,  which  appointment  as attorney is coupled
with an interest.

                                   ARTICLE II

                GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

                  Each  Assignor  represents,   warrants  and  covenants,  which
representations,  warranties and covenants shall survive  execution and delivery
of this Agreement, as follows:

<PAGE>

                  2.1.  Necessary  Filings.   All  filings,   registrations  and
recordings necessary or appropriate to create, preserve, protect and perfect the
security  interest  granted by such Assignor to the  Collateral  Agent hereby in
respect of the  Collateral  have been  accomplished  and the  security  interest
granted  to the  Collateral  Agent  pursuant  to  this  Agreement  in and to the
Collateral constitutes a perfected security interest therein prior to the rights
of all other Persons therein and subject to no other Liens (other than Permitted
Liens) and is entitled to all the rights,  priorities  and benefits  afforded by
the Uniform  Commercial  Code or other  relevant  law as enacted in any relevant
jurisdiction to perfected security interests.

                  2.2. No Liens. Such Assignor is, and as to Collateral acquired
by it from time to time after the date hereof such  Assignor  will be, the owner
of all Collateral free from any Lien,  security  interest,  encumbrance or other
right,  title or interest of any Person (other than Permitted  Liens),  and such
Assignor  shall  defend the  Collateral  against  all claims and  demands of all
Persons at any time  claiming  the same or any interest  therein  adverse to the
Collateral Agent.

                  2.3.  Other  Financing  Statements.   There  is  no  financing
statement (or similar  statement or instrument of registration  under the law of
any  jurisdiction)  covering or  purporting to cover any interest of any kind in
the Collateral (other than Permitted Liens), and so long as the Total Commitment
has not been  terminated or any Letter of Credit or Note remains  outstanding or
any of the  Obligations  remain unpaid or any Interest Rate  Protection or Other
Hedging  Agreement  remains in effect or any  Obligations  are owed with respect
thereto,  such  Assignor will not execute or authorize to be filed in any public
office  any  financing   statement  (or  similar   statement  or  instrument  of
registration  under the law of any  jurisdiction) or statements  relating to the
Collateral,  except financing  statements filed or to be filed in respect of and
covering the security  interests granted hereby by such Assignor or as permitted
by the Credit Agreement.

                  2.4. Chief  Executive  Office;  Records.  The chief  executive
office of such  Assignor is located at the  address or  addresses  indicated  on
Annex A hereto. Such Assignor will not move its chief executive office except to
such new location as such  Assignor may  establish in  accordance  with the last
sentence of this Section 2.4. The  originals  of all  documents  evidencing  all
Receivables  and Contract Rights of such Assignor and the only original books of
account and records of such Assignor  relating thereto are, and will continue to
be, kept at such chief  executive  office or at such other  locations as are set
forth  on  Annex B  hereto  or at such  other  locations  as such  Assignor  may
establish  in  accordance  with the  last  sentence  of this  Section  2.4.  All
Receivables  and Contract  Rights of such Assignor are, and will continue to be,
maintained at, and controlled and directed (including,  without limitation,  for
general accounting  purposes) from, the office locations described above or such
new location  established  in accordance  with the last sentence of this Section
2.4. No Assignor  shall  establish  new  locations for such offices until (i) it
shall have given to the  Collateral  Agent not less than 30 days' prior  written
notice of its  intention  to do so,  clearly  describing  such new  location and
providing such other information in connection therewith as the Collateral Agent
may  request,  (ii) with respect to such new  location,  it shall have taken all
action,  satisfactory to the Collateral Agent, to maintain the security interest
of the Collateral  Agent in the Collateral  intended to be granted hereby at all
times fully perfected and in full force and effect,  (iii) at the request of the
Collateral  Agent,  it shall have furnished an opinion of counsel  acceptable to
the Collateral Agent to the effect that all financing or continuation statements
and amendments or supplements  thereto have been filed in the appropriate filing
office or

<PAGE>

offices,  and (iv) the Collateral  payment of all filing fees and taxes, if any,
payable in connection  with such  filings) have been taken,  in order to perfect
(and  maintain  the  perfection  and priority  of) the first  priority  security
interest granted hereby.

                  2.5.  Location of Inventory and  Equipment.  All Inventory and
Equipment  held on the date  hereof by each  Assignor  is  located at one of the
locations  shown on Annex C hereto.  Each Assignor agrees that all Inventory and
Equipment now held or subsequently  acquired by it shall be kept at (or shall be
in transport  to) any one of the  locations  shown on Annex C hereto or such new
location as such Assignor may establish in accordance  with the last sentence of
this Section 2.5. Any Assignor may  establish a new location for  Inventory  and
Equipment only if (i) it shall have given to the Collateral  Agent not less than
30 days prior written notice of its intention so to do, clearly  describing such
new location and providing such other information in connection therewith as the
Collateral Agent may request,  (ii) with respect to such new location,  it shall
have taken all action  satisfactory  to the  Collateral  Agent to  maintain  the
security  interest  of the  Collateral  Agent in the  Collateral  intended to be
granted hereby at all times fully perfected and in full force and effect,  (iii)
at the request of the  Collateral  Agent,  it shall have furnished an opinion of
counsel  acceptable to the Collateral  Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the appropriate  filing office or offices,  and (iv) the Collateral  Agent shall
have received evidence that all other actions  (including,  without  limitation,
the payment of all filing fees and taxes,  if any,  payable in  connection  with
such filings) have been taken,  in order to perfect (and maintain the perfection
and priority of) the first priority security interest granted hereby.

                  2.6. Trade Names;  Change of Name. No Assignor has or operates
in any  jurisdiction  under,  or  previously  has  had or  has  operated  in any
jurisdiction  within the five year period  preceding the date of this  Agreement
under,  any trade names,  fictitious  names or other names except its legal name
and such other  trade or  fictitious  names as are listed on Annex D hereto.  No
Assignor  shall  change its legal name or assume or operate in any  jurisdiction
under any trade,  fictitious  or other name except those names listed on Annex D
hereto and new names  established  in accordance  with the last sentence of this
Section 2.6. No Assignor shall assume or operate in any  jurisdiction  under any
new  trade,  fictitious  or other  name  until  (i) it shall  have  given to the
Collateral Agent not less than 30 days' prior written notice of its intention so
to do, clearly  describing such new name and the jurisdictions in which such new
name shall be used and providing such other information in connection  therewith
as the  Collateral  Agent may request,  (ii) with  respect to such new name,  it
shall have taken all action  requested by the Collateral  Agent, to maintain the
security  interest  of the  Collateral  Agent in the  Collateral  intended to be
granted hereby at all times fully perfected and in full force and effect,  (iii)
at the request of the  Collateral  Agent,  it shall have furnished an opinion of
counsel  acceptable to the Collateral  Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the appropriate  filing office or offices,  and (iv) the Collateral  Agent shall
have received evidence that all other actions  (including,  without  limitation,
the payment of all filing fees and taxes,  if any,  payable in  connection  with
such filings) have been taken,  in order to perfect (and maintain the perfection
and priority of) the first priority security interest granted hereby.

                  2.7.  Recourse.  This  Agreement is made with full recourse to
each  Assignor  and  pursuant to and upon all the  warranties,  representations,
covenants and agreements on the part of

<PAGE>

each such  Assignor  contained  herein,  in the other Credit  Documents,  in the
Interest Rate Protection or Other Hedging Agreements and otherwise in writing in
connection herewith or therewith.

                                   ARTICLE III

               SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT

                   RIGHTS; INSTRUMENTS; CONCENTRATION ACCOUNT

                  3.1. Additional Representations and Warranties. As of the time
when each of its Receivables  arises,  the relevant  Assignor shall be deemed to
have represented and warranted that such Receivable, and all records, papers and
documents  relating thereto are genuine and in all respects what they purport to
be, and that all papers and documents  relating  thereto (i) will  represent the
genuine,  legal,  valid and binding  obligation of the account debtor evidencing
indebtedness unpaid and owed by the respective account debtor arising out of the
performance  of labor or  services  or the sale or  lease  and  delivery  of the
inventory,  materials,  equipment or merchandise  listed therein,  or both, (ii)
will be the only original  writings  evidencing and embodying such obligation of
the  account  debtor  named  therein  (other  than  copies  created  for general
accounting   purposes),   (iii)  will  evidence  true  and  valid   obligations,
enforceable in accordance with their respective terms, except to the extent that
the  enforcement  thereof may be limited by applicable  bankruptcy,  insolvency,
reorganization  or other similar laws affecting  creditors' rights generally and
by equity principles  (regardless of whether  enforcement is sought in equity or
at law),  and (iv) will be in  compliance  in all respects and will conform with
all applicable federal, state and local laws and applicable laws of any relevant
foreign jurisdiction.

                  3.2.  Maintenance  of  Records.  Each  Assignor  will keep and
maintain at its own cost and expense  satisfactory  and complete  records of its
Receivables and Contracts, including, but not limited to, originals or copies of
all documentation (including each Contract) with respect thereto, records of all
payments received, all credits granted thereon, all merchandise returned and all
other dealings therewith, and such Assignor will make the same available on such
Assignor's  premises to the Collateral Agent for inspection,  at such Assignor's
own cost and expense,  at any and all  reasonable  times  during,  so long as no
Event of Default has occurred and is continuing,  normal  business hours and, so
long as no Event of Default has occurred or is continuing,  upon prior notice to
the chief financial officer or other authorized  officer of such Assignor.  Upon
the  occurrence  and during the  continuance  of an Event of Default  and at the
request  of the  Collateral  Agent,  such  Assignor  shall,  at its own cost and
expense,  deliver all tangible  evidence of its  Receivables and Contract Rights
(including, without limitation, all documents evidencing the Receivables and all
Contracts)  and  such  books  and  records  to the  Collateral  Agent  or to its
representatives  (copies of which evidence and books and records may be retained
by such Assignor) and, if the Collateral  Agent so directs,  such Assignor shall
legend, in form and manner satisfactory to the Collateral Agent, the Receivables
and the  Contracts,  as well as books,  records and  documents of such  Assignor
evidencing or pertaining to such  Receivables  and Contracts with an appropriate
reference to the fact that such  Receivables and Contracts have been assigned to
the  Collateral  Agent and that the  Collateral  Agent has a  security  interest
therein.

<PAGE>

                  3.3. Direction to Account Debtors;  Contracting Parties;  etc.
Upon the  occurrence and during the  continuance of an Event of Default,  and if
the  Collateral  Agent so  directs  any  Assignor,  to the extent  permitted  by
applicable law, such Assignor agrees (x) to cause all payments on account of the
Receivables  and Contracts to be made directly to the Cash  Collateral  Account,
(y) that the Collateral  Agent may, at its option,  directly notify the obligors
with respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (x), and (z) that the Collateral
Agent may enforce  collection  of any such  Receivables  and  Contracts  and may
adjust,  settle or compromise the amount of payment thereof,  in the same manner
and to the same  extent  as such  Assignor.  Without  notice to or assent by any
Assignor,  the  Collateral  Agent  may  apply  any or all  amounts  then in,  or
thereafter  deposited in, the Cash Collateral Account which application shall be
effected in the manner provided in Section 7.4 of this Agreement. The reasonable
out-of-pocket costs and expenses (including reasonable  out-of-pocket attorneys'
fees) of collection,  whether  incurred by an Assignor or the Collateral  Agent,
shall be borne by the Assignors.

                  3.4.  Modification of Terms; etc. No Assignor shall rescind or
cancel any  indebtedness  evidenced by any Receivable or under any Contract,  or
modify any term thereof or make any adjustment with respect  thereto,  or extend
or renew the same,  or compromise  or settle any dispute,  claim,  suit or legal
proceeding  relating  thereto,  or sell any Receivable or Contract,  or interest
therein,  without the prior written consent of the Collateral  Agent,  except as
permitted by Section 3.5. Each Assignor will duly fulfill all obligations on its
part to be fulfilled  under or in connection  with the Receivables and Contracts
and  will do  nothing  to  impair  the  rights  of the  Collateral  Agent in the
Receivables or Contracts, except as permitted by Section 3.5.

                  3.5.  Collection.  Each Assignor shall endeavor to cause to be
collected  from the account  debtor named in each of its  Receivables or obligor
under any of its  Contracts,  as and when due  (including,  without  limitation,
amounts,  services or products which are delinquent,  such amounts,  services or
products to be collected in accordance with generally accepted lawful collection
procedures) any and all amounts,  services or products owing under or on account
of such  Receivable or Contract,  and apply  forthwith upon receipt  thereof all
such  amounts,  services  or  products as are so  collected  to the  outstanding
balance of such  Receivable or under such  Contract,  except that,  prior to the
occurrence of an Event of Default, any Assignor may allow in the ordinary course
of business as  adjustments  to  amounts,  services or products  owing under its
Receivables  and  Contracts  (i) an extension or renewal of the time or times of
payment or exchange, or settlement for less than the total unpaid balance, which
such Assignor finds appropriate in accordance with reasonable  business judgment
and (ii) a refund or credit due as a result of returned  or damaged  merchandise
or  improperly  performed  services.  The  reasonable  out-of-pocket  costs  and
expenses (including,  without limitation,  reasonable  out-of-pocket  attorneys'
fees) of collection,  whether  incurred by an Assignor or the Collateral  Agent,
shall be borne by the Assignors.

                  3.6.  Instruments.  If  any  Assignor  owns  or  acquires  any
Instrument constituting  Collateral,  such Assignor will within 10 Business Days
notify the Collateral  Agent thereof,  and upon request by the Collateral  Agent
will promptly  deliver such  Instrument to the  Collateral  Agent  appropriately
endorsed to the order of the Collateral Agent as further security hereunder.

<PAGE>

                 3.7.  Concentration  Account.  (a) Within  sixty days after the
Initial  Borrowing  Date,  the  Assignors  shall  cause  to be  established  the
Concentration  Account  with the  Concentration  Account Bank as  referenced  in
Section 7.18 of the Credit  Agreement.  Each Assignor hereby agrees that, within
sixty days after the Initial  Borrowing Date, it shall notify the  Concentration
Account Bank that the  Concentration  Account  maintained with the Concentration
Account Bank by such Assignor is under the exclusive dominion and control of the
Collateral Agent and all moneys,  instruments and other  securities  received in
such Concentration  Account are to be held by the Concentration Account Bank for
the benefit of the Collateral  Agent.  Furthermore,  within sixty days after the
Initial Borrowing Date, the Assignors shall cause the Concentration Account Bank
to execute and deliver to the Collateral  Agent a Concentration  Account Consent
Letter acknowledging the security interest and exclusive dominion and control of
the Collateral Agent in all moneys,  instruments and other securities  deposited
in the Concentration  Account.  Each Assignor hereby transfers to the Collateral
Agent the exclusive  dominion and control over the Concentration  Account.  Each
Assignor hereby represents and warrants that it does not now maintain,  and will
not in the future  maintain,  any other account with the  Concentration  Account
Bank other than the Concentration Account; provided,  however, that any Assignor
may  establish  and  maintain   additional   Concentration   Accounts  with  the
Concentration  Account Bank or any new Concentration Account Bank, if (x) in the
case  of  the  existing   Concentration   Account  Bank,   such  Assignor,   the
Concentration  Account Bank and the Collateral  Agent shall have entered into an
amendment to the existing  Concentration  Account Consent Letter to include such
new Concentration  Account under such Concentration Account Consent Letter, such
amendment to be in form and substance  satisfactory to the Collateral Agent, and
(y) in the case of a new Concentration  Account Bank (i) the Assignor shall have
given  the  Collateral  Agent  at least 15 days'  prior  written  notice  of its
intention to  establish a new  Concentration  Account  with a new  Concentration
Account  Bank,  (ii) such new  Concentration  Account  Bank shall be  reasonably
acceptable to the Collateral Agent and (iii) such new Concentration Account Bank
shall enter into a  Concentration  Account  Consent  Letter in the form attached
hereto as Annex E with  such  changes  as may be  acceptable  to the  Collateral
Agent.

                  (b)  Until an Event of  Default  shall  have  occurred  and be
continuing, each Assignor is hereby authorized by the Collateral Agent to direct
the  disposition  of any  and  all  moneys,  instruments  and  other  securities
deposited  in the  Concentration  Account for use by the  Assignor in any manner
permitted by the Credit Agreement.

                  (c) Upon the occurrence and during the continuance of an Event
of Default,  the  authorization  of the Assignors  under Section 3.7(b) shall be
revoked  and  all  deposits  contained  in the  Concentration  Account,  and any
additional moneys,  instruments and other securities  subsequently  deposited in
the Concentration  Account shall be transferred to the Cash Collateral  Account,
to be held by the Collateral  Agent as Collateral for the Obligations or applied
to the  Obligations in accordance  with this Agreement (all such deposits in any
such Cash Collateral  Account shall constitute  "Collateral" for all purposes of
this  Agreement).  Upon the occurrence and during the continuance of an Event of
Default,  without notice to or assent by any Assignor,  the Collateral Agent may
apply  any or all  amounts  then  in,  or  thereafter  deposited  in,  the  Cash
Collateral Account in the manner provided in Section 7.4 of this Agreement.  The
reasonable  out-of-pocket costs and expenses (including reasonable out-of-pocket
attorney's  fees)  of  collection,  whether  incurred  by  an  Assignor  or  the
Collateral Agent, shall be borne by the Assignors.

<PAGE>

                  3.8. Further Actions.  Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such vouchers, invoices, schedules,  confirmatory assignments,
conveyances,  financing statements,  transfer endorsements,  powers of attorney,
certificates,  reports and other assurances or instruments and take such further
steps relating to its Receivables,  Contracts, Instruments and other property or
rights covered by the security interest hereby granted,  as the Collateral Agent
may reasonably require.

                                   ARTICLE IV

                    SPECIAL PROVISIONS CONCERNING TRADEMARKS

                  4.1. Additional Representations and Warranties.  Each Assignor
represents and warrants that it is the true, lawful, sole and exclusive owner of
the Marks listed in Annex F hereto and that said listed Marks constitute all the
Marks that such Assignor presently owns or uses in connection with its business.
Each  Assignor  represents  and warrants  that it owns or is licensed to use all
Marks that it uses. Each Assignor  further  warrants that it has no knowledge as
of the date hereof,  of any third party claim that any aspect of such Assignor's
present or  contemplated  business  operations  infringes  or will  infringe any
rights in any trademark,  service mark or trade name.  Each Assignor  represents
and warrants that it is the  beneficial and record owner of all U.S. and foreign
trademark  registrations and applications listed in Annex F hereto and that said
registrations  are valid,  subsisting and have not been cancelled and that, such
Assignor is not aware of any third-party claim that any of said registrations is
invalid  or  unenforceable,  or  that  there  is any  reason  that  any of  said
applications  will  not  pass to  registration.  Each  Assignor  represents  and
warrants that upon the  recordation  of an  Assignment  of Security  Interest in
United States Trademarks and Patents in the form of Annex G hereto in the United
States Patent and Trademark Office, together with filings on Form UCC-1 pursuant
to this  Agreement,  all  filings  registrations  and  recordings  necessary  or
appropriate to perfect the security  interest granted to the Collateral Agent in
the United  States Marks covered by this  Agreement  under federal law will have
been  accomplished.  Each  Assignor  agrees to  execute  such an  Assignment  of
Security  Interest in United States  Trademarks and Patents  covering all right,
title and interest in each United States Mark,  and the  associated  goodwill of
the  Assignor,  and to  record  the same.  Each  Assignor  hereby  grants to the
Collateral  Agent an absolute power of attorney to sign, upon the occurrence and
during  the  continuance  of an Event of  Default,  any  document  which  may be
required  by the U.S.  Patent  and  Trademark  Office or  secretary  of state or
equivalent  governmental  agency  of any  State of the  United  States or in any
foreign  jurisdiction  in order to effect an absolute  assignment  of all right,
title and interest in each Mark, and record the same.

                  4.2. Licenses and Assignments. Each Assignor hereby agrees not
to divest  itself of any right under any Mark absent prior  written  approval of
the Collateral Agent.

                  4.3.  Infringements.   Each  Assignor  agrees,  promptly  upon
learning  thereof,  to notify  the  Collateral  Agent in writing of the name and
address of, and to furnish such pertinent information that may be available with
respect to (i) any party who such Assignor believes is infringing or diluting or
otherwise  violating in any respect any of such Assignor's  rights in and to any
Mark, or (ii) any party  claiming that such  Assignor's use of any Mark violates
in any respect

<PAGE>

any property right of that party. Each Assignor further agrees, unless otherwise
agreed by the Collateral  Agent,  diligently to prosecute any Person  infringing
any Mark.

                  4.4.  Preservation  of Marks.  Each Assignor agrees to use its
material Marks in interstate or foreign  commerce  during the time in which this
Agreement  is in  effect,  sufficiently  to  preserve  such  Marks as valid  and
subsisting  trademarks  or service  marks under the laws of the United States or
the relevant foreign jurisdictions.

                  4.5. Maintenance of Registration.  Each Assignor shall, at its
own expense,  diligently  process all documents required by the Trademark Act of
1946,  as amended,  15 U.S.C.  ss.ss.  1051 et seq.  and any foreign  equivalent
thereof to maintain  its material  trademark  registrations,  including  but not
limited  to  affidavits  of  continued  use and  applications  for  renewals  of
registration  in the United  States  Patent and  Trademark  Office or equivalent
governmental agency in any foreign  jurisdiction for all of its registered Marks
pursuant to 15 U.S.C.  ss.ss.  1058,  1059 and 1065 and any  foreign  equivalent
thereof,  and shall pay all fees and  disbursements in connection  therewith and
shall not abandon any such filing of affidavit of use or any such application of
renewal prior to the  exhaustion  of all  administrative  and judicial  remedies
without prior written consent of the Collateral  Agent.  Each Assignor agrees to
notify the  Collateral  Agent  three (3) months  prior to the dates on which the
affidavits of continued use or the applications for renewal registration are due
with respect to any Mark that the affidavits of continued use or the application
for renewal is being processed.

                  4.6. Future Registered Marks. If any registration for any Mark
issues hereafter to any Assignor as a result of any application now or hereafter
pending  before the United States Patent and Trademark  Office or any equivalent
governmental  agency in any foreign  jurisdiction,  within 30 days of receipt of
such certificate,  such Assignor shall deliver to the Collateral Agent a copy of
such  certificate and an assignment for security in such Mark, to the Collateral
Agent  and at the  expense  of such  Assignor,  confirming  the  assignment  for
security  in such  Mark to the  Collateral  Agent  hereunder,  the  form of such
security to be  substantially  the same as the form hereof or in such other form
as may be satisfactory to the Collateral Agent.

                  4.7.  Remedies.  If an Event of  Default  shall  occur  and be
continuing,  the  Collateral  Agent  may,  by  written  notice  to the  relevant
Assignor,  take any or all of the  following  actions:  (i)  declare  the entire
right, title and interest of such Assignor in and to each of the Marks, together
with all trademark  rights and rights of protection to the same and the goodwill
of such  Assignor's  business  symbolized by said Marks and the right to recover
for past infringements  thereof,  vested in the Collateral Agent for the benefit
of the Secured Creditors,  in which event such rights,  title and interest shall
immediately  vest,  in the  Collateral  Agent  for the  benefit  of the  Secured
Creditors,  and the Collateral  Agent shall be entitled to exercise the power of
attorney  referred to in Section 4.1 to execute,  cause to be  acknowledged  and
notarized and to record said absolute  assignment  with the  applicable  agency;
(ii) take and use or sell the Marks and the goodwill of such Assignor's business
symbolized  by the  Marks  and the  right to carry on the  business  and use the
assets of such Assignor in connection  with which the Marks have been used;  and
(iii)  direct  such  Assignor to refrain,  in which  event such  Assignor  shall
refrain, from using the Marks in any manner whatsoever,  directly or indirectly,
and, if requested by the Collateral Agent, change such Assignor's corporate name
to  eliminate  therefrom  any use of any Mark and execute such

<PAGE>

other and further  documents  that the  Collateral  Agent may request to further
confirm this and to transfer  ownership of the Marks and  registrations  and any
pending  trademark  applications  therefor  in  the  United  States  Patent  and
Trademark  Office  or  any  equivalent   governmental   agency  in  any  foreign
jurisdiction to the Collateral Agent.

                                    ARTICLE V

                          SPECIAL PROVISIONS CONCERNING

                      PATENTS, COPYRIGHTS AND TRADE SECRETS

                  5.1. Additional Representations and Warranties.  Each Assignor
represents and warrants that it is the true, lawful, sole and exclusive owner of
all rights in (i) all trade  secrets and  proprietary  information  necessary to
operate the business of such  Assignor  (the "Trade  Secret  Rights"),  (ii) the
Patents  listed in Annex G hereto  and (iii)  the  Copyrights  listed in Annex H
hereto,  that said  Patents  constitute  all the  patents and  applications  for
patents that such  Assignor  now owns and that such  Copyrights  constitute  all
registrations of copyrights and applications  for copyright  registrations  that
such Assignor now owns.  Each Assignor  further  represents and warrants that it
has  the  exclusive  right  to use and  practice  under  all  such  Patents  and
Copyrights that it owns, uses or practices under. Each Assignor further warrants
that it is aware of no claim  that any  aspect  of such  Assignor's  present  or
contemplated  business  operations  infringes or will infringe any rights of any
third party in any patent or copyright or such Assignor has  misappropriated any
trade secret or proprietary  information.  Each Assignor represents and warrants
that upon the recordation of an Assignment of Security Interest in United States
Trademarks and Patents in the form of Annex I hereto in the United States Patent
and Trademark  Office and an  Assignment  of Security  Interest in United States
Copyrights in the form of Annex J hereto in the United States Copyright  Office,
together  with  filings on Form UCC-1  pursuant to this  Agreement,  all filings
registrations  and  recordings  necessary or appropriate to perfect the security
interest  granted to the Collateral  Agent in the United States Patents,  United
States  Copyrights  and Trade  Secret  Rights  covered by this  Agreement  under
federal  law will have been  accomplished.  Each  Assignor  agrees to execute an
Assignment of Security  Interest in United States  Patents and Trademarks and an
Assignment of Security Interest in United States Copyrights  covering all right,
title  and  interest  in each  United  States  Patent  and  each  United  States
Copyright,  and the associated goodwill of the Assignor, and to record the same.
Each  Assignor  hereby  grants  to the  Collateral  Agent an  absolute  power of
attorney to sign, upon the occurrence and during the continuance of any Event of
Default,  any document  which may be required by the U.S.  Patent and  Trademark
Office or equivalent governmental agency in any foreign jurisdiction or the U.S.
Copyright Office or equivalent  governmental agency in any foreign  jurisdiction
in order to effect an absolute  assignment  of all right,  title and interest in
each Patent and Copyright, and to record the same.

                  5.2. Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right under any Patent or Copyright absent prior written
approval of the Collateral Agent.

                  5.3.  Infringements.   Each  Assignor  agrees,  promptly  upon
learning thereof,  to furnish the Collateral Agent in writing with all pertinent
information   available  to  such   Assignor   with  respect  to   infringement,
contributing  infringement  or active  inducement  to  infringe in any

<PAGE>

Patent or  Copyright  or to any claim that the practice of any Patent or the use
of any Copyright  violates any property right of a third party,  or with respect
to any  misappropriation of any Trade Secret Right or any claim that practice of
any Trade Secret  Right  violates  any  property  right of a third  party.  Each
Assignor  further  agrees,  absent  direction  of the  Collateral  Agent  to the
contrary,  diligently to prosecute any Person infringing any Patent or Copyright
or any Person misappropriating any Trade Secret Right.

                  5.4.  Maintenance  of  Patents  and  Copyrights.  At  its  own
expense,  each  Assignor  shall make timely  payment of all  post-issuance  fees
required  pursuant  to 35 U.S.C.  ss. 41 and any foreign  equivalent  thereof to
maintain  in full force  rights  under each  Patent,  and to apply as  permitted
pursuant  to  applicable  law for any  renewal of each  Copyright  absent  prior
written consent of the Collateral Agent.

                  5.5.  Prosecution of Patent  Application.  At its own expense,
each Assignor shall diligently  prosecute all applications for Patents listed in
Annex G hereto and shall not abandon any such application prior to exhaustion of
all  administrative  and  judicial  remedies,  absent  written  consent  of  the
Collateral Agent.

                  5.6.  Other  Patents  and  Copyrights.  Within  30 days of the
acquisition or issuance of a Patent or of a Copyright registration, or of filing
of an application for a Patent or Copyright registration,  the relevant Assignor
shall deliver to the Collateral  Agent a copy of said Copyright  registration or
Patent or certificate or registration of, or application  therefor,  as the case
may be, with an assignment  for security as to such Patent or Copyright,  as the
case may be,  to the  Collateral  Agent  and at the  expense  of such  Assignor,
confirming the assignment for security, the form of such assignment for security
to be substantially  the same as the form hereof or in such other form as may be
satisfactory to the Collateral Agent.

                  5.7.  Remedies.  If an Event of  Default  shall  occur  and be
continuing, the Collateral Agent may by written notice to the relevant Assignor,
take any or all of the following actions:  (i) declare the entire right,  title,
and interest of such  Assignor in each of the Patents and  Copyrights  vested in
the Collateral  Agent for the benefit of the Secured  Creditors,  in which event
such right,  title, and interest shall  immediately vest in the Collateral Agent
for the benefit of the Secured  Creditors,  in which case the  Collateral  Agent
shall be entitled to exercise  the power of attorney  referred to in Section 5.1
to execute,  cause to be acknowledged  and notarized and to record said absolute
assignment  with the  applicable  agency;  (ii)  take and  practice  or sell the
Patents and  Copyrights;  and (iii)  direct such  Assignor to refrain,  in which
event such Assignor  shall  refrain,  from  practicing the Patents and using the
Copyrights  directly or  indirectly,  and such Assignor shall execute such other
and further  documents as the  Collateral  Agent may request  further to confirm
this and to transfer  ownership of the Patents and  Copyrights to the Collateral
Agent for the benefit of the Secured Creditors.

<PAGE>

                                   ARTICLE VI

                      PROVISIONS CONCERNING ALL COLLATERAL

                  6.1. Protection of Collateral Agent's Security.  Each Assignor
will do nothing to impair the rights of the Collateral  Agent in the Collateral.
Each Assignor  will at all times keep its  Inventory  and  Equipment  insured in
favor of the Collateral  Agent, at such Assignor's own expense to the extent and
in the manner  provided in the Credit  Agreement;  all policies or  certificates
with respect to such  insurance  (and any other  insurance  (other than employee
benefit  insurance)  maintained by such Assignor):  (i) shall be endorsed to the
Collateral  Agent's  satisfaction  for  the  benefit  of  the  Collateral  Agent
(including, without limitation, by naming the Collateral Agent as loss payee and
naming  each of the  Banks,  the Agent and the  Collateral  Agent as  additional
insureds);  and (ii)  shall  state  that such  insurance  policies  shall not be
cancelled  or  revised  without 30 days'  prior  written  notice  thereof by the
insurer to the Collateral  Agent; and certified copies of such policies shall be
deposited  with the Collateral  Agent.  If any Assignor shall fail to insure its
Inventory  and Equipment in accordance  with the preceding  sentence,  or if any
Assignor shall fail to so endorse and deposit all policies with respect thereto,
the Collateral  Agent shall have the right (but shall be under no obligation) to
procure  such  insurance  and such  Assignor  agrees to promptly  reimburse  the
Collateral  Agent for all costs and expenses of procuring  such  insurance.  All
proceeds of any  insurance  shall be  deposited in the Cash  Collateral  Account
pending application thereof pursuant to the Credit Agreement or pursuant hereto.
The  Collateral  Agent shall,  at the time such  proceeds of such  insurance are
distributed  to the Secured  Creditors,  apply such proceeds in accordance  with
Section  7.4.  Each  Assignor  assumes  all  liability  and   responsibility  in
connection with the Collateral acquired by it and the liability of such Assignor
to pay the  Obligations  shall in no way be affected or  diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.

                  6.2. Warehouse Receipts  Non-negotiable.  Each Assignor agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory,  such warehouse  receipt or receipt
in the nature thereof shall not be "negotiable" (as such term is used in Section
7-104 of the Uniform  Commercial Code as in effect in any relevant  jurisdiction
or under other relevant law).

                  6.3. Further Actions.  Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists,  descriptions  and designations of its Collateral,
warehouse  receipts,  receipts  in the nature of  warehouse  receipts,  bills of
lading,  documents  of  title,  vouchers,  invoices,   schedules,   confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney,  certificates,  reports and other  assurances or instruments  and take
such  further  steps  relating to the  Collateral  and other  property or rights
covered by the security  interest  hereby  granted,  which the Collateral  Agent
deems  reasonably  appropriate or advisable to perfect,  preserve or protect its
security interest in the Collateral.

                  6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral  Agent such financing  statements,  in form reasonably
acceptable to the Collateral  Agent,

<PAGE>

as the  Collateral  Agent may from  time to time  reasonably  request  or as are
necessary or desirable in the opinion of the  Collateral  Agent to establish and
maintain a valid, enforceable, first priority perfected security interest in the
Collateral  (subject to the  Permitted  Liens) as provided  herein and the other
rights and  security  contemplated  hereby all in  accordance  with the  Uniform
Commercial  Code as enacted in any and all relevant  jurisdictions  or any other
relevant law. Each Assignor  will pay any  applicable  filing fees,  recordation
taxes and related  expenses  relating to its  Collateral.  Each Assignor  hereby
authorizes the Collateral  Agent to file any such financing  statements  without
the signature of such Assignor where permitted by law.

                                   ARTICLE VII

                  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

                  7.1.  Remedies;  Obtaining the Collateral  Upon Default.  Each
Assignor  agrees  that,  if any Event of  Default  shall  have  occurred  and be
continuing,  then and in every such case, the Collateral  Agent,  in addition to
any rights now or hereafter existing under applicable law, shall have all rights
as a  secured  creditor  under  the  Uniform  Commercial  Code  in all  relevant
jurisdictions and may:

                 (i)  personally,  or by agents or attorneys,  immediately  take
         possession of the Collateral or any part thereof, from such Assignor or
         any other  Person who then has  possession  of any part thereof with or
         without  notice or process of law,  and for that purpose may enter upon
         such  Assignor's  premises  where any of the  Collateral is located and
         remove the same and use in  connection  with such  removal  any and all
         services, supplies, aids and other facilities of such Assignor;

                (ii)  instruct  the  obligor  or  obligors  on  any   agreement,
         instrument or other  obligation  (including,  without  limitation,  the
         Receivables and the Contracts)  constituting the Collateral to make any
         payment  required by the terms of such  agreement,  instrument or other
         obligation  directly to the  Collateral  Agent and may exercise any and
         all remedies of such Assignor in respect of such Collateral;

               (iii) withdraw all moneys,  instruments  and other  securities in
         the Concentration  Account and/or the Cash Collateral Account and/or in
         any other cash collateral account for application to the Obligations in
         accordance with Section 7.4;

                (iv)  sell,  assign  or  otherwise  liquidate  any or all of the
         Collateral  or any part  thereof in  accordance  with  Section  7.2, or
         direct the relevant Assignor to sell, assign or otherwise liquidate any
         or all of the Collateral or any part thereof,  and, in each case,  take
         possession of the proceeds of any such sale or liquidation;

                 (v) take  possession of the Collateral or any part thereof,  by
         directing  the relevant  Assignor in writing to deliver the same to the
         Collateral  Agent at any place or places  designated by the  Collateral
         Agent, in which event such Assignor shall at its own expense:

<PAGE>

                           (x)  forthwith  cause the same to be moved to the
                  place or places so  designated  by the Collateral Agent and
                  there delivered to the Collateral Agent;

                           (y) store and keep any Collateral so delivered to the
                  Collateral  Agent at such  place  or  places  pending  further
                  action by the Collateral Agent as provided in Section 7.2; and

                           (z) while the Collateral shall be so stored and kept,
                  provide  such  guards  and  maintenance  services  as shall be
                  necessary  to protect  the same and to preserve  and  maintain
                  them in good condition; and

                (vi)  license  or   sublicense,   whether  on  an  exclusive  or
         nonexclusive  basis, any Marks,  Patents or Copyrights  included in the
         Collateral  for such term and on such  conditions and in such manner as
         the Collateral Agent shall in its sole judgment determine;

it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation.

                  7.2. Remedies;  Disposition of the Collateral.  Any Collateral
repossessed  by the  Collateral  Agent  under or pursuant to Section 7.1 and any
other Collateral  whether or not so repossessed by the Collateral  Agent, may be
sold,  assigned,  leased or otherwise disposed of under one or more contracts or
as an entirety,  and without the necessity of gathering at the place of sale the
property to be sold,  and in general in such manner,  at such time or times,  at
such  place  or  places  and on such  terms  as the  Collateral  Agent  may,  in
compliance with any mandatory  requirements  of applicable law,  determine to be
commercially reasonable.  Any of the Collateral may be sold, leased or otherwise
disposed  of, in the  condition  in which  the same  existed  when  taken by the
Collateral  Agent or after any overhaul or repair at the expense of the relevant
Assignor  which  the  Collateral   Agent  shall  determine  to  be  commercially
reasonable.  Any such disposition which shall be a private sale or other private
proceedings  permitted by such requirements  shall be made upon not less than 10
days' written notice to the relevant Assignor  specifying the time at which such
disposition  is to be made and the  intended  sale price or other  consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the  Collateral  involved  at a price or for such other  consideration  at least
equal to the intended sale price or other  consideration so specified.  Any such
disposition which shall be a public sale permitted by such requirements shall be
made  upon not less  than 10  days'  written  notice  to the  relevant  Assignor
specifying  the time and place of such sale and,  in the  absence of  applicable
requirements  of law,  shall be by public  auction (which may, at the Collateral
Agent's  option,  be subject to reserve),  after  publication  of notice of such
auction  not less  than 10 days  prior  thereto  in two  newspapers  in  general
circulation  in the  City of New  York.  To the  extent  permitted  by any  such
requirement of law, the Collateral Agent may bid for and become the purchaser of
the  Collateral  or any item thereof,  offered for sale in accordance  with this
Section without  accountability  to the relevant  Assignor.  If, under mandatory
requirements of applicable  law, the Collateral  Agent shall be required to make
disposition of the Collateral  within a period of time which does not permit the
giving  of  notice  to the  relevant

<PAGE>

Assignor as hereinabove specified,  the Collateral Agent need give such Assignor
only such notice of  disposition  as shall be reasonably  practicable in view of
such mandatory  requirements  of applicable  law. Each Assignor  agrees to do or
cause to be done all such other acts and things as may be  reasonably  necessary
to make such sale or sales of all or any  portion  of the  Collateral  valid and
binding and in compliance with any and all applicable laws, regulations, orders,
writs,  injunctions,  decrees or awards of any and all  courts,  arbitrators  or
governmental  instrumentalities,  domestic or foreign,  having jurisdiction over
any such sale or sales, all at such Assignor's expense.

                  7.3. Waiver of Claims.  Except as otherwise expressly provided
in this  Agreement,  EACH ASSIGNOR  HEREBY  WAIVES,  TO THE EXTENT  PERMITTED BY
APPLICABLE  LAW,  NOTICE AND JUDICIAL  HEARING IN CONNECTION WITH THE COLLATERAL
AGENT'S TAKING  POSSESSION OR THE COLLATERAL  AGENT'S  DISPOSITION OF ANY OF THE
COLLATERAL,  INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY  PREJUDGMENT  REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH  ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE  CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and the Assignor hereby further waives, to the extent permitted
by law:

                 (i)     all damages  occasioned  by such  taking of  possession
        except any damages which are the direct result of the Collateral Agent's
        gross negligence or willful misconduct;

                (ii)     all other  requirements as to the time, place and terms
        of sale or other requirements with respect to the enforcement of the
        Collateral Agent's rights hereunder; and

               (iii) all rights of redemption,  appraisement,  valuation,  stay,
        extension or moratorium  now or hereafter in force under any applicable
        law in order to prevent or delay the  enforcement  of this Agreement or
        the absolute sale of the  Collateral or any portion  thereof,  and each
        Assignor,  for itself and all who may claim under it,  insofar as it or
        they now or hereafter  lawfully  may,  hereby waives the benefit of all
        such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral  shall operate to divest all right,  title,  interest,  claim and
demand,  either  at law or in  equity,  of the  relevant  Assignor  therein  and
thereto,  and shall be a perpetual  bar both at law and in equity  against  such
Assignor  and against any and all Persons  claiming or  attempting  to claim the
Collateral  so sold,  optioned  or realized  upon,  or any part  thereof,  from,
through and under such Assignor.

                  7.4. Application of Proceeds.  (a) All moneys collected by the
Collateral  Agent (or,  to the extent any other  Security  Document to which the
Assignor is a party requires  proceeds of Collateral  under such agreement to be
applied in  accordance  with the  provisions  of this  Agreement,  the  Pledgee,
Mortgagee or Collateral Agent under such other agreement) upon any sale or other
disposition of the  Collateral,  together with all other moneys  received by the
Collateral Agent hereunder, shall be applied as follows:

<PAGE>

                 (i)  first,  to  the  payment  of  all  Obligations  owing  the
         Collateral  Agent (or any other  Indemnitee,  in the case of clause (v)
         referenced  below) of the type provided in clauses (iii),  (iv) and (v)
         of the definition of Obligations;

                (ii) second, to the extent proceeds remain after the application
         pursuant  to  the  preceding   clause  (i),  an  amount  equal  to  the
         outstanding  Primary Obligations shall be paid to the Secured Creditors
         as provided in Section 7.4(d),  with each Secured Creditor receiving an
         amount equal to its outstanding Primary Obligations or, if the proceeds
         are insufficient to pay in full all such Primary  Obligations,  its Pro
         Rata Share of the amount remaining to be distributed;

               (iii) third,  to the extent proceeds remain after the application
         pursuant to the preceding  clauses (i) and (ii), an amount equal to the
         outstanding   Secondary  Obligations  shall  be  paid  to  the  Secured
         Creditors as provided in Section  7.4(d),  with each  Secured  Creditor
         receiving an amount equal to its outstanding  Secondary Obligations or,
         if the  proceeds  are  insufficient  to pay in full all such  Secondary
         Obligations,  its  Pro  Rata  Share  of  the  amount  remaining  to  be
         distributed; and

                (iv) fourth, to the extent proceeds remain after the application
         pursuant to the preceding clauses (i), (ii) and (iii) and following the
         termination of this Agreement  pursuant to Section 10.9 hereof,  to the
         relevant Assignor or as required by applicable law.

                  (b) For purposes of this  Agreement (x) "Pro Rata Share" shall
mean,  when  calculating a Secured  Creditor's  portion of any  distribution  or
amount,  that  amount  (expressed  as a  percentage)  equal  to a  fraction  the
numerator of which is the then unpaid amount of such Secured  Creditor's Primary
Obligations or Secondary Obligations, as the case may be, and the denominator of
which is the then  outstanding  amount of all Primary  Obligations  or Secondary
Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the
case of the Credit Document Obligations,  all principal of, and interest on, all
Loans,  and all  Fees  and  (ii) in the  case of the  Interest  Rate  Protection
Obligations, all amounts due under the Interest Rate Protection or Other Hedging
Agreements  (other  than  indemnities,  fees  (including,   without  limitation,
attorneys'  fees) and similar  obligations and  liabilities)  and (z) "Secondary
Obligations" shall mean all Obligations other than Primary Obligations.

                  (c) When  payments to Secured  Creditors  are based upon their
respective  Pro Rata  shares,  the amounts  received by such  Secured  Creditors
hereunder  shall be applied (for  purposes of making  determinations  under this
Section 7.4 only) (i) first, to their Primary  Obligations  and (ii) second,  to
their Secondary  Obligations.  If any payment to any Secured Creditor of its Pro
Rata Share of any  distribution  would  result in  overpayment  to such  Secured
Creditor,  such excess  amount shall  instead be  distributed  in respect of the
unpaid Primary Obligations or Secondary Obligations,  as the case may be, of the
other Secured Creditors, with each Secured Creditor whose Primary Obligations or
Secondary Obligations, as the case may be, have not been paid in full to receive
an amount equal to such excess amount  multiplied by a fraction the numerator of
which is the unpaid Primary  Obligations or Secondary  Obligations,  as the case
may be, of such  Secured  Creditor  and the  denominator  of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors entitled to such distribution.

<PAGE>

                  (d) All payments  required to be made hereunder  shall be made
(i) if to the Bank  Creditors,  to the Agent under the Credit  Agreement for the
account  of the Bank  Creditors,  and  (ii) if to the  Other  Creditors,  to the
trustee,  paying agent or other similar representative (each a "Representative")
for the Other Creditors or, in the absence of such a Representative, directly to
the Other Creditors.

                  (e) For purposes of applying  payments  received in accordance
with this Section 7.4, the  Collateral  Agent shall be entitled to rely upon (i)
the Administrative  Agent under the Credit Agreement and (ii) the Representative
for the Other  Creditors or, in the absence of such a  Representative,  upon the
Other  Creditors  for a  determination  (which the  Administrative  Agent,  each
Representative  for any Secured  Creditors and the Secured  Creditors  agree (or
shall agree) to provide upon request of the Collateral Agent) of the outstanding
Primary Obligations and Secondary  Obligations owed to the Bank Creditors or the
Other Creditors,  as the case may be. Unless it has actual knowledge  (including
by way of written  notice  from a Bank  Creditor  or an Other  Creditor)  to the
contrary,  the  Administrative  Agent  and each  Representative,  in  furnishing
information  pursuant to the preceding  sentence,  and the Collateral  Agent, in
acting hereunder,  shall be entitled to assume that no Secondary Obligations are
outstanding.  Unless it has actual knowledge (including by way of written notice
from an Other  Creditor)  to the  contrary,  the  Collateral  Agent,  in  acting
hereunder, shall be entitled to assume that no Interest Rate Protection or Other
Hedging Agreements are in existence.

                  (f) It is understood that each Assignor shall remain liable to
the  extent  of  any  deficiency  between  the  amount  of the  proceeds  of the
Collateral and the aggregate amount of the sums referred to in clauses (i), (ii)
and (iii) of Section 7.4(a) with respect to the relevant Assignor.

                  7.5.  Remedies  Cumulative.  Each and every  right,  power and
remedy hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection or Other Hedging Agreements, the other Credit Documents
now or  hereafter  existing  at law,  in equity or by statute and each and every
right, power and remedy whether  specifically herein given or otherwise existing
may be exercised  from time to time or  simultaneously  and as often and in such
order as may be deemed  expedient  by the  Collateral  Agent.  All such  rights,
powers and remedies shall be cumulative and the exercise or the beginning of the
exercise of one shall not be deemed a waiver of the right to exercise  any other
or others.  No delay or omission of the Collateral  Agent in the exercise of any
such  right,  power  or  remedy  and  no  renewal  or  extension  of  any of the
Obligations  shall impair any such right,  power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on any Assignor in any case shall entitle it to any other or
further  notice or demand in  similar or other  circumstances  or  constitute  a
waiver of any of the  rights  of the  Collateral  Agent to any other or  further
action in any  circumstances  without  notice or  demand.  In the event that the
Collateral Agent shall bring any suit to enforce any of its rights hereunder and
shall be  entitled  to  judgment,  then in such  suit the  Collateral  Agent may
recover reasonable expenses,  including attorneys' fees, and the amounts thereof
shall be included in such judgment.

                  7.6.  Discontinuance  of  Proceedings.  In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under  this  Agreement  by  foreclosure,

<PAGE>

sale,  entry  or  otherwise,  and such
proceeding  shall have been  discontinued  or abandoned  for any reason or shall
have been determined  adversely to the Collateral  Agent, then and in every such
case the relevant  Assignor,  the Collateral Agent and each holder of any of the
Obligations  shall be restored to their former  positions  and rights  hereunder
with respect to the Collateral  subject to the security  interest  created under
this  Agreement,  and all rights,  remedies and powers of the  Collateral  Agent
shall continue as if no such proceeding had been instituted.

                                  ARTICLE VIII

                                    INDEMNITY

                  8.1. Indemnity. (a) Each Assignor jointly and severally agrees
to indemnify, reimburse and hold the Collateral Agent, each Secured Creditor and
their respective successors,  permitted assigns,  employees, agents and servants
(hereinafter in this Section 8.1 referred to individually as  "Indemnitee,"  and
collectively  as   "Indemnitees")   harmless  from  any  and  all   liabilities,
obligations,  damages,  injuries,  penalties,  claims, demands,  actions, suits,
judgments and any and all reasonable costs, expenses or disbursements (including
reasonable out-of-pocket attorneys' fees and expenses) (for the purposes of this
Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind
and nature imposed on, asserted against or incurred by any of the Indemnitees in
any  way  relating  to or  arising  out of this  Agreement,  any  Interest  Rate
Protection or Other Hedging  Agreement,  any other Credit  Document or any other
document  executed  in  connection  herewith  or  therewith  or in any other way
connected with the  administration  of the transactions  contemplated  hereby or
thereby or the  enforcement of any of the terms of, or the  preservation  of any
rights  under any  thereof,  or in any way  relating  to or  arising  out of the
manufacture,  ownership,  ordering,  purchase,  delivery,  control,  acceptance,
lease,  financing,  possession,  operation,  condition,  sale,  return  or other
disposition, or use of the Collateral (including,  without limitation, latent or
other defects,  whether or not  discoverable),  the violation of the laws of any
country, state or other governmental body or unit, any tort (including,  without
limitation, claims arising or imposed under the doctrine of strict liability, or
for or on  account  of  injury  to or the  death of any  Person  (including  any
Indemnitee), or property damage), or contract claim; provided that no Indemnitee
shall be  indemnified  pursuant to this  Section  8.1(a) for losses,  damages or
liabilities to the extent caused by the gross  negligence or willful  misconduct
of such  Indemnitee.  Each  Assignor  agrees  that  upon  written  notice by any
Indemnitee of the  assertion of such a liability,  obligation,  damage,  injury,
penalty,  claim, demand,  action, suit or judgment,  the relevant Assignor shall
assume full  responsibility  for the defense thereof.  Each Indemnitee agrees to
use its best  efforts to  promptly  notify  the  relevant  Assignor  of any such
assertion of which such Indemnitee has knowledge.

                  (b) Without  limiting the application of Section 8.1(a),  each
Assignor  agrees,  jointly and  severally,  to pay, or reimburse the  Collateral
Agent for any and all  reasonable  fees,  costs and expenses of whatever kind or
nature incurred in connection  with the creation,  preservation or protection of
the  Collateral  Agent's  Liens on, and security  interest  in, the  Collateral,
including,  without  limitation,  all out-of-pocket fees and taxes in connection
with the recording or filing of  instruments  and  documents in public  offices,
payment or discharge of any taxes or Liens upon or in respect of the Collateral,
premiums for insurance with respect to the  Collateral and all other  reasonable
fees,  costs  and  expenses  in  connection  with  protecting,   maintaining  or
preserving

<PAGE>

the Collateral and the Collateral  Agent's  interest  therein,  whether  through
judicial  proceedings or otherwise,  or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the Collateral.

                  (c) Without limiting the application of Section 8.1(a) or (b),
each Assignor  agrees,  jointly and severally,  to pay,  indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer,  expend or incur in consequence of or growing out of
any  misrepresentation  by any Assignor in this  Agreement,  any  Interest  Rate
Protection  or Other  Hedging  Agreement,  any other  Credit  Document or in any
writing  contemplated by or made or delivered  pursuant to or in connection with
this Agreement,  any Interest Rate Protection or Other Hedging  Agreement or any
other Credit Document.

                  (d) If and to the extent that the  obligations of any Assignor
under this Section 8.1 are  unenforceable  for any reason,  such Assignor hereby
agrees to make the maximum  contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.

                  8.2. Indemnity  Obligations  Secured by Collateral;  Survival.
Any amounts paid by any Indemnitee as to which such  Indemnitee has the right to
reimbursement  shall  constitute  Obligations  secured  by the  Collateral.  The
indemnity  obligations  of each  Assignor  contained  in this Article VIII shall
continue in full force and effect  notwithstanding  the full  payment of all the
Notes issued under the Credit  Agreement,  the  termination of all Interest Rate
Protection or Other Hedging  Agreements and the payment of all other Obligations
and notwithstanding the discharge thereof.

                                   ARTICLE IX

                                   DEFINITIONS

                  The following terms shall have the meanings herein  specified.
Such definitions shall be equally applicable to the singular and plural forms of
the terms defined.

                  "Agent"  shall have the meaning  provided  in the  recitals to
this Agreement.

                  "Agreement" shall have the meaning provided in the preamble to
this Agreement.

                  "Assignor"  shall have the meaning provided in the preamble to
this Agreement.

                  "Bank  Creditors"  shall  have  the  meaning  provided  in the
preamble to this Agreement.

                  "Banks"  shall have the meaning  provided  in the  recitals to
this Agreement.

                  "Cash  Collateral  Account" shall mean a non-interest  bearing
account maintained with, and in the sole dominion and control of, the Collateral
Agent for the benefit of the Secured Creditors.

<PAGE>

                  "Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

                  "Class" shall have the meaning provided in Section 10.2.

                  "Collateral"  shall  have  the  meaning  provided  in  Section
1.1(a).

                  "Collateral  Agent"  shall have the  meaning  provided  in the
preamble to this Agreement.

                  "Contract  Rights"  shall  mean  all  rights  of any  Assignor
(including without limitation all rights to payment) under each Contract.

                  "Contracts"  shall mean all contracts between any Assignor and
one or more additional parties (including, without limitation, any Interest Rate
Protection or Other Hedging Agreements and the Acquisition Documents).

                  "Copyrights" shall mean any U.S. or foreign copyright owned by
any  Assignor,  including  any  registrations  of any  Copyrights,  in the  U.S.
Copyright Office or the equivalent thereof in any foreign jurisdiction,  as well
as any application for a U.S. or foreign copyright registration now or hereafter
made with the U.S.  Copyright  Office or the  equivalent  thereof in any foreign
jurisdiction by any Assignor.

                  "Credit  Agreement"  shall have the  meaning  provided  in the
recitals to this Agreement.

                  "Credit Document  Obligations" shall have the meaning provided
in the definition of "Obligations" in this Article IX.

                  "Default" shall mean any event which,  with notice or lapse of
time, or both, would constitute an Event of Default.

                  "Documents"  shall have the  meaning  provided  in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

                  "Equipment"  shall  mean  any  "equipment,"  as  such  term is
defined in the  Uniform  Commercial  Code as in effect on the date hereof in the
State of New York,  now or hereafter  owned by any  Assignor  and, in any event,
shall  include,  but  shall  not  be  limited  to,  all  machinery,   equipment,
furnishings,  movable trade fixtures and vehicles now or hereafter  owned by any
Assignor and any and all additions, substitutions and replacements of any of the
foregoing,  wherever located, together with all attachments,  components, parts,
equipment and accessories installed thereon or affixed thereto.

                  "Event of Default" shall mean any Event of Default under,  and
as defined in, the Credit  Agreement or any payment  default  under any Interest
Rate  Protection  or Other  Hedging  Agreement  and shall in any event,  without
limitation,  include any  payment  default on any of the  Obligations  after the
expiration of any applicable grace period.

<PAGE>

                  "General  Intangibles"  shall have the meaning provided in the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

                  "Goods"  shall  have  the  meaning  provided  in  the  Uniform
Commercial Code as in effect on the date hereof in the State of New York.

                  "Indemnitee" shall have the meaning provided in Section 8.1.

                  "Instrument"  shall have the  meaning  provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

                  "Interest Rate Protection  Obligations" shall have the meaning
provided in the definition of "Obligations" in this Article IX.

                  "Interest Rate Protection or Other Hedging  Agreements"  shall
have the meaning provided in the preamble to this Agreement.

                  "Inventory" shall mean  merchandise,  inventory and goods, and
all  additions,   substitutions  and  replacements  thereof,  wherever  located,
together with all goods,  supplies,  incidentals,  packaging materials,  labels,
materials  and any other  items  used or usable  in  manufacturing,  processing,
packaging or shipping  same;  in all stages of  production -- from raw materials
through  work-in-process  to finished  goods -- and all products and proceeds of
whatever  sort  and  wherever  located  and any  portion  thereof  which  may be
returned,  rejected,  reclaimed or repossessed by the Collateral  Agent from any
Assignor's  customers,  and shall  specifically  include all "inventory" as such
term is defined in the Uniform  Commercial  Code as in effect on the date hereof
in the State of New York, now or hereafter owned by any Assignor.

                  "Liens" shall mean any security  interest,  mortgage,  pledge,
lien, claim, charge, encumbrance,  title retention agreement,  lessor's interest
in a  financing  lease or  analogous  instrument,  in, of, or on any  Assignor's
property.

                  "Marks" shall mean all right, title and interest in and to any
U.S. or foreign trademarks,  service marks and trade names now held or hereafter
acquired  by  any  Assignor,  including  any  registration  or  application  for
registration of any trademarks and service marks in the United States Patent and
Trademark Office, or the equivalent thereof in any State of the United States or
in any foreign country,  and any trade dress including logos and/or designs used
by any Assignor in the United States or any foreign country.

                  "Obligations"  shall mean (i) the full and prompt payment when
due  (whether at the stated  maturity,  by  acceleration  or  otherwise)  of all
obligations and indebtedness (including,  without limitation,  indemnities, fees
and interest thereon) of each Assignor owing to the Bank Creditors, now existing
or hereafter  incurred  under,  arising out of or in connection  with any Credit
Document and the due  performance and compliance by each Assignor with the terms
of each such Credit Document,  including, without limitation, in the case of (x)
Holdings,  all obligations  under the Holdings  Guaranty and (y) each Subsidiary
Guarantor,  all obligations under the Subsidiaries Guaranty (other than those in
respect of Interest  Rate  Protection  or Other  Hedging  Agreements)  (all such
obligations  and  indebtedness  under  this  clause  (i),  except to the

<PAGE>

extent  consisting of obligations or indebtedness  with respect to Interest Rate
Protection or Other Hedging  Agreements,  being herein  collectively  called the
"Credit  Document  Obligations");  (ii)  the full and  prompt  payment  when due
(whether  at  the  stated  maturity,   by  acceleration  or  otherwise)  of  all
obligations and indebtedness (including,  without limitation,  indemnities, fees
and interest thereon) of each Assignor owing to the Other Creditors now existing
or hereafter  incurred under,  arising out of or in connection with any Interest
Rate Protection or Other Hedging Agreement including, without limitation, in the
case of (x) Holdings,  all obligations  under the Holdings Guaranty and (y) each
Subsidiary Guarantor,  all obligations under the Subsidiaries  Guaranty, in each
case in respect of Interest Rate  Protection or Other  Hedging  Agreements  (all
such  obligations  and   indebtedness   under  this  clause  (ii)  being  herein
collectively called the "Interest Rate Protection  Obligations");  (iii) any and
all sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve  its  security  interest  in the  Collateral;  (iv) in the event of any
proceeding for the collection or enforcement of any  indebtedness,  obligations,
or liabilities  referred to in clauses (i), (ii) and (iii) above, after an Event
of Default shall have occurred and be  continuing,  the  reasonable  expenses of
re-taking,  holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of
its rights hereunder,  together with reasonable attorneys' fees and court costs;
and (v) all amounts paid by any  Indemnitee as to which such  Indemnitee has the
right to reimbursement under Section 8.1 of this Agreement.

                  "Other  Creditors"  shall  have the  meaning  provided  in the
preamble to this Agreement.

     "Patents"  shall mean any U.S. or foreign  patent to which any Assignor now
or hereafter has title and any divisions or  continuations  thereof,  as well as
any  application  for a U.S.  or  foreign  patent now or  hereafter  made by any
Assignor.

                  "Primary  Obligation"  shall  have  the  meaning  provided  in
Section 7.4(b).

                  "Pro Rata Share"  shall have the  meaning  provided in Section
7.4(b).

                  "Proceeds"  shall have the  meaning  provided  in the  Uniform
Commercial  Code as in  effect  in the  State of New York on the date  hereof or
under other relevant law and, in any event,  shall  include,  but not be limited
to, (i) any and all proceeds of any insurance,  indemnity,  warranty or guaranty
payable to the  Collateral  Agent or any Assignor from time to time with respect
to any of the  Collateral,  (ii) any and all payments  (in any form  whatsoever)
made or due and payable to any Assignor from time to time in connection with any
requisition,  confiscation,  condemnation,  seizure or  forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of  governmental  authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.

                  "Receivables" shall mean any "account" as such term is defined
in the Uniform  Commercial  Code as in effect on the date hereof in the State of
New York,  now or  hereafter  owned by any  Assignor  and,  in any event,  shall
include,  but shall not be limited to, all of such Assignor's  rights to payment
for goods sold or leased or services performed by such Assignor,  whether now in
existence or arising from time to time hereafter, including, without limitation,


<PAGE>

rights evidenced by an account,  note,  contract,  security  agreement,  chattel
paper,  or other  evidence of  indebtedness  or security,  together with (a) all
security pledged, assigned,  hypothecated or granted to or held by such Assignor
to secure the foregoing,  (b) all of any Assignor's right, title and interest in
and to any  goods or  services,  the sale of which  gave rise  thereto,  (c) all
guarantees,  endorsements and  indemnifications on, or of, any of the foregoing,
(d) all powers of attorney for the execution of any evidence of  indebtedness or
security  or other  writing in  connection  therewith,  (e) all books,  records,
ledger cards, and invoices relating thereto,  (f) all evidences of the filing of
financing  statements  and  other  statements  and  the  registration  of  other
instruments  in connection  therewith and amendments  thereto,  notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (g) all credit information, reports and memoranda relating thereto and
(h) all other writings related in any way to the foregoing.

                  "Representative"  shall have the  meaning  provided in Section
7.4(d).

                  "Requisite  Creditors"  shall  have the  meaning  provided  in
Section 10.2.

                  "Secondary  Obligation"  shall have the  meaning  provided  in
Section 7.4(b).

                  "Secured  Creditors"  shall have the  meaning  provided in the
preamble to this Agreement.

                  "Subsidiaries Guaranty" shall have the meaning provided in the
recitals to this Agreement.

                  "Termination  Date" shall have the meaning provided in Section
10.9.

                  "Trade  Secret  Rights"  shall have the  meaning  provided  in
Section 5.1.

                                    ARTICLE X

                                  MISCELLANEOUS

                  10.1.  Notices.  Except as  otherwise  specified  herein,  all
notices,  requests,  demands or other  communications  to or upon the respective
parties  hereto shall be in writing  (including  telegraphic,  telex,  facsimile
transmission   or  cable   communication)   and  shall  be  delivered,   mailed,
telegraphed, telexed, facsimile transmitted or cabled, addressed:

<PAGE>

                  (a)  if to any Assignor, at its address set forth opposite its
         signature below;

                  (b)  if to the Collateral Agent:

                           Paribas
                           787 Seventh Avenue
                           New York, New York  10019
                           Attention: Salo Aizenberg
                           Telephone No.:  (212) 841-2595
                           Facsimile No.:  (212) 841-2369;

                  (c) if to any Bank Creditor,  either (x) to the Agent,  at the
         address of the Agent  specified in the Credit  Agreement or (y) at such
         address  as such Bank  Creditor  shall  have  specified  in the  Credit
         Agreement;

                  (d) if to any Other Creditor,  to the  Representative  for the
         Other  Creditors,  at such  address  as such  Representative  may  have
         provided to the Borrowers and the  Collateral  Agent from time to time,
         or, in the absence of a Representative, directly to the Other Creditors
         at such address as the Other  Creditors shall have specified in writing
         to the Borrower and the Collateral Agent;

or at such other  address as shall have been  furnished in writing by any Person
described above to the party required to give notice hereunder. All such notices
and  communications  shall,  when  mailed,   telegraphed,   telexed,   facsimile
transmitted  or cabled or sent by overnight  courier,  be effective on the third
Business Day following  deposit in the U.S.  mails,  certified,  return  receipt
requested,  when delivered to the telegraph company, cable company or on the day
following delivery to an overnight courier, as the case may be, or sent by telex
or facsimile  device,  except that notices and  communications to the Collateral
Agent shall not be effective until received by the Collateral Agent.

                  10.2. Waiver;  Amendment.  None of the terms and conditions of
this  Agreement  may be  changed,  waived,  modified  or  varied  in any  manner
whatsoever  unless in writing duly signed by each  Assignor  and the  Collateral
Agent  (with the  consent of the  Required  Banks or, to the extent  required by
Section 13.12 of the Credit  Agreement,  all of the Banks);  provided,  that any
change, waiver,  modification or variance affecting the rights and benefits of a
single  Class (as  defined  below) of  Secured  Creditors  (and not all  Secured
Creditors in a like or similar  manner) shall require the written consent of the
Requisite Creditors of such Class of Secured Creditors.  For the purpose of this
Agreement  the term "Class"  shall mean each class of Secured  Creditors,  i.e.,
whether (x) the Bank Creditors as holders of the Credit Document  Obligations or
(y)  the  Other  Creditors  as the  holders  of  the  Interest  Rate  Protection
Obligations.  For the purpose of this Agreement,  the term "Requisite Creditors"
of any  Class  shall  mean  each of (x)  with  respect  to the  Credit  Document
Obligations,  the  Required  Banks and (y) with  respect  to the  Interest  Rate
Protection  Obligations,  the holders of at least a majority of all  obligations
outstanding  from  time to time  under the  Interest  Rate  Protection  or Other
Hedging Agreements.

<PAGE>

                  10.3.  Obligations Absolute.  The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any  bankruptcy,  insolvency,  reorganization,  arrangement,
readjustment,  composition,  liquidation or the like of such Assignor, except to
the extent that the enforceability thereof may be limited by any such event; (b)
any  exercise or  non-exercise,  or any waiver of, any right,  remedy,  power or
privilege  under or in respect of this  Agreement,  any other Credit Document or
any Interest Rate Protection or Other Hedging Agreement,  except as specifically
set forth in a waiver granted  pursuant to Section 10.2; or (c) any amendment to
or  modification of any Credit Document or any Interest Rate Protection or Other
Hedging Agreement or any security for any of the Obligations; whether or not any
Assignor  shall have  notice or  knowledge  of any of the  foregoing,  except as
specifically  set forth in an amendment  or  modification  executed  pursuant to
Section 10.2.

                  10.4.  Successors and Assigns. This Agreement shall be binding
upon each Assignor and its successors and assigns and shall inure to the benefit
of  the  Collateral  Agent  and  each  Secured  Creditor  and  their  respective
successors and assigns; provided, that no Assignor may transfer or assign any or
all of its rights or obligations  hereunder without the prior written consent of
the Collateral Agent. All agreements, statements, representations and warranties
made by each Assignor herein or in any certificate or other instrument delivered
by such  Assignor or on its behalf under this  Agreement  shall be considered to
have been relied upon by the Secured  Creditors  and shall survive the execution
and delivery of this Agreement, the other Credit Documents and the Interest Rate
Protection or Other Hedging  Agreements  regardless of any investigation made by
the Secured Creditors or on their behalf.

                  10.5.  Headings  Descriptive.  The  headings  of  the  several
sections of this  Agreement are inserted for  convenience  only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

                  10.6.  Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

                  10.7.  Governing  Law.  THIS  AGREEMENT  AND  THE  RIGHTS  AND
OBLIGATIONS OF THE PARTIES  HEREUNDER  SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

                  10.8.  Assignor's  Duties.  It is expressly  agreed,  anything
herein  contained  to the contrary  notwithstanding,  that each  Assignor  shall
remain  liable to perform  all of the  obligations,  if any,  assumed by it with
respect  to  the  Collateral  and  the  Collateral  Agent  shall  not  have  any
obligations  or  liabilities  with  respect  to any  Collateral  by reason of or
arising out of this  Agreement,  nor shall the  Collateral  Agent be required or
obligated  in any manner to perform or fulfill  any of the  obligations  of each
Assignor under or with respect to any Collateral.

                  10.9.  Termination;  Release.  (a) After the Termination Date,
this Agreement shall  terminate  (provided that all indemnities set forth herein
including,  without  limitation,  in  Section

<PAGE>

8.1 hereof shall survive such  termination)  and the  Collateral  Agent,  at the
request  and  expense of the  respective  Assignor,  will  promptly  execute and
deliver to such Assignor a proper instrument or instruments  (including  Uniform
Commercial  Code  termination   statements  on  form  UCC-3)  acknowledging  the
satisfaction and termination of this Agreement,  and will duly assign,  transfer
and deliver to such Assignor (without recourse and without any representation or
warranty)  such of its  Collateral as may be in the possession of the Collateral
Agent and as has not  theretofore  been sold or  otherwise  applied or  released
pursuant to this Agreement. As used in this Agreement,  "Termination Date" shall
mean the date upon which the Total  Commitment and all Interest Rate  Protection
or Other Hedging  Agreements have been  terminated,  no Note is outstanding (and
all Loans have been paid in full) and all other Obligations then owing have been
paid in full.

                  (b) In the event that any part of the Collateral is sold by an
Assignor in  connection  with a sale  permitted  by the Credit  Agreement  or is
otherwise  released at the direction of the Required  Banks (or all the Banks if
required by Section 13.12 of the Credit Agreement) and the proceeds of such sale
or sales or from such  release are applied in  accordance  with the terms of the
Credit  Agreement,  such  Collateral  will be sold  free and  clear of the Liens
created by this Agreement and the Collateral  Agent,  at the request and expense
of the  respective  Assignor,  will duly  assign,  transfer  and deliver to such
Assignor (without  recourse and without any  representation or warranty) such of
the  Collateral  of such  Assignor  as is then  being  (or has  been) so sold or
released and as may be in the  possession  of the  Collateral  Agent and has not
theretofore been released pursuant to this Agreement.

                  (c) At any time that an Assignor  desires that  Collateral  be
released as provided in the foregoing  Section  10.9(a) or (b), it shall deliver
to the Collateral  Agent a certificate  signed by its chief  financial  officer,
chief executive  officer or another  authorized  senior officer stating that the
release of the respective Collateral is permitted pursuant to Section 10.9(a) or
(b). If requested by the Collateral  Agent (although the Collateral  Agent shall
have no  obligation  to make any such  request),  the  relevant  Assignor  shall
furnish appropriate legal opinions (from counsel, which may be in-house counsel,
acceptable to the Collateral  Agent) to the effect set forth in the  immediately
preceding sentence.  The Collateral Agent shall have no liability  whatsoever to
any  Secured  Creditor  as the  result of any  release  of  Collateral  by it as
permitted by this Section 10.

                  10.10.  Counterparts.  This  Agreement  may be executed in any
number  of  counterparts  and  by  the  different  parties  hereto  on  separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts  executed  by all the  parties  hereto  shall  be  lodged  with the
Borrower and the Collateral Agent.

                  10.11. The Collateral Agent. The Collateral Agent will hold in
accordance  with this Agreement all items of the Collateral at any time received
under this  Agreement.  It is  expressly  understood  and agreed by the  parties
hereto and each Secured  Creditor,  by accepting the benefits of this Agreement,
acknowledges  and agrees that the obligations of the Collateral  Agent as holder
of the  Collateral  and  interests  therein and with respect to the  disposition
thereof, and otherwise under this Agreement,  are only those expressly set forth
in this  Agreement.  The

<PAGE>

Collateral  Agent shall act hereunder on the terms and  conditions  set forth in
Section 11 of the Credit Agreement.

                  10.12.  Limited  Obligations.  It is the  desire and intent of
each  Assignor,  the  Collateral  Agent  and the  Secured  Creditors  that  this
Agreement  shall  be  enforced  against  each  Assignor  to the  fullest  extent
permissible  under the laws and public policies applied in each  jurisdiction in
which  enforcement is sought.  If and to the extent that the obligations of each
Assignor   under  this   Agreement   shall  be  adjudicated  to  be  invalid  or
unenforceable  for any reason  (including,  without  limitation,  because of any
applicable state or federal law relating to fraudulent conveyances or transfers,
which laws would determine the solvency of any Assignor by reference to the full
amount of the  Obligations  at the time of the  execution  and  delivery of this
Agreement),  then the amount of the Obligations of such Assignor shall be deemed
to be reduced and such Assignor shall pay the maximum amount of the  Obligations
which would be permissible under the applicable law.

                  10.13.  Subsidiary as Assignor.  It is  understood  and agreed
that any Subsidiary of the Borrower  and/or Holdings that is required to execute
a counterpart  of this  Agreement  after the date hereof  pursuant to the Credit
Agreement shall  automatically  become a Assignor  hereunder by executing a copy
hereof and delivering the same to the Collateral Agent.

<PAGE>


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

Address:

[___________________                                        USOL HOLDINGS, INC.,
____________________                                             as an Assignor
Attention: ____________

Telephone: ________________
Facsimile:  _________________]                               By:________________
                                                                  Name:
                                                                  Title:
[___________________                                         USOL, INC.,
____________________                                             as an Assignor
Attention: ____________

Telephone: ________________
Facsimile:  _________________]                               By:________________
                                                                  Name:
                                                                  Title:
[___________________                                         [SUBSIDIARIES],
____________________                                             as an Assignor
Attention: ____________

Telephone: ________________
Facsimile:  _________________]                               By:________________
                                                                  Name:
                                                                  Title:

<PAGE>

Accepted and Agreed to:


PARIBAS,

as Collateral Agent and Administrative Agent for the Banks


By:______________________
    Title:


By:______________________
    Title:




<PAGE>


                                                                        ANNEX A
                                                                           TO
                                                                        SECURITY
                                                                       AGREEMENT


            SCHEDULE OF CHIEF EXECUTIVE OFFICES/RECORD LOCATIONS

1.       USOL Holdings, Inc.



2.       USOL, Inc.



3.       [Subsidiaries]



                           [INFORMATION TO ALL ANNEXES

                           TO BE PROVIDED BY BORROWER]


<PAGE>


                                                                        ANNEX B
                                                                          TO
                                                                        SECURITY
                                                                       AGREEMENT


              SCHEDULE OF RECEIVABLES AND CONTRACT RIGHTS LOCATIONS

1.       USOL Holdings, Inc.



2.       USOL, Inc.



3.       [Subsidiaries]



<PAGE>


                                                                        ANNEX C
                                                                            TO
                                                                        SECURITY
                                                                       AGREEMENT


                  SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS

1.       USOL Holdings, Inc.



2.       USOL, Inc.



3.       [Subsidiaries]






<PAGE>


                                                                        ANNEX D
                                                                          TO
                                                                        SECURITY
                                                                       AGREEMENT


                           TRADE AND FICTITIOUS NAMES

1.       USOL Holdings, Inc.



2.       USOL, Inc.



3.       [Subsidiaries]



<PAGE>


                                                                        ANNEX E
                                                                           TO
                                                                        SECURITY
                                                                       AGREEMENT

                      CONCENTRATION ACCOUNT CONSENT LETTER

                                                                 ______ __, 199_

[Name and address
of Concentration Account Bank]


Gentlemen:

                  We refer to account number _____ (the "Concentration Account")
maintained  with you by [NAME OF CREDIT  PARTY] (the  "Company")  and into which
certain moneys,  instruments and other property are deposited from time to time.
The Company has granted to Paribas, as Collateral Agent (the "Collateral Agent")
for the benefit of the Secured  Creditors under, and as defined in, the Security
Agreement, dated as of December __, 1999, among USOL Holdings, Inc., USOL, Inc.,
(the  "Borrower"),  various  subsidiaries  and the Collateral  Agent, a security
interest in all assets and  properties  of the Company,  including,  among other
things, the Concentration  Account,  all moneys,  instruments and other property
deposited   therein  and  all  certificates  or  other   instruments,   if  any,
representing or evidencing the Concentration  Account.  It is a condition to the
continued  maintenance of the  Concentration  Account with you that you agree to
this Letter Agreement.

                  By signing this Letter Agreement, you agree that from the date
hereof the  Concentration  Account  shall be under the  exclusive  dominion  and
control of the Collateral  Agent and all moneys,  instruments and other property
of the Company received in connection  therewith whether or not deposited in the
Concentration  Account  shall be held solely for the  benefit of the  Collateral
Agent. The Concentration  Account shall be subject to written  instructions only
from the Collateral Agent. You agree to:

                  (a) follow your usual operating procedures for the handling of
         any  remittance  received in the  Concentration  Account that  contains
         restrictive  endorsements,  irregularities,  such as a variance between
         the written and numerical amounts,  undated or postdated items, missing
         signature, incorrect payee, etc.;

                  (b)  indorse  and  process  all  eligible   checks  and  other
         remittance  items, not covered by subparagraph (a) above,  deposit such
         checks and other remittance items in the Concentration Account; and

                  (c) maintain a record of all checks and other remittance items
         received in the Concentration Account and, in addition to providing the
         Company with photostats, vouchers, enclosures, etc. of checks and other
         remittance  items  received  on a daily  basis,  as  well as a  monthly
         statement,  furnish to the Collateral Agent, free of any service charge
         payable by the  Collateral  Agent,  your  regular bank  statement  with
         respect to the

<PAGE>

         Concentration  Accounts,  with the words  "Paribas,  as
         Collateral  Agent Re: [NAME OF CREDIT PARTY]"  included thereon so that
         there is no confusion as to ownership of the Concentration  Account and
         so  that  the  Collateral  Agent  is  able  to  properly  identify  the
         Concentration Account.

                  You hereby  agree to follow the  instructions  of the Borrower
with  respect to the  disposition  of any and all moneys,  securities  and other
instruments  deposited in the Concentration  Account as directed by the Borrower
unless and until you have received written instructions to the contrary from the
Collateral  Agent, in which case you agree to follow such  instructions from the
Collateral Agent.

                  You  waive  and  agree not to  assert,  claim or  endeavor  to
exercise,  and by executing  this Letter  Agreement bar and estop  yourself from
asserting,  claiming  or  exercising,  and you  acknowledge  that  you  have not
heretofore  received  a notice  from any  other  party  asserting,  claiming  or
exercising,  any right of setoff, banker's lien or other purported form of claim
with respect to the  Concentration  Account and funds from time to time therein.
You shall have no rights in the Concentration  Account or the funds therein.  To
the extent you may ever have any such rights,  you hereby expressly  subordinate
all such rights to all rights of the Collateral Agent.

                  You may terminate this Letter Agreement only upon thirty days'
prior written notice to that effect to the Borrower and the Collateral Agent, by
cancelling the  Concentration  Account  maintained with you and transferring all
funds, if any, in such Concentration  Account to the Collateral Agent. After any
such termination, you shall nonetheless remain obligated promptly to transfer to
the Collateral  Agent at such address anything from time to time received in the
Concentration Account.


<PAGE>


                  THIS LETTER  AGREEMENT  SHALL BE GOVERNED BY AND  CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                                             Very  truly  yours,
                                                             [NAME   OF   CREDIT
                                                             PARTY]

                                                             By:________________
                                                                Title:


                                                             PARIBAS,
                                                             as Collateral Agent
                                                             By:________________
                                                                Title:


                                                             By:________________
                                                                Title:
Acknowledged and agreed to as of
the date first above written.

[CONCENTRATION ACCOUNT BANK]


By:_________________________
     Title:


<PAGE>


                                                                        ANNEX F
                                                                           TO
                                                                        SECURITY
                                                                       AGREEMENT

                                 LIST OF MARKS

                            Registration Registration

Trademark               Number                  Date                    Country
---------               ------                  ----                     -------



<PAGE>


                                                                        ANNEX G
                                                                           TO
                                                                        SECURITY
                                                                       AGREEMENT


                        LIST OF PATENTS AND APPLICATIONS


<PAGE>


                                                                        ANNEX H
                                                                           TO
                                                                        SECURITY
                                                                       AGREEMENT

                       LIST OF COPYRIGHTS AND APPLICATIONS


<PAGE>

                                                                        ANNEX I
                                                                          TO
                                                                        SECURITY
                                                                       AGREEMENT

                        ASSIGNMENT OF SECURITY INTEREST IN

                      UNITED STATES TRADEMARKS AND PATENTS

                  FOR GOOD AND VALUABLE  CONSIDERATION,  receipt and sufficiency
of which  are  hereby  acknowledged,  [ASSIGNOR],  a  _______  corporation  (the
"Assignor")  with principal  offices at  ______________________________________,
hereby  assigns and grants to  Paribas,  as  Collateral  Agent,  with  principal
offices at 787 Seventh  Avenue,  New York,  New York 10019 (the  "Assignee"),  a
security interest in (i) all of the Assignor's right,  title and interest in and
to  the  United  States  trademarks,   trademark   registrations  and  trademark
applications (the "Marks") set forth on Schedule A attached hereto,  (ii) all of
the  Assignor's  right,  title and interest in and to the United States  patents
(the  "Patents")  set forth on Schedule B attached,  in each case  together with
(iii) all Proceeds (as such term is defined in the Security  Agreement  referred
to below)  and  products  of the Marks and  Patents,  (iv) the  goodwill  of the
businesses symbolized by the Marks and (v) all causes of action arising prior to
or after the date  hereof for  infringement  of any of the Marks and  Patents or
unfair competition regarding the same.

                  THIS  ASSIGNMENT  is  made  to  secure  the  full  and  prompt
performance and payment of all the Obligations of the Assignor,  as such term is
defined in the Security  Agreement  between the  Assignor,  the other  assignors
party thereto and the  Assignee,  dated as of December __, 1999 (as amended from
time to time, the "Security Agreement").  Upon the occurrence of the Termination
Date (as defined in the  Security  Agreement),  the  Assignee  shall,  upon such
satisfaction, execute, acknowledge, and deliver to the Assignor an instrument in
writing  releasing the security interest in the Marks and Patents acquired under
this Assignment.

                  This  Assignment  has been  granted  in  conjunction  with the
security  interest  granted to the Assignee  under the Security  Agreement.  The
rights and  remedies  of the  Assignee  with  respect to the  security  interest
granted herein are without  prejudice to, and are in addition to those set forth
in the Security  Agreement,  all terms and provisions of which are  incorporated
herein by reference.  In the event that any  provisions of this  Assignment  are
deemed to conflict with the Security  Agreement,  the provisions of the Security
Agreement shall govern.


<PAGE>


     IN WITNESS WHEREOF,  the undersigned has executed this Assignment as of the
____ day of ______, ---.


                                                   [ASSIGNOR],
                                                   as Assignor
                                                   By:__________________________
                                                      Title:


                                                   PARIBAS,
                                                   as Collateral Agent, Assignee
                                                   By:__________________________
                                                      Title:

<PAGE>

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


                  On this ____ day of ________,  ____, before me personally came
_________________, who, being by me duly sworn, did state as follows: that [s]he
is ______________ [title] of [ASSIGNOR], that [s]he is authorized to execute the
foregoing  Assignment  on  behalf  of  said  corporation  and  that he did so by
authority of the Board of Directors of said corporation.

                                                       -------------------------
                                                              Notary Public

<PAGE>


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


                  On this ____ day of ____________,  ____,  before me personally
came  ____________________,  who, being by me duly sworn,  did state as follows:
that he is [Title] of Paribas,  that he is  authorized  to execute the foregoing
Assignment on behalf of said  corporation and that he did so by authority of the
Board of Directors of said corporation.

                                                       -------------------------
                                                              Notary Public


<PAGE>

                                                                      SCHEDULE A

                   REGISTERED U.S. TRADEMARKS AND SERVICEMARKS

MARK                              REG. NO.                          REG. DATE
----                              --------                          ---------


<PAGE>
                                                                      SCHEDULE B

                              UNITED STATES PATENTS

PATENT NO.                        TITLE                             ISSUE DATE
----------                        -----                             ----------



<PAGE>
                                                                        ANNEX J
                                                                           TO
                                                                        SECURITY
                                                                       AGREEMENT

                          ASSIGNMENT OF SECURITY INTEREST

                          IN UNITED STATES COPYRIGHTS

                  WHEREAS,   [ASSIGNOR],   a  ______________   corporation  (the
"Assignor"),      having      its      chief      executive      officer      at
________________________________,  is the owner of all right, title and interest
in and to the United States  copyrights and associated  United States  copyright
registrations  and applications for resignation set forth in Schedule A attached
hereto;

                  WHEREAS,  PARIBAS,  as Collateral Agent,  having its principal
offices at 787  Seventh  Avenue,  New York,  New York  10019  (the  "Assignee"),
desires to acquire a security  interest  in, and lien on,  said  copyrights  and
copyright  registrations  and  applications  therefor  and the  goodwill  of the
business symbolized by said copyrights; and

                  WHEREAS,  the  Assignor is willing to assign to the  Assignee,
and to grant to the Assignee a security interest in and lien upon the copyrights
and copyright registrations and applications therefor described above;

                  NOW,  THEREFORE,  for good  and  valuable  consideration,  the
receipt of which is hereby acknowledged, and subject to the terms and conditions
of the Security  Agreement,  dated as of December __, 1999, between the Assignor
and the Assignee (as amended from time to time, the "Security  Agreement"),  the
Assignor  hereby assigns to the Assignee,  and grants to the Assignee a security
interest in and a lien upon,  the  copyrights  and copyright  registrations  and
applications  therefor set forth in Schedule A attached  hereto and the goodwill
of the business symbolized by said copyrights.

                  This  Assignment  has been  granted  in  conjunction  with the
security  interest  granted to the Assignee  under the Security  Agreement.  The
rights and remedies of the Assignee with respect to the security  granted herein
are without prejudice to, and are in addition to those set forth in the Security
Agreement,  all  terms  and  provisions  of which  are  incorporated  herein  by
reference.  In the event that any  provisions of this  Assignment  are deemed to
conflict with the Security  Agreement,  the provisions of the Security Agreement
shall govern.

                  Executed at New York, New York, the ____ day of _______, ____.

                                               [ASSIGNOR],
                                                as Assignor
                                                By___________________________
                                                  Name:
                                                  Title:

<PAGE>

                                                PARIBAS,
                                                as Collateral Agent, Assignee
                                                By___________________________
                                                  Name:
                                                  Title:

<PAGE>

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


                  On  this  ___  day  of   ________________,   ____,  before  me
personally came  ___________________,  who, being duly sworn, did depose and say
that he is ____________________ of [Assignor],  that he is authorized to execute
the  foregoing  Assignment on behalf of said  corporation  and that he did so by
authority of the Board of Directors of said corporation.

                                                      -------------------------
                                                            Notary Public


<PAGE>


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


                  On  this  ___  day  of   ________________,   ____,  before  me
personally came  ___________________,  who, being duly sworn, did depose and say
that he is ____________________ of Paribas, that he is authorized to execute the
foregoing  Assignment  on  behalf  of  said  corporation  and  that he did so by
authority of the Board of Directors of said corporation.

                                                      -------------------------
                                                              Notary Public

<PAGE>
                                                                      SCHEDULE A


                                 U.S. COPYRIGHTS

 REGISTRATION                         PUBLICATION
    NUMBERS                               DATE                   COPYRIGHT TITLE
 -------------                       --------------              ---------------






<PAGE>

                     TABLE OF CONTENTS

                                                                           Page

ARTICLE I  SECURITY INTERESTS..................................................2

         1.1.  Grant of Security Interests.....................................2
         1.2.  Power of Attorney...............................................3

ARTICLE II  GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS..................3

         2.1.  Necessary Filings...............................................4
         2.2.  No Liens........................................................4
         2.3.  Other Financing Statements......................................4
         2.4.  Chief Executive Office; Records.................................4
         2.5.  Location of Inventory and Equipment.............................5
         2.6.  Trade Names; Change of Name.....................................5
         2.7.  Recourse........................................................5

ARTICLE III  SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT

         RIGHTS; INSTRUMENTS; CONCENTRATION ACCOUNT............................6
         3.1.  Additional Representations and Warranties.......................6
         3.2.  Maintenance of Records..........................................6
         3.3.  Direction to Account Debtors; Contracting Parties; etc..........7
         3.4.  Modification of Terms; etc......................................7
         3.5.  Collection......................................................7
         3.6.  Instruments.....................................................7
         3.7.   Concentration Account..........................................8
         3.8.  Further Actions.................................................9

ARTICLE IV  SPECIAL PROVISIONS CONCERNING TRADEMARKS...........................9

         4.1.  Additional Representations and Warranties.......................9
         4.2.  Licenses and Assignments........................................9
         4.3.  Infringements...................................................9
         4.4.  Preservation of Marks..........................................10
         4.5.  Maintenance of Registration....................................10
         4.6.  Future Registered Marks........................................10
         4.7.  Remedies.......................................................10

ARTICLE V  SPECIAL PROVISIONS CONCERNING
         PATENTS, COPYRIGHTS AND TRADE SECRETS................................11

         5.1.  Additional Representations and Warranties......................11
         5.2.  Licenses and Assignments.......................................11
         5.3.  Infringements..................................................11

<PAGE>

         5.4.  Maintenance of Patents and Copyrights..........................12
         5.5.  Prosecution of Patent Application..............................12
         5.6.  Other Patents and Copyrights...................................12
         5.7.  Remedies.......................................................12

ARTICLE VI  PROVISIONS CONCERNING ALL COLLATERAL..............................13

         6.1.  Protection of Collateral Agent's Security......................13
         6.2.  Warehouse Receipts Non-negotiable..............................13
         6.3.  Further Actions................................................13
         6.4.  Financing Statements...........................................13

ARTICLE VII  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT.....................14

         7.1.  Remedies; Obtaining the Collateral Upon Default................14
         7.2.  Remedies; Disposition of the Collateral........................15
         7.3.  Waiver of Claims...............................................16
         7.4.  Application of Proceeds........................................16
         7.5.  Remedies Cumulative............................................18
         7.6.  Discontinuance of Proceedings..................................18

ARTICLE VIII  INDEMNITY.......................................................19

         8.1.  Indemnity......................................................19
         8.2.  Indemnity Obligations Secured by Collateral; Survival..........20

ARTICLE IX  DEFINITIONS.......................................................20


ARTICLE X  MISCELLANEOUS......................................................24

         10.1.  Notices.......................................................24
         10.2.  Waiver; Amendment.............................................25
         10.3.  Obligations Absolute..........................................26
         10.4.  Successors and Assigns........................................26
         10.5.  Headings Descriptive..........................................26
         10.6.  Severability..................................................26
         10.7.  Governing Law.................................................26
         10.8.  Assignor's Duties.............................................26
         10.9.  Termination; Release..........................................26
         10.10.  Counterparts.................................................27
         10.11.  The Collateral Agent.........................................27
         10.12.  Limited Obligations..........................................28
         10.13.  Subsidiary as Assignor.......................................28

<PAGE>

ANNEX A Schedule of Chief Executive Offices/Record Locations
ANNEX B Schedule of Receivables  and Contract  Rights  Locations
ANNEX C Schedule of Inventory  and Equipment  Locations
ANNEX D Trade and Fictitious  Names
ANNEX E  Concentration Account  Consent  Letter
ANNEX F List of  Marks
ANNEX G List of  Patents  and Applications
ANNEX H List of Copyrights and Applications
ANNEX I Assignment of Security  Interest in United States Trademarks and Patents
ANNEX J Assignment of Security Interest in United States Copyrights

<PAGE>

                                                                       EXHIBIT H

                              SUBSIDIARIES GUARANTY

                  GUARANTY, dated as of December __, 1999 (as amended,  modified
or  supplemented  from  time  to  time,  this  "Guaranty"),  made by each of the
undersigned  (each a  "Guarantor"  and,  together with each other entity that is
required to execute a  counterpart  hereof  pursuant  to Section 25 hereof,  the
"Guarantors"). Except as otherwise defined herein, terms used herein and defined
in the Credit  Agreement  (as  defined  below)  shall be used  herein as therein
defined.

                              W I T N E S S E T H :


                  WHEREAS,  USOL Holdings,  Inc.  ("Holdings"),  USOL, Inc. (the
"Borrower"), various financial institutions from time to time party thereto (the
"Banks"),  Paribas,  as Administrative  Agent (the  "Administrative  Agent") and
Syndication  Agent (the  "Syndication  Agent"),  and Deutsche  Bank AG, New York
Branch, as Documentation Agent (the "Documentation Agent", and together with the
Administrative  Agent and Syndication Agent, the "Agents"),  have entered into a
Credit  Agreement,  dated as of  December  30,  1999 (as  amended,  modified  or
supplemented  from time to time,  the  "Credit  Agreement"),  providing  for the
making of Loans to the Borrower as contemplated  therein (the Banks,  the Agents
and the Collateral Agent herein called the "Bank Creditors");

                  WHEREAS,  the Borrower may from time to time enter into one or
more (i) interest rate protection  agreements  (including,  without  limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange  contracts,  currency swap  agreements  or other similar  agreements or
arrangements  designed to protect  against the  fluctuations  in currency values
and/or  (iii)  other  types of hedging  agreements  from time to time (each such
agreement or arrangement  with an Other Creditor (as  hereinafter  defined),  an
"Interest Rate Protection Agreement or Other Hedging Agreement"), with any Bank,
any affiliate thereof or a syndicate of financial  institutions organized by any
such  Bank or  affiliate  of any such Bank or  affiliate  (even if any such Bank
ceases to be a Bank  under the Credit  Agreement  for any  reason)  and any such
other institution that participates in such Interest Rate Protection  Agreements
or  Other  Hedging  Agreements  and  their  subsequent  successors  and  assigns
collectively,  the "Other Creditors",  and together with the Bank Creditors, the
"Creditors");

                 WHEREAS, the Borrower is a Wholly-Owned Subsidiary of Holdings;

                  WHEREAS, each Guarantor is a direct or indirect Wholly-Owned
Subsidiary of  the Borrower;

                  WHEREAS,  it is a requirement  under the Credit Agreement that
each Guarantor shall have executed and delivered this Guaranty; and

                  WHEREAS,   each  Guarantor  will  obtain   benefits  from  the
incurrence of Loans by the Borrower under the Credit  Agreement and the entering
into of Interest Rate  Protection  Agreements or Other Hedging  Agreements  and,
accordingly, desires to execute this Guaranty in order to satisfy the conditions
described  in the  preceding  paragraph  and to induce the Banks to

<PAGE>

maintain and make Loans to the Borrower and the Other  Creditors to maintain and
enter into Interest Rate Protection  Agreements or Other Hedging Agreements with
the Borrower;

                  NOW,  THEREFORE,  in  consideration of the foregoing and other
benefits  accruing to each  Guarantor,  the receipt and sufficiency of which are
hereby acknowledged,  each Guarantor hereby makes the following  representations
and  warranties  to the  Creditors  and hereby  covenants  and agrees  with each
Creditor as follows:

                  1. Each  Guarantor,  jointly and  severally,  irrevocably  and
unconditionally  guarantees:  (i) to the Bank  Creditors  the  full  and  prompt
payment when due (whether at the stated maturity,  by acceleration or otherwise)
of (x) the  principal of and interest on the Notes issued by, and the Loans made
to,  the  Borrower  under the  Credit  Agreement  and (y) all other  obligations
(including obligations which, but for any automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities  owing by the Borrower to
the  Bank  Creditors  (including,  without  limitation,  indemnities,  Fees  and
interest thereon) now existing or hereafter incurred under, arising out of or in
connection  with the Credit  Agreement or any other Credit  Document and the due
performance and compliance with the terms,  conditions and agreements  contained
in  the  Credit  Documents  by  the  Borrower  (all  such  principal,  interest,
liabilities  and  obligations  being  herein  collectively  called  the  "Credit
Agreement  Obligations");  and (ii) to each Other  Creditor  the full and prompt
payment when due (whether at the stated maturity,  by acceleration or otherwise)
of all  obligations  (including  obligations  which,  but for any automatic stay
under Section 362(a) of the Bankruptcy  Code,  would become due) and liabilities
owing by the Borrower to the Other  Creditors  (including,  without  limitation,
indemnities,  fees and  interest  thereon)  under any Interest  Rate  Protection
Agreements  or Other Hedging  Agreements,  whether now in existence or hereafter
arising,  and the due performance and compliance by the Borrower with all terms,
conditions  and  agreements   contained   therein  (all  such   obligations  and
liabilities under this clause (ii) being herein  collectively  called the "Other
Obligations",  and together  with the Credit  Agreement  Obligations  are herein
collectively called the "Guaranteed  Obligations").  Each Guarantor understands,
agrees and confirms  that the Creditors may enforce this Guaranty up to the full
amount of the Guaranteed  Obligations  against each Guarantor without proceeding
against  any  other  Guarantor,  the  Borrower,  against  any  security  for the
Guaranteed Obligations,  or against any other guarantor under any other guaranty
covering all or a portion of the  Guaranteed  Obligations.  This Guaranty  shall
constitute  a guaranty of payment and not of  collection.  All  payments by each
Guarantor under this Guaranty shall be made on the same basis as payments by the
Borrower are made under Sections 3.03 and 3.04 of the Credit Agreement.

                  2.  Additionally,   each  Guarantor,  jointly  and  severally,
unconditionally  and  irrevocably,   guarantees  the  payment  of  any  and  all
Guaranteed  Obligations  of the Borrower to the Creditors  whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any of
the  events   specified   in  Section   9.05  of  the  Credit   Agreement,   and
unconditionally  and  irrevocably,  jointly and severally,  promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of
the United States.

                  3. The liability of each Guarantor  hereunder is exclusive and
independent  of any security for or other  guaranty of the  indebtedness  of the
Borrower  whether  executed by such Guarantor,  any other  Guarantor,  any other
guarantor or by any other party,  and the liability of

<PAGE>

each Guarantor  hereunder shall not be affected or impaired by (i) any direction
as to  application  of payment by the Borrower or by any other  party,  (ii) any
other  continuing  or other  guaranty,  undertaking  or maximum  liability  of a
guarantor or of any other party as to the  indebtedness  of the Borrower,  (iii)
any payment on or in reduction of any such other guaranty or  undertaking,  (iv)
any dissolution, termination or increase, decrease or change in personnel by the
Borrower,  (v) any payment  made to any Creditor on the  indebtedness  which any
Creditor  repays  the  Borrower  pursuant  to  court  order  in any  bankruptcy,
reorganization,  arrangement,  moratorium or other debtor relief proceeding, and
each  Guarantor  waives  any  right  to  the  deferral  or  modification  of its
obligations  hereunder  by reason  of any such  proceeding,  (vi) any  action or
inaction  by the  Creditors  as  contemplated  in  Section 6 hereof or (vii) any
invalidity,  irregularity or  unenforceability  of all or part of the Guaranteed
Obligations or of any security therefor.

                  4. The obligations of each Guarantor hereunder are independent
of the obligations of any other  Guarantor,  any other guarantor of the Borrower
or the Borrower,  and a separate action or actions may be brought and prosecuted
against  each  Guarantor  whether  or not action is  brought  against  any other
Guarantor,  any other  guarantor  of the Borrower or the Borrower and whether or
not any other Guarantor,  any other guarantor of the Borrower or the Borrower be
joined in any such  action or actions.  Each  Guarantor  waives,  to the fullest
extent permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement  thereof.  Any payment by the Borrower or
other  circumstance  which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to each Guarantor.

                  5.  Each  Guarantor  hereby  waives  (to  the  fullest  extent
permitted by applicable law) notice of acceptance of this Guaranty and notice of
any  liability  to  which  it  may  apply,  and  waives  promptness,  diligence,
presentment, demand of payment, protest, notice of dishonor or nonpayment of any
such  liabilities,  suit or  taking of other  action by the  Agents or any other
Creditor against,  and any other notice to, any party liable thereon  (including
such Guarantor or any other guarantor of the Borrower).

                  6. Any  Creditor may at any time and from time to time without
the consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:

                 (i) change the  manner,  place or terms of payment  of,  and/or
change or extend the time of payment of, renew or alter,  any of the  Guaranteed
Obligations,  (including  any  increase  or  decrease  in the  rate of  interest
thereon),   any  security  therefor,  or  any  liability  incurred  directly  or
indirectly in respect  thereof,  and the guaranty herein made shall apply to the
Guaranteed Obligations as so changed, extended, renewed or altered;

                (ii) take and hold  security  for the payment of the  Guaranteed
Obligations and/or sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by  whomsoever at any time
pledged  or  mortgaged  to  secure,  or  howsoever   securing,   the  Guaranteed
Obligations  or any  liabilities  (including  any of those  hereunder)  incurred
directly  or  indirectly  in  respect  thereof  or  hereof,  and/or  any  offset
thereagainst;

<PAGE>

               (iii) exercise or refrain from  exercising any rights against the
Borrower,  any  Guarantor,  any other  guarantor  of the  Borrower  or others or
otherwise act or refrain from acting;

                (iv) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability  (including any of those hereunder)  incurred
directly or indirectly in respect  thereof or hereof,  and may  subordinate  the
payment of all or any part thereof to the payment of any liability  (whether due
or not) of the Borrower to creditors of the Borrower;

                 (v) apply any sums by whomsoever paid or howsoever  realized to
any liability or liabilities of the Borrower to the Creditors regardless of what
liabilities of the Borrower remain unpaid;

     (vi)  release  or  substitute  any  one  or  more  endorsers,   guarantors,
Guarantors, the Borrower or other obligors;

               (vii) consent to or waive any breach of, or any act,  omission or
default  under,  the  Interest  Rate  Protection  Agreements  or  Other  Hedging
Agreements,  the  Credit  Documents  or  any of the  instruments  or  agreements
referred  to  therein,  or  otherwise  amend,  modify or  supplement  any of the
Interest Rate  Protection  Agreements or Other  Hedging  Agreements,  the Credit
Documents or any of such other instruments or agreements; and/or

              (viii)  act or  fail  to act in any  manner  referred  to in  this
Guaranty which may deprive such  Guarantor of its right to  subrogation  against
the Borrower to recover full  indemnity  for any payments  made pursuant to this
Guaranty.

                  7. No invalidity,  irregularity or  unenforceability of all or
any part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this  Guaranty,  and this  Guaranty  shall be primary,
absolute and  unconditional  notwithstanding  the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge  of a surety or  guarantor  except  payment in full of the  Guaranteed
Obligations.

                  8. This Guaranty is a continuing  one and all  liabilities  to
which it  applies  or may apply  under the terms  hereof  shall be  conclusively
presumed  to have been  created in reliance  hereon.  No failure or delay on the
part of any Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right,  power or  privilege  hereunder  preclude  any other or further  exercise
thereof or the exercise of any other right,  power or privilege.  The rights and
remedies  herein  expressly  specified are  cumulative  and not exclusive of any
rights or remedies  which any Creditor  would  otherwise  have.  No notice to or
demand on any  Guarantor in any case shall  entitle such  Guarantor to any other
further  notice or demand in  similar or other  circumstances  or  constitute  a
waiver of the  rights of any  Creditor  to any  other or  further  action in any
circumstances  without notice or demand. It is not necessary for any Creditor to
inquire into the  capacity or powers of the Borrower or any of its  Subsidiaries
or the  officers,  directors,  partners or agents acting or purporting to act on
its behalf,  and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.

<PAGE>

                  9. Any  indebtedness  of the Borrower now or hereafter held by
any Guarantor is hereby  subordinated to the indebtedness of the Borrower to the
Creditors;  and such  indebtedness  of the  Borrower  to any  Guarantor,  if the
Administrative  Agent, after an Event of Default has occurred and is continuing,
so requests,  shall be  collected,  enforced  and received by such  Guarantor as
trustee for the  Creditors  and be paid over to the  Creditors on account of the
indebtedness  of the  Borrower  to  the  Creditors,  but  without  affecting  or
impairing  in any  manner  the  liability  of such  Guarantor  under  the  other
provisions of this Guaranty.  Prior to the transfer by any Guarantor of any note
or negotiable  instrument  evidencing any  indebtedness  of the Borrower to such
Guarantor,  such Guarantor shall mark such note or negotiable  instrument with a
legend  that the same is subject to this  subordination.  Without  limiting  the
generality of the  foregoing,  each  Guarantor  hereby agrees with the Creditors
that it will not  exercise  any  right of  subrogation  which it may at any time
otherwise have as a result of this Guaranty (whether contractual,  under Section
509 of the Bankruptcy Code or otherwise)  until all Guaranteed  Obligations have
been irrevocably paid in full in cash.

                  10. (a) Each  Guarantor  waives any right  (except as shall be
required by  applicable  statute and cannot be waived) to require the  Creditors
to: (i) proceed against the Borrower,  any other Guarantor,  any other guarantor
of the Borrower or any other party; (ii) proceed against or exhaust any security
held from the Borrower, any other Guarantor, any other guarantor of the Borrower
or any other party;  or (iii) pursue any other  remedy in the  Creditors'  power
whatsoever.  Each  Guarantor  waives any defense  based on or arising out of any
defense  of the  Borrower,  any  other  Guarantor,  any other  guarantor  of the
Borrower  or any  other  party  other  than  payment  in full of the  Guaranteed
Obligations,  including, without limitation, any defense based on or arising out
of the disability of the Borrower,  any other Guarantor,  any other guarantor of
the  Borrower or any other  party,  or the  unenforceability  of the  Guaranteed
Obligations or any part thereof from any cause,  or the cessation from any cause
of the  liability of the Borrower  other than payment in full of the  Guaranteed
Obligations.  The Creditors  may, at their  election,  foreclose on any security
held by the Agents,  the Collateral  Agent or the other Creditors by one or more
judicial or nonjudicial  sales,  whether or not every aspect of any such sale is
commercially  reasonable  (to the extent such sale is  permitted  by  applicable
law),  or exercise any other right or remedy the  Creditors may have against the
Borrower or any other party, or any security,  without affecting or impairing in
any way the  liability  of any  Guarantor  hereunder  except to the  extent  the
Guaranteed Obligations have been paid in full. Each Guarantor waives any defense
arising out of any such  election by the  Creditors,  even though such  election
operates to impair or extinguish  any right of  reimbursement  or subrogation or
other right or remedy of such Guarantor  against the Borrower or any other party
or any security.

                  (b)  Each  Guarantor  waives  all  presentments,  demands  for
performance,  protests and notices,  including,  without limitation,  notices of
nonperformance,  notices of protest, notices of dishonor,  notices of acceptance
of this Guaranty, and notices of the existence,  creation or incurring of new or
additional indebtedness. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other  circumstances  bearing upon the risk of nonpayment of the  Guaranteed
Obligations  and the nature,  scope and extent of the risks which such Guarantor
assumes and incurs  hereunder,  and agrees that the Creditors shall have no duty
to  advise  any  Guarantor  of   information   known  to  them   regarding  such
circumstances or risks.

<PAGE>

                  11. The  Creditors  agree that this  Guaranty  may be enforced
only by the action of the Administrative  Agent or the Collateral Agent, in each
case acting upon the  instructions  of the Required Banks (or, after the date on
which all Credit Document  Obligations have been paid in full, the holders of at
least a  majority  of the  outstanding  Other  Obligations)  and  that no  other
Creditor shall have any right individually to seek to enforce or to enforce this
Guaranty  or to  realize  upon  the  security  to be  granted  by  the  Security
Documents,  it being  understood and agreed that such rights and remedies may be
exercised by the Administrative  Agent or the Collateral Agent or the holders of
at least a majority of the outstanding  Other  Obligations,  as the case may be,
for the  benefit  of the  Creditors  upon  the  terms of this  Guaranty  and the
Security  Documents.  The Creditors  further agree that this Guaranty may not be
enforced  against  any  director,  officer,  employee,  or  stockholder  of  any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).

                  12. In order to induce the Banks to make Loans pursuant to the
Credit Agreement, and in order to induce the Other Creditors to execute, deliver
and perform the Interest Rate Protection Agreements or Other Hedging Agreements,
each Guarantor represents, warrants and covenants that:

                  (a)  Such  Guarantor  (i)  is a  duly  organized  and  validly
         existing  corporation  and is in good  standing  under  the laws of the
         jurisdiction  of its  organization,  and has the  corporate  power  and
         authority  to own its  property and assets and to transact the business
         in which it is engaged  and  presently  proposes  to engage and (ii) is
         duly qualified and is authorized to do business and is in good standing
         in all  jurisdictions  where it is required to be so  qualified  except
         where the failure to be so qualified  could  reasonably  be expected to
         have a material adverse effect on the business,  operations,  property,
         assets,  nature  of  assets,   liabilities,   condition  (financial  or
         otherwise) or prospects of such  Guarantor or of such Guarantor and its
         Subsidiaries taken as a whole.

                  (b) Such  Guarantor has the  corporate  power and authority to
         execute,  deliver  and  carry  out the  terms  and  provisions  of this
         Guaranty  and each other  Document to which it is a party and has taken
         all necessary corporate action to authorize the execution, delivery and
         performance by it of this Guaranty and each such other  Document.  Such
         Guarantor has duly executed and delivered  this Guaranty and each other
         Document to which it is a party,  and this Guaranty and each such other
         Document  constitutes the legal,  valid and binding  obligation of such
         Guarantor  enforceable  in  accordance  with its  terms,  except to the
         extent  that the  enforceability  hereof or  thereof  may be limited by
         applicable bankruptcy, insolvency, reorganization,  moratorium or other
         similar  laws  affecting  creditors'  rights  generally  and  equitable
         principles  (regardless  of whether  such  enforceability  is sought in
         equity or at law).

                  (c) Neither the  execution,  delivery or  performance  by such
         Guarantor  of this  Guaranty  or any  other  Document  to which it is a
         party,  nor compliance by it with the terms and  provisions  hereof and
         thereof:  (i) will  contravene  any  applicable  provision  of any law,
         statute,  rule or regulation,  or any order, writ, injunction or decree
         of any court or governmental instrumentality,  (ii) will conflict or be
         inconsistent  with  or  result  in any  breach  of,  any of the  terms,
         covenants,  conditions or provisions of, or constitute a default under,

<PAGE>

         or  (other  than  pursuant  to the  Security  Documents)  result in the
         creation or imposition  of (or the  obligation to create or impose) any
         Lien upon any of the property or assets of such Guarantor or any of its
         Subsidiaries pursuant to the terms of any indenture,  mortgage, deed of
         trust, credit agreement, loan agreement or any other agreement or other
         instrument  to which such  Guarantor  or any of its  Subsidiaries  is a
         party or by which it or any of its  property  or  assets is bound or to
         which it may be subject  or (iii) will  violate  any  provision  of the
         certificate of incorporation  or by-laws (or equivalent  organizational
         documents) of such Guarantor or any of its Subsidiaries.

                  (d) No order,  consent,  approval,  license,  authorization or
         validation of, or filing,  recording or registration with, or exemption
         by, any foreign or domestic  governmental  or public body or authority,
         or any subdivision thereof, is required to authorize, or is required in
         connection  with, (i) the execution,  delivery and  performance of this
         Guaranty or any other Document to which such  Guarantor is a party,  or
         (ii) the legality,  validity,  binding effect or enforceability of this
         Guaranty or any other Document to which such Guarantor is a party.

                  (e) There are no  actions,  suits or  proceedings  pending  or
         threatened  (i) with respect to this Guaranty or any other  Document to
         which such Guarantor is a party,  (ii) with respect to any Indebtedness
         of  such  Guarantor  or any  of  its  Subsidiaries,  (iii)  that  could
         reasonably  be  expected  to  have a  material  adverse  effect  on the
         business, operations,  property, assets, nature of assets, liabilities,
         condition (financial or otherwise) or prospects of such Guarantor or of
         such Guarantor and its Subsidiaries taken as a whole or (iv) that could
         reasonably be expected to have a material  adverse effect on the rights
         or remedies of the  Creditors  or on the ability of such  Guarantor  to
         perform its respective obligations to the Creditors hereunder and under
         the other Credit Documents to which it is a party.

                  13. Each Guarantor  covenants and agrees that on and after the
date hereof and until the  termination of the Total  Commitment and all Interest
Rate Protection  Agreements or Other Hedging Agreements and when no Note remains
outstanding and all other  Guaranteed  Obligations have been paid in full (other
than  indemnities  described  in  Section  13.01  of the  Credit  Agreement  and
analogous  provisions  in the  Security  Documents  which  are not  then due and
payable),  such Guarantor  shall take, or will refrain from taking,  as the case
may be,  all  actions  that are  necessary  to be taken or not  taken so that no
violation of any provision, covenant or agreement contained in Section 7 or 8 of
the Credit Agreement,  and so that no Default or Event of Default,  is caused by
the actions of such Guarantor or any of its Subsidiaries.

                  14. The Guarantors  hereby jointly and severally  agree to pay
all  out-of-pocket  costs and expenses of each Creditor in  connection  with the
enforcement  of this  Guaranty  and the  protection  of such  Creditor's  rights
hereunder,  and in connection  with any  amendment,  waiver or consent  relating
hereto  (including,  without  limitation,  the fees and disbursements of counsel
employed by the Agents or any of the Creditors).

                  15. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.

<PAGE>

                  16.  Neither  this  Guaranty nor any  provision  hereof may be
changed,  waived,  discharged or terminated in any manner  whatsoever  unless in
writing  duly  signed by the  Administrative  Agent (with the consent of (x) the
Required  Banks  or, to the  extent  required  by  Section  13.12 of the  Credit
Agreement,  all of the Banks, at all times prior to the time at which all Credit
Agreement  Obligations  have been paid in full, or (y) the holders of at least a
majority of the  outstanding  Other  Obligations  at all times after the time at
which  all  Credit  Agreement  Obligations  have  been  paid in  full)  and each
Guarantor  directly  affected  thereby (it being understood that the addition or
release  of any  Guarantor  hereunder  shall not  constitute  a change,  waiver,
discharge or  termination  affecting any  Guarantor  other than the Guarantor so
added or released);  provided, that any change, waiver, modification or variance
affecting  the rights  and  benefits  of a single  class (as  defined  below) of
Creditors (and not all Creditors in a like or similar  manner) shall require the
written consent of the Requisite Creditors (as defined below) of such Class. For
the  purpose  of this  Guaranty,  the term  "Class"  shall  mean  each  class of
Creditors,  i.e.,  whether  (i) the Bank  Creditors  as  holders  of the  Credit
Agreement  Obligations  or (ii) the  Other  Creditors  as  holders  of the Other
Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of
any  Class  shall  mean  each  of  (i)  with  respect  to the  Credit  Agreement
Obligations,  the Required Banks and (ii) with respect to the Other Obligations,
the holders of at least a majority of all obligations  outstanding  from time to
time under the Interest Rate Protection Agreements or Other Hedging Agreements.

                  17.  Each   Guarantor   acknowledges   that  an  executed  (or
conformed) copy of each of the Credit Documents and the Interest Rate Protection
Agreements or Other Hedging  Agreements has been made available to its principal
executive officers and such officers are familiar with the contents thereof.

                  18. In addition to any rights now or hereafter  granted  under
applicable  law  (including,  without  limitation,  Section  151 of the New York
Debtor and Creditor Law) and not by way of  limitation of any such rights,  upon
the occurrence  and during the  continuance of an Event of Default (such term to
mean and include any "Event of  Default" as defined in the Credit  Agreement  or
any payment  default  under any  Interest  Rate  Protection  Agreement  or Other
Hedging  Agreement  and shall in any event,  include,  without  limitation,  any
payment  default  on any of the  Guaranteed  Obligations  continuing  after  any
applicable grace period), each Creditor is hereby authorized at any time or from
time to time,  without notice to any Guarantor or to any other Person,  any such
notice being expressly  waived,  to set off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held or
owing by such  Creditor to or for the credit or the  account of such  Guarantor,
against and on account of the  obligations  and liabilities of such Guarantor to
such Creditor under this Guaranty,  irrespective of whether or not such Creditor
shall have made any demand hereunder and although said obligations, liabilities,
deposits or claims,  or any of them,  shall be  contingent  or  unmatured.  Each
Creditor  acknowledges  and agrees that the  provisions  of this  Section 18 are
subject to the sharing  provisions  set forth in Section  13.06(b) of the Credit
Agreement.

                  19. All  notices,  requests,  demands or other  communications
pursuant  hereto shall be deemed to have been duly given or made when  delivered
to the Person to which such notice,  request,  demand or other  communication is
required or permitted to be given or made under this Guaranty, addressed to such
party  at (i) in the  case of any  Bank  Creditor,  as  provided  in the

<PAGE>

Credit  Agreement,  (ii) in the case of any Guarantor,  at its address set forth
opposite its  signature  below and (iii) in the case of any Other  Creditor,  at
such  address as such Other  Creditor  shall  have  specified  in writing to the
Guarantor;  or in any case at such other  address as any of the  Persons  listed
above may hereafter notify the others in writing.

                  20. If claim is ever made upon any Creditor  for  repayment or
recovery  of any amount or amounts  received  in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said  amount  by  reason  of (i) any  judgment,  decree or order of any court or
administrative  body having  jurisdiction over such payee or any of its property
or (ii) any  settlement or  compromise of any such claim  effected by such payee
with any such claimant  (including  the  Borrower),  then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor,  notwithstanding  any revocation hereof or
the cancellation of any Note or any Interest Rate Protection  Agreement or Other
Hedging Agreement or other instrument  evidencing any liability of the Borrower,
and such Guarantor shall be and remain liable to the aforesaid  payees hereunder
for the amount so repaid or  recovered  to the same extent as if such amount had
never originally been received by any such payee.

                  21. (A) THIS  GUARANTY AND THE RIGHTS AND  OBLIGATIONS  OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

                  (B) ANY  LEGAL  ACTION  OR  PROCEEDING  WITH  RESPECT  TO THIS
GUARANTY OR ANY OTHER CREDIT  DOCUMENT TO WHICH ANY  GUARANTOR IS A PARTY MAY BE
BROUGHT  IN THE  COURTS  OF THE  STATE OF NEW YORK OR OF THE  UNITED  STATES  OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS  GUARANTY,  EACH  GUARANTOR  HEREBY  IRREVOCABLY  ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,  THE JURISDICTION OF THE
AFORESAID COURTS. EACH GUARANTOR FURTHER IRREVOCABLY  CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE  MAILING OF COPIES  THEREOF BY  REGISTERED  OR  CERTIFIED  MAIL,  POSTAGE
PREPAID,  TO EACH  GUARANTOR  AT ITS ADDRESS SET FORTH  OPPOSITE  ITS  SIGNATURE
BELOW,  SUCH  SERVICE  TO BECOME  EFFECTIVE  30 DAYS AFTER  SUCH  MAILING.  EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND
FURTHER  IRREVOCABLY  WAIVES  AND  AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR
PROCEEDING  COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT TO WHICH SUCH
GUARANTOR  IS A  PARTY  THAT  SERVICE  OF  PROCESS  WAS IN ANY  WAY  INVALID  OR
INEFFECTIVE.  NOTHING  HEREIN SHALL AFFECT THE RIGHT OF ANY OF THE  CREDITORS TO
SERVE  PROCESS  IN ANY  OTHER  MANNER  PERMITTED  BY LAW  OR TO  COMMENCE  LEGAL
PROCEEDINGS   OR  OTHERWISE   PROCEED   AGAINST  EACH  GUARANTOR  IN  ANY  OTHER
JURISDICTION.

<PAGE>

                  (C) EACH  GUARANTOR  HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION
WHICH  IT MAY  NOW OR  HEREAFTER  HAVE  TO THE  LAYING  OF  VENUE  OF ANY OF THE
AFORESAID  ACTIONS OR  PROCEEDINGS  ARISING  OUT OF OR IN  CONNECTION  WITH THIS
GUARANTY  OR ANY OTHER  CREDIT  DOCUMENT  BROUGHT IN THE COURTS  REFERRED  TO IN
CLAUSE (B) ABOVE AND HEREBY FURTHER  IRREVOCABLY  WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT SUCH  ACTION OR  PROCEEDING  BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                  (D) EACH GUARANTOR HEREBY  IRREVOCABLY  WAIVES ALL RIGHTS TO A
TRIAL  BY JURY IN ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM  ARISING  OUT OF OR
RELATING  TO THIS  GUARANTY,  THE OTHER  CREDIT  DOCUMENTS  OR THE  TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

                  22. In the event that all of the capital  stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the
requirements  of  Section  8.02 of the Credit  Agreement  (or such sale or other
disposition  has been approved in writing by the Required Banks (or all Banks if
required by Section  13.12 of the Credit  Agreement))  and the  proceeds of such
sale,  disposition or liquidation  are applied in accordance with the provisions
of the Credit  Agreement,  to the extent  applicable,  such  Guarantor  shall be
released from this Guaranty and this Guaranty  shall,  as to each such Guarantor
or  Guarantors,  terminate,  and have no  further  force  or  effect  (it  being
understood and agreed that the sale of one or more Persons that own, directly or
indirectly,  all of the capital stock of any  Guarantor  shall be deemed to be a
sale of such Guarantor for the purposes of this Section 22).

                  23. All payments made by any Guarantor  hereunder will be made
without  setoff,  counterclaim  or other defense.

                  24.   This   Guaranty   may  be  executed  in  any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed by all the parties  hereto  shall be lodged with the  Borrower  and the
Administrative Agent.

                  25.  It is  understood  and  agreed  that  any  Subsidiary  of
Holdings that is required to execute a counterpart of this Guaranty  pursuant to
the  Credit  Agreement  after  the  date  hereof  shall  automatically  become a
Guarantor hereunder by executing a counterpart hereof and delivering the same to
the Administrative Agent.

<PAGE>

                  26. It is the  desire  and  intent of each  Guarantor  and the
Creditors  that this Guaranty  shall be enforced  against each  Guarantor to the
fullest extent  permissible  under the laws and public policies  applied in each
jurisdiction  in which  enforcement is sought.  If,  however,  and to the extent
that, the obligations of each Guarantor under this Guaranty shall be adjudicated
to be invalid or unenforceable for any reason  (including,  without  limitation,
because  of  any  applicable   state  or  federal  law  relating  to  fraudulent
conveyances or transfers), then the amount of the Guaranteed Obligations of such
Guarantor shall be deemed to be reduced and such Guarantor shall pay the maximum
amount of the Guaranteed Obligations which would be permissible under applicable
law.

                                      * * *

<PAGE>

                  IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.

Address:                                [SUBSIDIARIES]


                                        By: ____________________________________
                                               Title:


Accepted and Agreed to:
PARIBAS, as Administrative Agent for the Banks


By_________________________________
    Title:



By_________________________________
    Title:

<PAGE>

                                                                       EXHIBIT I





December __, 1999

To the Administrative Agent and the Banks party to the Credit Agreement referred
to below:

Re:  USOL, Inc. Credit Facility

Ladies and Gentlemen:

                  Reference  is made to (i) the  Credit  Agreement,  dated as of
December 30, 1999,  among USOL  Holdings,  Inc.  ("Holdings"),  USOL,  Inc. (the
"Borrower"), the financial institutions party thereto from time to time (each, a
"Bank" and,  collectively,  the "Banks"),  Paribas, as Administrative Agent (the
"Administrative  Agent") and  Syndication  Agent (the  "Syndication  Agent") and
Deutsche Bank AG, New York Branch,  as Documentation  Agent (the  "Documentation
Agent",  and together with the  Administrative  Agent and Syndication Agent, the
"Agents")  (as such Credit  Agreement may be amended,  modified or  supplemented
from time to time, the "Credit  Agreement") and (ii) the Subsidiaries  Guaranty,
dated as of December __, 1999, among various  subsidiaries of the Borrower (each
a "Subsidiary  Guarantor," and  collectively,  the "Subsidiary  Guarantors") and
Paribas,  as Collateral  Agent (the  "Collateral  Agent") (as such  Subsidiaries
Guaranty  may be  amended,  modified  or  supplemented  from  time to time,  the
"Subsidiaries Guaranty").

                  Each of Holdings and the  Borrower,  pursuant to Section 13.08
of the Credit Agreement,  and each Subsidiary Guarantor,  pursuant to Section 21
of  the  Subsidiaries  Guaranty,  has  irrevocably  designated,   appointed  and
empowered the undersigned (at the undersigned's office located at 1633 Broadway,
New York, New York 10019),  as its authorized  designee,  appointee and agent to
receive,  accept and  acknowledge  for and on its behalf,  and in respect of its
property,  service of any and all legal process,  summons, notices and documents
which may be served in any such legal action or  proceeding  with respect to the
Credit  Agreement or the Subsidiaries  Guaranty,  as the case may be, and/or any
other  Credit  Document  (as defined in the Credit  Agreement)  to which it is a
party in the courts of the State of New York or of the United  States of America
for the Southern District of New York.

                  The  undersigned  hereby (a) informs  you that it  irrevocably
accepts such appointment and will perform such obligations as agent as set forth
in Section  13.08 of the Credit  Agreement  and  Section 21 of the  Subsidiaries
Guaranty  and (b) agrees  with you that (i) it will not  terminate  such  agency
relationship prior to December 31, 2006, provided that this appointment as

<PAGE>

agentshall remain in full force and effect so long as any dispute arising under,
or relating to, the Credit  Agreement,  any Credit Document or the  transactions
contemplated thereby shall continue and the undersigned is advised in writing of
any extension of such date and also provided that the  undersigned  has received
payment for service  through that date,  (ii) it will  maintain an office in New
York, New York, at all times to and including said date and will give you prompt
notice  of any  change  of its  address  during  such  period  and (iii) it will
promptly forward to Holdings,  the Borrower, or a Subsidiary  Guarantor,  as the
case may be,  any  such  summons,  complaint  or other  legal  process  that the
undersigned  receives  in  connection  with  its  appointment  as such  agent of
Holdings, the Borrower, and the Subsidiary Guarantors.

                  As  process  agent,  the  undersigned,  and its  successor  or
successors,  agree to discharge  the  above-mentioned  obligations  and will not
refuse  fulfillment  of such  obligations  under  Section  13.08  of the  Credit
Agreement and Section 21 of the Subsidiaries Guaranty.

Very truly yours,



CT CORPORATION SYSTEM



_______________________________
Name:
Title:

<PAGE>

                                                                       EXHIBIT J

                         OFFICER'S SOLVENCY CERTIFICATE

     I, the undersigned,  [Chairman]  [President]  [Chief Financial  Officer] of
USOL Holdings, Inc., a [Delaware] corporation ("Holdings"), do hereby certify on
behalf of Holdings that:

     1. This  Certificate  is furnished to the Banks pursuant to Section 4.13 of
the Credit Agreement, dated as of December 30, 1999, among Holdings, USOL, Inc.,
various  financial  institutions  from time to time party thereto (the "Banks"),
Paribas, as Administrative  Agent and Documentation Agent, and Deutsche Bank AG,
New York Branch, as Documentation Agent (such Credit Agreement,  as in effect on
the date of this  Certificate,  being  herein  called the  "Credit  Agreement").
Unless  otherwise  defined herein,  capitalized  terms used in this  Certificate
shall have the meanings set forth in the Credit Agreement.

     2. For  purposes  of this  Certificate,  the  terms  below  shall  have the
following definitions:

         (a)      "Fair Value"

                  The amount at which the assets, in their entirety,  of each of
                  (i) Holdings and its Subsidiaries  (taken as a whole) and (ii)
                  the  Borrower  (on a  stand-alone  basis)  would  change hands
                  between  a  willing  buyer  and a  willing  seller,  within  a
                  commercially reasonable period of time, each having reasonable
                  knowledge of the relevant facts,  with neither being under any
                  compulsion to act.

         (b)      "Present Fair Salable Value"

                  The amount that could be obtained  by an  independent  willing
                  seller from an independent willing buyer if the assets of each
                  of (i)  Holdings and its  Subsidiaries  (taken as a whole) and
                  (ii) the  Borrower  (on a  stand-alone  basis)  are sold  with
                  reasonable  promptness  under normal  selling  conditions in a
                  current market.

         (c)      "New Financing"

                  The  indebtedness  incurred or to be incurred by Holdings  and
                  the other  Guarantors under the Credit Documents and all other
                  financing contemplated by the Credit Documents.

         (d)      "Stated Liabilities"

                  The recorded  liabilities  (including  Contingent  Liabilities
                  that would be recorded in accordance  with generally  accepted
                  accounting   principles  ("GAAP")   consistently  applied)  of
                  Holdings and the other  Guarantors  at  ______________,  1999,
                  together with (i) the net change in long-term debt  (including
                  current maturities) between ______________,  1999 and the date
                  hereof  and (ii)  without  duplication,  the amount of all New
                  Financing.

<PAGE>

         (e)      "Contingent Liabilities"

                  The maximum estimated amount of liability reasonably likely to
                  result   from   pending   litigation,   asserted   claims  and
                  assessments,  guaranties, uninsured risks and other contingent
                  liabilities  of Holdings and its  Subsidiaries  (exclusive  of
                  such Contingent  Liabilities to the extent reflected in Stated
                  Liabilities).

         (f)      "Will be able to pay its  Stated  Liabilities  and  Identified
                  Contingent  Liabilities,  as they mature"

                  For the  period  from  the  date  hereof  through  the  stated
                  maturity of all New  Financing,  each of (i)  Holdings and its
                  Subsidiaries  (taken as a whole) and (ii) the  Borrower  (on a
                  stand-alone  basis) will have sufficient  assets and cash flow
                  to pay their  respective  Stated  Liabilities  and  Contingent
                  Liabilities as those  liabilities  mature or otherwise  become
                  due.

         (g)      "Does not have Unreasonably Small Capital"

                  For the  period  from  the  date  hereof  through  the  stated
                  maturity of all New  Financing,  each of (i)  Holdings and its
                  Subsidiaries  (taken as a whole) and (ii) the  Borrower  (on a
                  stand-alone  basis),  after  consummation of all  Indebtedness
                  (including  the Loans)  being  incurred  or assumed  and Liens
                  created by Holdings and the Borrower in connection  therewith,
                  is a going concern and has  sufficient  capital to ensure that
                  it will  continue to be a going concern for such period and to
                  remain a going concern despite moderately  negative deviations
                  from the Projections discussed below.

     3. For  purposes of this  Certificate,  I or officers of Holdings  under my
direction and supervision, have performed the following procedures as of and for
the periods set forth below.

         (a)      I have  reviewed  the  financial  statements  referred to in
                  Sections  4.15(a) and 6.05(a) of the Credit Agreement.

         (b)      I have reviewed the unaudited pro forma  consolidated  balance
                  sheet of the  Holdings  and its  Subsidiaries  referred  to in
                  Sections 4.15(a) and 6.05(a) of the Credit Agreement.

         (c)      I have made inquiries of certain  officers of the Holdings and
                  its  Subsidiaries  who have  responsibility  for financial and
                  accounting  matters  regarding (i) the existence and amount of
                  Contingent   Liabilities   associated  with  the  business  of
                  Holdings and its  Subsidiaries  and (ii) whether the unaudited
                  pro forma  consolidated  financial  statements  referred to in
                  paragraph (b) above are in  conformity  with GAAP applied on a
                  basis  substantially  consistent  with  that  of  the  audited
                  financial statements as at December 31, 1998.

         (d)      I have knowledge of and have reviewed to my  satisfaction  the
                  Credit Documents and the other  Documents,  and the respective
                  Schedules and Exhibits thereto.

<PAGE>

         (e)      With respect to Contingent Liabilities, I:

1.   inquired of certain  officials  of Holdings and its  Subsidiaries  who have
     responsibility  for  legal,  financial  and  accounting  matters  as to the
     existence  and  estimated   liability   with  respect  to  all   Contingent
     Liabilities known to them;

2.   confirmed with officers of Holdings and its Subsidiaries, that, to the best
     of such officers'  knowledge,  (i) all  appropriate  items were included in
     Stated  Liabilities or the listing of Contingent  Liabilities made known to
     me in the course of my inquiry and that (ii) the amounts  relating  thereto
     were the  maximum  estimated  amount of  liabilities  reasonably  likely to
     result therefrom as of the date hereof; and

3.   I hereby certify that, to the best of my knowledge, all material Contingent
     Liabilities have been considered in making the  certification  set forth in
     paragraph 4 below,  and with respect to each such Contingent  Liability the
     estimated  maximum  amount of liability  with  respect  thereto was used in
     making such certification.

(f)  I have examined the Projections  relating to Holdings and its  Subsidiaries
     which have been previously delivered to the Banks, and have re-examined the
     Projections  on the date hereof and  considered  the effect  thereon of any
     changes since the date of the preparation  thereof on the results projected
     therein.  After  such  review,  I hereby  certify  that in my  opinion  the
     Projections  are  reasonable and  attainable  (although  actual results may
     differ  from  the  Projections  and no  representation  is  made  that  the
     Projections  will in fact be  attained)  and the  Projections  support  the
     conclusions contained in paragraph 4 below.

(g)  I have made inquiries of certain  officers of Holdings and its Subsidiaries
     who have  responsibility  for financial  reporting and  accounting  matters
     regarding  whether they were aware of any events or conditions  that, as of
     the date  hereof,  would cause each of (i)  Holdings  and its  Subsidiaries
     (taken as a whole) or (ii) the  Borrower  (on a stand alone  basis),  after
     giving effect to the  Transaction  and the related  financing  transactions
     (including the incurrence of the New Financing),  to (i) have assets with a
     Fair  Value or  Present  Fair  Salable  Value that are less than the sum of
     Stated Liabilities and Contingent Liabilities; (ii) have Unreasonably Small
     Capital;  or (iii) not be able to pay its Stated Liabilities and Contingent
     Liabilities as they mature or otherwise become payable.

     4. Based on and  subject to the  foregoing,  I hereby  certify on behalf of
Holdings that, after giving effect to the Transaction and the related  financing
transactions (including the incurrence of the New Financing),  it is my informed
opinion that (x) the Fair Value and Present Fair Salable  Value of the assets of
each of (i)  Holdings  and its  Subsidiaries  (taken  as a  whole)  or (ii)  the
Borrower (on a stand alone basis),  exceed their respective  Stated  Liabilities
and Contingent Liabilities; (y) each of (i) Holdings and its Subsidiaries (taken
as a  whole)  or (ii)  the

<PAGE>

Borrower (on a stand alone basis), does not have Unreasonably Small Capital; and
(z) each of (i)  Holdings  and its  Subsidiaries  (taken as a whole) or (ii) the
Borrower  (on a stand alone basis) will be able to pay their  respective  Stated
Liabilities  and  Contingent  Liabilities,  as they mature or  otherwise  become
payable.

                  IN WITNESS  WHEREOF,  I have hereto set my hand this __ day of
December, 1999.

                                                 USOL HOLDINGS, INC.

                                                 By:___________________________
                                                    Name:
                                                    Title:

<PAGE>

                                                                       EXHIBIT K

                     BORROWING BASE CERTIFICATE AS OF [DATE]

To:  The Banks party to the Credit  Agreement,  dated as of December  30,  1999,
     among USOL Holdings,  Inc. ("Holdings"),  USOL, Inc. (the "Borrower"),  the
     financial  institutions  party  thereto  from time to time  (the  "Banks"),
     Paribas,  as  Administrative  Agent and Syndication Agent and Deutsche Bank
     AG, New York Branch, as Documentation Agent (the "Credit Agreement")(1)


                                                                      Amount in
                                                                    U.S. Dollars

1.        Cable Television Subscribers

          $675 multiplied by the number of Cable
          Television Subscribers

2.        Telephony Subscribers                                     $___________


           $450 multiplied by the number of Telephony
           Subscribers


3.        Indebtedness Outstanding                                  $___________


          Less - Indebtedness outstanding (exclusive of Loans)


4.        Total                                                      $__________

<PAGE>

     The undersigned hereby certifies that all of the information provided above
is true and correct as of the date first above written.

     IN WITNESS  WHEREOF,  the undersigned has hereunto set his or her hand this
_____ day of _____________.
                                                    USOL, INC.



                                                    By:_________________________
                                                       Name:
                                                       Title:

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

1 All capitalized  terms used herein shall have the meaning provided therefor in
such Credit Agreement.

<PAGE>

                                                                       EXHIBIT L


                    BANK ASSIGNMENT AND ASSUMPTION AGREEMENT

                                                         Date __________________



     Reference  is made to the Credit  Agreement  described in Item 2 of Annex I
hereto (as such Credit  Agreement  may  hereafter  be amended,  supplemented  or
otherwise modified from time to time, the "Credit Agreement"). Unless defined in
Annex I  hereto,  terms  defined  in the  Credit  Agreement  are used  herein as
defined. _________________ (the "Assignor") and _______________ (the "Assignee")
hereby agree as follows:

     1. The Assignor hereby sells and assigns to the Assignee  without  recourse
and  without  representation  or  warranty  (other  than as  expressly  provided
herein),  and the Assignee hereby purchases and assumes from the Assignor,  that
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement  as of the  date  hereof  which  represents  the  percentage  interest
specified  in Item 4 of  Annex I hereto  (the  "Assigned  Share")  of all of the
outstanding  rights and obligations  under the Credit Agreement  relating to the
facilities listed in Item 4 of Annex I hereto,  including,  without  limitation,
(x) in the case of any assignment of all or any portion of the Loan  Commitment,
all rights and  obligations  with  respect  to the  Assigned  Share of such Loan
Commitment and (y) in the case of any assignment of Loans not  accompanied by an
assignment  of a Loan  Commitment  (which  may only  occur when there is no Loan
Commitment),  all rights and  obligations  with respect to the Assigned Share of
such Loans. After giving effect to such sale and assignment, the Assignee's Loan
Commitment and the amount of the outstanding Loans owing to the Assignee will be
as set forth in Item 4 Annex I hereto.

     2. The  Assignor  (i)  represents  and  warrants  that it is the  legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or representations made in or in connection with the Credit Agreement
or  the  other  Credit   Documents  or  the   execution,   legality,   validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or the
other Credit  Documents or any other instrument or document  furnished  pursuant
thereto;   and  (iii)  makes  no  representation  or  warranty  and  assumes  no
responsibility with respect to the financial condition of the Borrower or any of
its  Subsidiaries  or the performance or observance by the Credit Parties of any
of their obligations under the Credit Agreement or the other Credit Documents to
which they are a party or any other  instrument or document  furnished  pursuant
thereto.

     3. The  Assignee  (i)  confirms  that it has  received a copy of the Credit
Agreement and the other Credit Documents,  together with copies of the financial
statements  referred to therein and such other  documents and  information as it
has deemed  appropriate  to make its own credit  analysis  and decision to enter
into  this  Assignment  and  Assumption  Agreement;  (ii)  agrees  that it will,
independently and without reliance upon the  Administrative  Agent, the Assignor
or any other Bank and based on such  documents and  information as it shall deem
appropriate at the time,  continue to make its own credit decisions in taking or
not taking

<PAGE>

action  under  the  Credit  Agreement;  (iii)  confirms  that it is an  Eligible
Transferee  under  the  Credit  Agreement;  (iv)  appoints  and  authorizes  the
Administrative  Agent and the Collateral  Agent to take such action as agent and
collateral  agent on its behalf and to  exercise  such  powers  under the Credit
Agreement and the other Credit Documents as are delegated to the  Administrative
Agent and reasonably the  Collateral  Agent by the terms thereof,  together with
such powers as are incidental thereto;  [and] (v) agrees that it will perform in
accordance  with their  terms all of the  obligations  which by the terms of the
Credit  Agreement are required to be performed by it as a Bank; [and (vi) to the
extent  legally  entitled  to do so,  attaches  the forms  described  in Section
3.04(b)(ii) of the Credit Agreement.](1)

     4. Following the execution of this Bank Assignment and Assumption Agreement
by the Assignor and the  Assignee,  an executed  original  hereof  (together all
attachments) will be delivered to the  Administrative  Agent. The effective date
of this Bank Assignment and Assumption  Agreement shall be the date of execution
hereof by the  Assignor  and the  Assignee  and the  receipt  of the  consent of
Paribas  pursuant to Section 13.04(b) of the Credit Agreement and receipt by the
Administrative  Agent of the assignment fee referred to in such Section 13.04(b)
(the "Settlement Date").

     5.  Upon  the  delivery  of  a  fully  executed   original  hereof  to  the
Administrative  Agent, as the Settlement Date, (i) the Assignee shall be a party
to the Credit  Agreement and, to the extent provided in this Bank Assignment and
Assumption  Agreement,  have the rights and obligations of a Bank thereunder and
under the other  Credit  Documents  and (ii) the Assignor  shall,  to the extent
provided in this Bank Assignment and Assumption Agreement, relinquish its rights
and be released from its  obligations  under the Credit  Agreement and the other
Credit Documents.

     6. It is agreed that the Assignee  shall be entitled to (x) all interest on
the Assigned Share of the Loans at the rates  specified in Item 6 of Annex I and
(y) all  Commitment  Commission  (if  applicable)  on the Assigned  Share of the
Unutilized  Commitment at the rate specified in Item 7 of Annex I hereto; which,
in each case,  accrue on and after the  Settlement  Date,  such interest and, if
applicable,  Commitment  Commission,  to be  paid  by the  Administrative  Agent
directly to the  Assignee.  It is further  agreed that all payments of principal
made on the Assigned  Share of the Loans which occur on and after the Settlement
Date will be paid directly by the Administrative Agent to the Assignee. Upon the
Settlement  Date, the Assignee shall pay to the Assignor an amount  specified by
the Assignor in writing  which  represents  the Assigned  Share of the principal
amount of the Loans made by the Assignor,  net of any closing  costs,  and which
are being  assigned  hereunder.  The Assignor  and the  Assignee  shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Settlement Date directly between themselves on the Settlement Date.

<PAGE>

     7. THIS BANK ASSIGNMENT AND ASSUMPTION  AGREEMENT SEIALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

<PAGE>


                  IN WITNESS WHEREOF,  the parties hereto have caused their duly
authorized  officers to execute and deliver this Bank  Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.

Accepted this __ day                          [NAME OF ASSIGNOR],
of ________                                   as Assignor


                                              By ____________________________
                                                 Title:


                                              [NAME OF ASSIGNEE],
                                              as Assignee


                                              By____________________________
                                                Title:


Acknowledged and Agreed:

PARIBAS, as Administrative
     and Syndication Agent

By_____________________
    Title:


By_____________________
    Title:


<PAGE>

                                                                         ANNEX I

               ANNEX FOR BANK ASSIGNMENT AND ASSUMPTION AGREEMENT

1.       Borrower:  USOL, Inc.
2.       Name and Date of Credit Agreement:

         Credit  Agreement,  dated as of December 30, 1999, among USOL Holdings,
         Inc. ("Holdings"),  USOL, Inc. (the "Borrower"), the Banks from time to
         time party thereto (the "Banks"), Paribas, as Administrative Agent (the
         "Administrative Agent") and Syndication Agent and Deutsche Bank AG, New
         York Branch, as Documentation Agent.

3.       Date of Assignment Agreement:

4.       Amounts (as of date of item #3 above):

                   Loan

                   Commitment
                   ----------
Aggregate
Amount
for all
Banks              $_________

Assigned
Share(2)             _______%
Amount of
Assigned Share
                   $_________

5.       Settlement Date:

<PAGE>

6.    Rate of Interest
      to the Assignee:      As set forth in Section 1.08 of the Credit Agreement
                             (unless otherwise agreed to by the Assignor and the
                             Assignee)(3)

7.    Commitment Commission  As set forth in Section 2.01(a) of the Credit
      to the Assignee:       Agreement (unless otherwise agreed to by the
                             Assignor and the Assignee)

8.    Notice:

              ASSIGNOR:

              -----------------------
              -----------------------
              -----------------------
              -----------------------
              Attention:
              Telephone:
              Telecopier:
              Reference:

              ASSIGNEE:


              -----------------------
              -----------------------
              -----------------------
              -----------------------
              Attention:
              Telephone:
              Telecopier:
              Reference:

<PAGE>

         Payment Instructions:

              ASSIGNOR:


              -----------------------
              -----------------------
              -----------------------
              -----------------------
              Attention:
              Reference:

              ASSIGNEE:

              -----------------------
              -----------------------
              -----------------------
              -----------------------
              Reference:

Accepted and Agreed:

[NAME OF ASSIGNEE]                                       [NAME OF ASSIGNOR]


By_____________________                                  By_____________________
_______________________                                  _______________________
(Print Name and Title)                                    (Print Name and Title)

___________________
1.   If the Assignee is organized  under the laws of a jurisdiction  outside the
     United States.

2    Percentage taken to 12 decimal places.

3    The Borrower  and the Agent shall direct the entire  amount of the interest
     to the  Assignee  at the  rate  set  forth in  Section  1.08 of the  Credit
     Agreement, with the Assignor and Assignee effecting the agreed upon sharing
     of the interest through payments by the Assignee to the Assignor.