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                                CREDIT AGREEMENT


                            Dated as of June 3, 1997


                                     between


                                 MICROTEST, INC.


                                       and


                         BANK OF AMERICA NATIONAL TRUST
                             AND SAVINGS ASSOCIATION


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<PAGE>
                                TABLE OF CONTENTS
Section                                                                     Page

                                    ARTICLE I
                     Definitions and Financial Requirements .................  1

  1.01  Definitions..........................................................  1
  1.02  Financial Requirements...............................................  6

                                   ARTICLE II
                               The Credit Facility ..........................  6

  2.01  The Revolving Facility ..............................................  6
  2.02  Advances Under the Revolving Facility ...............................  6
  2.03  Mandatory Payment ...................................................  7
  2.04  Facility Fee..... ...................................................  7
  2.05  Commitment Fee... ...................................................  7
  2.06  Default Rate..... ...................................................  7
  2.07  Early Termination of Commitment...... ...............................  7

                                   ARTICLE III
            Extensions of Credit, Payments and Interest Calculations ........  8

  3.01  Requests for Credit..................................................  8
  3.02  Disbursements and Payments...........................................  8
  3.03  Branch Accounts......................................................  8
  3.04  Evidence of Indebtedness.............................................  8
  3.05  Interest Calculation.................................................  8
  3.06  Late Payments; Compounding...........................................  8
  3.07  Business Day.........................................................  8
  3.08  Taxes and Other Charges..............................................  9
  3.09  Illegality........................................................... 10
  3.10  Increased Costs...................................................... 10
  3.11  Funding Losses....................................................... 10
  3.12  Inability to Determine Rates......................................... 11
  3.13  Certificate of the Bank.............................................. 11
  3.14  Debits to Borrower's Account......................................... 11
  3.15  Survival  ........................................................... 11

                                   ARTICLE IV
                      Conditions to Availability of Credit .................. 11

  4.01  Conditions to First Extension of Credit.............................. 12
  4.02  Conditions to Each Extension of Credit............................... 12

                                    ARTICLE V
                         Representations and Warranties...................... 13

  5.01  Corporate Existence and Power........................................ 13
  5.02  Authorization........................................................ 13
  5.03  Enforceability....................................................... 13
  5.04  Compliance with Laws................................................. 13
  5.05  Permits, Franchises.................................................. 14
                                        i
<PAGE>
Section                                                                     Page

  5.06  Litigation........................................................... 14
  5.07  No Event of Default.................................................. 14
  5.08  Other Obligations.................................................... 14
  5.09  Tax Returns.......................................................... 14
  5.10  Information Submitted................................................ 14
  5.11  No Material Adverse Effect........................................... 14
  5.12  ERISA Compliance..................................................... 15
  5.13  Environmental Matters................................................ 15
  5.14  Swap Obligations..................................................... 16

                                   ARTICLE VI
                              Affirmative Covenants ......................... 16

  6.01  Notices of Certain Events............................................ 16
  6.02  Financial and Other Information...................................... 16
  6.03  Books, Records, Audits and Inspections............................... 17
  6.04  Use of Facility...................................................... 17
  6.05  Insurance ........................................................... 17
  6.06  Compliance with Laws................................................. 17
  6.07  Change in Name, Structure or Location................................ 18
  6.08  Existence and Properties............................................. 18

                                   ARTICLE VII
                               Negative Covenants ........................... 18

  7.01  Other Indebtedness................................................... 18
  7.02  Liens     ........................................................... 19
  7.03  Dividends ........................................................... 19
  7.04  Loans     ........................................................... 19
  7.05  Liquidations; Mergers; Acquisitions.................................. 19
  7.06  Sale of Assets....................................................... 20
  7.07  Business Activities.................................................. 20
  7.08  Regulations G, T, U, and X........................................... 20
  7.09  Use of Proceeds - Ineligible Securities.............................. 21
  7.10  Modified Quick Ratio................................................. 21
  7.11  Tangible Net Worth................................................... 21
  7.12  Leverage Ratio....................................................... 21
  7.13  Consecutive Quarterly Losses; Losses in One Quarter.................. 21

                                  ARTICLE VIII
                                Events of Default ........................... 22

  8.01  Events of Default.................................................... 22
            (a)  Failure to Pay.............................................. 22
            (b)  Breach of Representation or Warranty........................ 22
            (c)  Specific Defaults........................................... 22
            (d)  Other Defaults.............................................. 22
            (e)  Judgments................................................... 22
            (f)  Failure to Pay Debts; Voluntary Bankruptcy.................. 22
            (g)  Involuntary Bankruptcy...................................... 22
            (h)  Default of Other Financial Obligations...................... 23
                                       ii
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            (i)  Default of Other Bank Obligations........................... 23
            (j)  Material Adverse Effect..................................... 23
            (k)  ERISA....................................................... 23
            (l)  Change of Control........................................... 24
  8.02  Remedies  ........................................................... 24

                                   ARTICLE IX
                                  Miscellaneous ............................. 25

  9.01  Successors and Assigns............................................... 25
  9.02  Consents and Waivers................................................. 25
  9.04  Costs and Attorneys' Fees............................................ 25
  9.05  Integration; Amendment............................................... 25
  9.06  Borrower's Documents................................................. 25
  9.07  Participations....................................................... 26
  9.08  General Indemnification.............................................. 26
  9.09  Arbitration; Reference Proceeding.................................... 26
  9.10  Notices   ........................................................... 28
  9.11  Headings; Interpretation............................................. 28
  9.12  Severability......................................................... 28
  9.13  Counterparts......................................................... 29
  9.14  Waiver of Jury Trial................................................. 29

Schedules
---------

Schedule 7.01   Existing Indebtedness
Schedule 7.02   Existing Liens

Exhibits
--------

Exhibit A       Form of Compliance Certificate
                                       iii
<PAGE>
                                CREDIT AGREEMENT

          THIS CREDIT AGREEMENT (this "Agreement") is entered into as of June 3,
1997, between Microtest, Inc., a Delaware corporation (the "Borrower"), and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank").

          In  consideration  of the mutual  covenants and  agreements  contained
herein, the Borrower and the Bank agree as follows:

                                    ARTICLE I

                     Definitions and Financial Requirements
                     --------------------------------------

     1.01  Definitions.  The  following  terms  (including  plural and  singular
versions thereof) have the meanings indicated:

     "Advance": an advance hereunder.

     "Availability  Period": the period commencing on the date of this Agreement
and  ending on the date that is the  earlier  to occur of (a) two years from the
Closing  Date,  (b)  March  31,  1999,  and (c) the  date on  which  the  Bank's
commitment to extend credit hereunder terminates.

     "Business  Day": any day other than a Saturday,  a Sunday,  or other day on
which commercial banks in San Francisco,  California, are authorized or required
by law to close and, if the applicable Business Day relates to any Offshore Rate
Advance,  means such a day on which  dealings  are carried on in the  applicable
offshore interbank market.

     "Closing Date":  the date on which all conditions to the initial  extension
of credit hereunder are satisfied.

     "Code":  the Internal  Revenue Code of 1986, as amended,  and the rules and
regulations promulgated thereunder as from time to time in effect.

     "Compliance  Certificate":  a compliance certificate in the form of Exhibit
A.

     "Credit Documents":  collectively, this Agreement and each other agreement,
documents and  instrument  now or hereafter  delivered to the Bank in connection
with the credits established herein and the transactions contemplated hereby.

     "Default":  any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or
                                        1
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otherwise remedied during such time) constitute an Event of Default.

     "Dollars", "dollars" and "$": each, lawful money of the United States.

     "Environmental  Laws":  any foreign,  federal,  state,  local, or municipal
laws,  rules,  orders,  regulations,   statutes,   ordinances,  codes,  decrees,
requirements of any governmental authority,  any and all requirements of law and
any and all common law requirements,  rules, and bases of liability  regulating,
relating to, or imposing liability or standards of conduct concerning  pollution
or protection of human health or the environment or Hazardous  Substances or any
activity involving Hazardous Substances, as now or may at any time hereafter may
be in effect.

     "ERISA":  the Employee  Retirement Income Security Act of 1974, as amended,
and the rules and  regulations  promulgated  thereunder  as from time to time in
effect.

     "ERISA Event": (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal  by the Borrower from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as defined in Section
4001(a)(2)  of ERISA) or a cessation  of  operations  which is treated as such a
withdrawal  under Section 4062(e) of ERISA; (c) the filing of a notice of intent
to terminate,  the treatment of a plan amendment as a termination  under Section
4041 or  4041A  of  ERISA  or the  commencement  of  proceedings  by the PBGC to
terminate  a Pension  Plan  subject  to Title IV of ERISA;  (d) a failure by the
Borrower to make required  contributions to a Pension Plan or other Plan subject
to Section 412 of the Code; (e) an event or condition which might  reasonably be
expected to constitute  grounds under Section 4042 of ERISA for the  termination
of, or the  appointment  of a trustee to  administer,  any Pension Plan; (f) the
imposition  of any liability  under Title IV of ERISA,  other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Borrower; or (g) an
application  for a funding  waiver or an  extension of any  amortization  period
pursuant to Section 412 of the Code with respect to any Pension Plan.

     "Event of Default": any event listed in Article VIII of this Agreement.

     "FDIC": the Federal Deposit Insurance Corporation, or any entity succeeding
to any of its principal functions.

     "Floating Rate": specified in subsection 2.02(a).

     "FRB": the Board of Governors of the Federal Reserve System,  or any entity
succeeding to any of its principal functions.

     "Hazardous  Substance":   any  hazardous  or  toxic  substance,   material,
pollutant,  waste  or  similar  designation,  defined,  listed,  classified,  or
regulated as such in or under any
                                        2
<PAGE>
Environmental  Laws,  including  asbestos,   petroleum,  or  petroleum  products
(including  gasoline,  crude  oil,  or any  fraction  thereof),  polychlorinated
biphenyls, and urea-formaldehyde insulation.

     "IRS": the Internal Revenue Service or any entity  succeeding to any of its
principal functions under the Code.

     "Material Adverse Effect":  (a) a material adverse change in, or a material
adverse effect upon, the operations,  business, properties, condition (financial
or otherwise) or prospects of the Borrower or the Borrower and its  Subsidiaries
taken as a whole;  (b) a material  impairment  of the ability of the Borrower to
perform under any Credit  Document;  or (c) a material  adverse  effect upon the
legality, validity, binding effect or enforceability of any Credit Document.

     "Offshore  Rate":  for each  Offshore  Rate  Interest  Period,  the rate of
interest  (rounded  upward to the next 1/16th of 1%) determined  pursuant to the
following formula:

          Offshore Rate =                     Offered Rate
                         ------------------------------------------------------
                                 1.00 - Eurodollar Reserve Percentage

          Where:

               "Offered  Rate"  means  the  rate of  interest  at  which  dollar
          deposits in the approximate  amount of the Offshore Rate Advance to be
          made and having a maturity  comparable  to such Offshore Rate Interest
          Period  would be offered by the  Bank's  London  Branch (or such other
          office as may be  designated  for such  purpose  by the Bank) to major
          banks in the London  interbank  market  upon  request of such banks at
          approximately  11:00 a.m.  (London,  England  time) two Business  Days
          prior to the first day of such Offshore Rate Interest Period.

               "Eurodollar  Reserve  Percentage"  means,  for any Offshore  Rate
          Interest  Period,  the  maximum  reserve  percentage  (expressed  as a
          decimal,  rounded  upward to the next  1/100th of 1%) in effect on the
          first  day of such  Offshore  Rate  Interest  Period  (whether  or not
          applicable to the Bank) under regulations  issued from time to time by
          the FRB for determining the maximum reserve requirement (including any
          emergency,  supplemental or other marginal reserve  requirement)  with
          respect   to   Eurocurrency   funding   (currently   referred   to  as
          "Eurocurrency  liabilities") having a term comparable to such Offshore
          Rate Interest Period.

     "Offshore  Rate  Advance":  an Advance  for which  interest is based on the
Offshore Rate.

     "Offshore Rate Interest Period":  for each Offshore Rate Advance the period
commencing on the date the Offshore Rate
                                        3
<PAGE>
Advance  begins to bear interest at a rate based on the Offshore Rate and ending
one,  two,  three,  or six months  thereafter,  as  requested  by the  Borrower;
provided, however, that the last day of each Offshore Rate Interest Period shall
be  determined  in  accordance  with the  practices of the  applicable  offshore
interbank  markets as from time to time in effect,  and provided further that no
such  interest  period  shall  extend  beyond  the last day of the  Availability
Period.

     "PBGC":  the Pension Benefit Guaranty  Corporation or any entity succeeding
to any of its principal functions under ERISA.

     "Pension  Plan":  a pension  plan (as  defined  in  Section  3(2) of ERISA)
subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions,  or in the case of a
multiple  employer  plan (as  described  in  Section  4064(a) of ERISA) has made
contributions at any time during the immediately preceding five plan years.

     "Permitted Swap Obligations":  all obligations (contingent or otherwise) of
the  Borrower  or any  Subsidiary  existing  or arising  under  Swap  Contracts,
provided that each of the following criteria is satisfied:  (a) such obligations
are (or were) entered into by such Person in the ordinary course of business for
the  purpose  of  directly   mitigating  risks   associated  with   liabilities,
commitments or assets held by such Person, or changes in the value of securities
issued by such Person in conjunction  with a securities  repurchase  program not
otherwise prohibited hereunder,  and not for purposes of speculation or taking a
"market  view;" and (b) such Swap  Contracts  do not contain  (i) any  provision
("walk-away" provision) exonerating the non-defaulting party from its obligation
to make payments on outstanding  transactions  to the  defaulting  party or (ii)
except in the case of a swap contract with the Bank or an affiliate of the Bank,
any provision  creating or permitting  the  declaration  of an event of default,
termination  event or similar  event upon the  occurrence of an Event of Default
hereunder (other than an Event of Default under subsection 8.01(a)).

     "Person":  an  individual,  partnership,   corporation,  limited  liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or governmental authority.

     "Plan":  an employee  benefit  plan (as  defined in Section  3(3) of ERISA)
which the Borrower  sponsors or maintains  or to which the  Borrower  makes,  is
making, or is obligated to make contributions and includes any Pension Plan.

     "Reference  Rate": for any day, the rate of interest in effect for such day
as  publicly  announced  from  time  to  time  by the  Bank  in  San  Francisco,
California,  as its  "reference  rate." It is a rate set by the Bank  based upon
various factors including the Bank's costs and desired return, general economic
                                        4
<PAGE>
conditions and other factors,  and is used as a reference point for pricing some
loans,  which may be priced at, above,  or below such announced rate. Any change
in the reference  rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.

     "Reference  Rate  Advance":  an Advance  that bears  interest  based on the
Reference Rate.

     "Reportable Event": any of the events set forth in Section 4043(c) of ERISA
or the  regulations  thereunder,  other than any such event for which the 30-day
notice  requirement  under  ERISA has been waived in  regulations  issued by the
PBGC.

     "Revolving Facility": the line of credit described in Section 2.01.

     "Swap Contract": any agreement,  whether or not in writing, relating to any
transaction that is a rate swap, basis swap, forward rate transaction, commodity
swap,  commodity  option,  equity or equity index swap or option,  bond, note or
bill option,  interest rate option,  forward foreign exchange transaction,  cap,
collar or floor transaction,  currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option to enter
into any of the foregoing) or any combination of the foregoing,  and, unless the
context  otherwise  clearly  requires,  any  master  agreement  relating  to  or
governing any or all of the foregoing.

     "Subsidiary": of the Borrower, any corporation,  association,  partnership,
joint  venture,  or other  business  entity of which more than 50% of the voting
stock  or  other  equity   interests  (in  the  case  of  entities   other  than
corporations),  is owned or controlled directly or indirectly by the Borrower or
one or more Subsidiaries of the Borrower or a combination thereof.

     "Tangible  Net Worth":  the gross book value of the assets of the  Borrower
and its Subsidiaries on a consolidated  basis  (exclusive of goodwill,  patents,
trademarks,  trade names, organization expense, treasury stock, unamortized debt
discount  and  expense,   deferred  research  and  development  costs,  deferred
marketing expenses, other deferred charges and other like intangibles and monies
due from affiliates, officers, directors, or shareholders of the Borrower or any
of  its  Subsidiaries)  less  (a)  reserves  applicable  thereto,  and  (b)  all
liabilities  (including  accrued and deferred income taxes and any  subordinated
liabilities). For the purpose of clarity, deferred taxes shall not be treated as
intangible assets.

     "Unfunded Pension  Liability":  the excess of a Plan's benefit  liabilities
under  Section  4001(a)(16)  of ERISA,  over the  current  value of that  Plan's
assets,  determined  in  accordance  with the  assumptions  used for funding the
Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
                                        5
<PAGE>
     1.02 Financial Requirements.  Unless otherwise specified in this Agreement,
all accounting terms used in this Agreement shall be interpreted,  all financial
computations  required  under this  Agreement  shall be made,  and all financial
information required under this Agreement shall be prepared,  in accordance with
generally  accepted  accounting  principles  in effect  from time to time in the
United States, consistently applied.

                                   ARTICLE II

                               The Credit Facility
                               -------------------

     2.01 The Revolving Facility.  (a) From time to time during the Availability
Period,  subject to the terms and  provisions  hereof,  the Bank, on a revolving
basis, will make dollar Advances to the Borrower.

          (b) The  aggregate  of all Advances may not exceed at any one time the
amount of $10,000,000.

     2.02  Advances  Under the  Revolving  Facility.  (a)  Subject  to the other
provisions of this Section,  Advances  under the Revolving  Facility  shall bear
interest at a rate per annum equal to the Reference  Rate plus 0.00%  percentage
points per annum (the Reference Rate plus 0.00%  percentage  points per annum is
referred to herein as the  "Floating  Rate").  The  Borrower  shall pay interest
monthly,  on the last day of each month  until the last day of the  Availability
Period,  on which date all accrued and unpaid interest shall be due and payable.
The Borrower shall repay the principal  amount of each Reference Rate Advance on
the  date  such  advance  is  converted  into an  Offshore  Rate  Advance  under
subsection (b) below, and on the last day of the Availability Period.

          (b) In lieu of the interest  rate  described  above,  the Borrower may
elect during the  Availability  Period to have all or portions of Advances under
the Revolving Facility be in dollars and bear interest at the Offshore Rate plus
1.50%  per  annum  during an  Offshore  Rate  Interest  Period,  subject  to the
following requirements:

               (i) Each  Offshore  Rate Advance  shall be for an amount not less
     than $500,000.

               (ii) The  Borrower  shall  pay  interest  on each  Offshore  Rate
     Advance  on the last day of the  Offshore  Rate  Interest  Period  for such
     Advance; provided, however, that if any Interest Period for a Offshore Rate
     Advance  exceeds three months,  interest  shall also be payable on the date
     which falls three months after the beginning of such Interest Period and on
     each date which falls three months after any such  interest  payment  date.
     The  Borrower  shall  repay the  principal  balance of each  Offshore  Rate
     Advance on the last day of the Offshore Rate Interest Period for such
                                        6
<PAGE>
     Advance,  and (if  sooner  occurring)  on the last day of the  Availability
     Period.

               (iii) Any payment of an Offshore  Rate Advance  prior to the last
     day  of the  Offshore  Rate  Interest  Period  for  such  Advance,  whether
     voluntary, by reason of acceleration or otherwise,  including any mandatory
     payments  required  under  this  Agreement  and  applied  by the Bank to an
     Offshore  Rate  Advance,  shall be  accompanied  by the  amount of  accrued
     interest  on the  amount  repaid and by the  amount  (if any)  required  by
     Section 3.11.

     2.03 Mandatory Payment.  If at any time and for any reason the total amount
of credit  outstanding  under this Agreement  exceeds the  limitations set forth
herein,  the  Borrower  shall pay to the Bank,  upon  demand,  the amount of the
excess.  Payments  under this Section may be applied to the  obligations  of the
Borrower to the Bank in the order and manner as the Bank in its  discretion  may
determine.

     2.04  Facility  Fee.  The Borrower  shall pay to the Bank a  non-refundable
facility  fee of  $20,000  on or  before  the  execution  and  delivery  of this
Agreement by the parties.

     2.05 Commitment Fee. The Borrower shall pay to the Bank a commitment fee at
the rate of 0.375% per annum on the average  daily unused  portion of the credit
provided  under  this  Agreement.  The  commitment  fee shall be  computed  on a
calendar quarter basis,  except for the first period which shall commence on the
Closing Date and end on June 30, 1997 and the last period which shall end on the
last day of the  Availability  Period.  The  commitment  fee shall be payable in
arrears on July 1, 1997, on the first day of each  successive  calendar  quarter
thereafter, and on the last day of the Availability Period.

     2.06 Default Rate.  Upon the occurrence and during the  continuation of any
Event  of  Default,  and  without  constituting  a waiver  of any such  Event of
Default,  Advances under the Revolving  Facility shall at the option of the Bank
bear  interest at a rate per annum which is 2% per annum higher than the rate of
interest otherwise provided under this Agreement.

     2.07  Early  Termination  of  Commitment.  The  Borrower  may at  any  time
terminate the Bank's  commitment  to extend  credit  hereunder by giving no less
than five Business  Days' prior notice to the Bank and paying in full the entire
amount of credit outstanding hereunder, together with any sums due under Section
3.11.  All accrued  commitment  fees to, but not including the effective date of
any termination of the  commitment,  shall be paid on the effective date of such
termination.
                                        7
<PAGE>
                                   ARTICLE III

            Extensions of Credit, Payments and Interest Calculations
            --------------------------------------------------------

     3.01 Requests for Credit.  Each request for an extension of credit shall be
made  in  writing  on a form  acceptable  to the  Bank  or in any  other  manner
acceptable to the Bank.

     3.02  Disbursements  and Payments.  Each  disbursement by the Bank and each
payment by the Borrower under this  Agreement  shall be made in the funds and at
such branch of the Bank as the Bank may from time to time select.

     3.03 Branch  Accounts.  Each extension of credit under this Agreement shall
be made for the account of such branch,  office, or affiliate of the Bank as the
Bank may from time to time select.

     3.04 Evidence of Indebtedness.  Principal, interest, and all other sums due
to the Bank  under  this  Agreement  shall be  evidenced  by  entries in records
maintained by the Bank,  and, if required by the Bank,  by a promissory  note or
notes.  Each  payment  on and any  other  credits  with  respect  to  principal,
interest,  and all other sums due under this  Agreement  shall be  evidenced  by
entries  to  records  maintained  by the  Bank.  The loan  accounts  or  records
maintained by the Bank shall be conclusive  absent  manifest error of the amount
of the credit  extended  hereunder  and the interest and payments  thereon.  Any
failure  to so  record  or any error in doing so shall  not,  however,  limit or
otherwise  affect the  obligation  of the  Borrower  hereunder to pay any amount
owing.

     3.05 Interest  Calculation.  Interest  based on the Reference Rate shall be
computed on the basis of a  365/366-day  year,  actual days  elapsed.  All other
interest and fees payable under this Agreement shall be computed on the basis of
a 360 day year and actual  days  elapsed,  which  results in more  interest or a
larger fee than if a 365-366 day year were used.

     3.06 Late Payments;  Compounding. Any sum payable by the Borrower hereunder
(including unpaid interest) if not paid when due shall bear interest (payable on
demand) from its due date until payment in full at a rate per annum equal to the
Floating Rate plus 2% per annum.  At the option of the Bank,  in each  instance,
any sum payable hereunder which is not paid when due (including unpaid interest)
may be added to principal of the Revolving  Facility and shall  thereafter  bear
interest at the rate applicable to principal.

     3.07 Business Day. Any sum payable by the Borrower  hereunder which becomes
due on a day which is not a Business  Day shall be due on the next  Business Day
after such due date, unless, in the case of an Offshore Rate Loan, the result of
such extension would be to carry such Offshore Rate Interest Period into another
calendar month, in which event such Offshore Rate
                                       8
<PAGE>
Interest  Period  shall  end on the  immediately  preceding  Business  Day.  Any
payments  received  by the Bank on a day  which is not a  Business  Day shall be
deemed to be received on the next Business Day after such date of receipt.

     3.08 Taxes and Other Charges. (a) (i) If any taxes (other than taxes on net
income (A) imposed by the country or any subdivision of the country in which the
Bank's  principal office or actual lending office is located and (B) measured by
the United  States  taxable  income the Bank would have received if all payments
under or in respect of this Agreement and any  instrument or agreement  required
hereunder  were exempt from taxes levied by the  Borrower's  country) are at any
time  imposed  on any  payments  under or in respect  of this  Agreement  or any
instrument  or  agreement  required  hereunder  including,  but not  limited to,
payments made pursuant to this  Section,  the Borrower  shall pay all such taxes
and shall also pay to the Bank,  at the time  interest is paid,  all  additional
amounts which the Bank  specifies as necessary to preserve the  after-tax  yield
the Bank would have received if such taxes had not been imposed.

               (ii) The additional  amounts  necessary to preserve the after-tax
yield the Bank would have  received if such taxes had not been imposed  shall be
calculated pursuant to the formula:

                                       (w)(t)(i)
                                 y = -----------
                                         1-w-t

where the terms are defined as follows:

                           y = additional payment to be made to the Bank

                           w = withholding tax rate levied by foreign
                               government

                           t  = the Bank's combined Federal and state tax rate

                           i  = amount  of  interest  to be paid on Credit
                                (computed  by  using  the  Offshore  Rate or
                                Reference  Rate  or  other  index  rate,  as
                                applicable  plus the quoted margin over such
                                rate)

                           1  = one

          (b) The  Borrower  will provide the Bank with  original tax  receipts,
notarized  copies of tax  receipts,  or such other  documentation  as will prove
payment of tax in a court of law applying  the United  States  Federal  Rules of
Evidence, for all taxes paid by the Borrower pursuant to subsection (a) above.
                                        9
<PAGE>
The Borrower will deliver receipts to the Bank within 30 days after the due date
for the related tax.

     3.09  Illegality.  (a) If the Bank determines that (i) the  introduction of
any law, rule, regulation, treaty, or determination of an arbitrator or court or
other  governmental  authority  or any  change  in or in the  interpretation  or
administration  thereof has made it unlawful,  or that any central bank or other
governmental authority has asserted that it is unlawful, for the Bank to make or
extend any  Advance or other  credit  under this  Agreement,  or (ii) any order,
judgment, or decree of any governmental  authority or arbitrator purports by its
terms to enjoin or  restrain  the Bank from making or  extending  any Advance or
other credit hereunder, then, on notice thereof by the Bank to the Borrower, the
obligation  of the Bank to make or extend such  Advance or other credit shall be
suspended until the Bank shall have notified the Borrower that the circumstances
giving rise to such determination no longer exist.

     (b) If the Bank  determines  that it is  unlawful  for it to  maintain  any
Offshore Rate Advance hereunder,  the Borrower shall prepay in full all Offshore
Rate Advances then outstanding,  together with interest accrued thereon,  either
on the last day of the applicable  Offshore Rate Interest Period if the Bank may
lawfully  continue to maintain  such Advances to such day and such loans have an
interest  period,  or  immediately,  if the Bank may not  lawfully  continue  to
maintain such Advances or such loans have no interest period,  together with any
amounts required to be paid in connection therewith pursuant to Section 3.11.

     3.10 Increased  Costs.  The Borrower shall pay to the Bank, on demand,  the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory  agency which is applicable to all national banks or
a class of all  national  banks.  The costs and losses will be allocated to this
facility in a manner  determined by the Bank, using any reasonable  method.  The
costs include the following:

          (a) any reserve or deposit requirements; and

          (b)  any  capital  requirements  relating  to the  Bank's  assets  and
commitments for credit.

     3.11 Funding  Losses.  The Borrower  shall  reimburse the Bank and hold the
Bank  harmless from any loss or expense which the Bank may sustain or incur as a
consequence  of the failure of the Borrower to make any payment or prepayment of
principal  of any Advance  hereunder  made at a rate of interest  related to the
Offshore Rate (including  payments made after any acceleration  thereof),  or to
borrow at such a rate, or the  prepayment of an Advance which bears  interest at
such a rate on a day  which  is not the  last day of the  interest  period  with
respect thereto (including payments made after any acceleration thereof or
                                       10
<PAGE>
because the total amount of credit exceeds the limitations set forth herein), or
the redenomination and conversion,  upon the occurrence of any Event of Default,
of an Advance  which bears  interest at such a rate;  including any such loss or
expense  arising from the liquidation or reemployment of funds obtained by it to
maintain its Advances made at a rate related to the Offshore  Rate  hereunder or
from fees payable to terminate  any deposits from which such funds were obtained
or deemed obtained.

     3.12 Inability to Determine  Rates. The Bank has no obligation to accept an
election for an Offshore Rate Advance if (a) deposits in the applicable currency
and in the principal  amount,  and for the period equal to the interest  period,
for such Advance are not available in the applicable  funding market; or (b) the
Offshore  Rate does not  accurately  reflect the cost of such  Advance.  Nothing
contained herein shall,  however,  obligate the Bank to obtain the funds for any
Advance in any particular manner.

     3.13  Certificate  of the Bank.  If the Bank  claims any  reimbursement  or
compensation  pursuant  to  Section  3.10 or Section  3.11,  then the Bank shall
deliver to the Borrower a certificate  setting  forth in  reasonable  detail the
amount payable to the Bank thereunder and such  certificate  shall be conclusive
and binding on the Borrower in the absence of manifest error.

     3.14 Debits to Borrower's Account.  The Borrower hereby authorizes the Bank
to debit the Borrower's deposit account number 235336440 at the Phoenix, Arizona
office of the Bank in the  amount of  principal,  interest,  fees,  or any other
amount due under this  Agreement or under any  instrument or agreement  required
under this Agreement. The Bank may, at its option, debit the account on the date
such amounts become due, or, if such due date is not a Business Day, on the next
Business Day after such due date. If there are insufficient funds in the account
to cover the amount  debited to the accounts in  accordance  with this  Section,
such debit may be reversed in whole or in part, at the option of the Bank in its
sole discretion, and the amount not debited shall be deemed to remain unpaid.

     3.15  Survival.  The  agreements  and  obligations  of the  Borrower  under
Sections 3.08 through 3.11 shall survive the  expiration or  termination  of the
commitment to extend credit  hereunder and the payment of all other  obligations
of the Borrower hereunder.
                                       11
<PAGE>
                                   ARTICLE IV

                      Conditions to Availability of Credit.
                      -------------------------------------

     The Bank's  obligation to extend credit under this  Agreement is subject to
the Bank's receipt of the following,  each in form and substance satisfactory to
the Bank:

     4.01 Conditions to First Extension of Credit. Before the first extension of
credit:

          (a) This Agreement, executed by the Borrower;

          (b)  Satisfactory  evidence  of due  authorization  of the  execution,
delivery, and performance by the Borrower of this Agreement and any other Credit
Documents, including certified resolutions,  incumbency certificate, articles of
incorporation and bylaws;

          (c) If requested  by the Bank,  an opinion of counsel for the Borrower
(which  counsel  must be  satisfactory  to the Bank) with  respect to such legal
matters relating hereto as the Bank may request;

          (d)  Certificates of state  officials  showing that the Borrower is in
good  standing or qualified to conduct  business  under the laws of the state of
its organization  and, if requested by the Bank, in any other state in which the
Borrower is required to be so qualified;

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

          (f)  Payment of any fee or  expense  required  hereunder  prior to the
first extension of credit (including the fee referenced in Section 2.04); and

          (g) Such other  approvals,  opinions,  documents or instruments as the
Bank may request.

     4.02  Conditions  to Each  Extension  of Credit.  Before each  extension or
renewal of credit  (including  pursuant to any election under Section  2.02(b)),
including the first:

          (a) The  representations  and warranties of the Borrower  contained in
this Agreement shall be true on and as of the date of each extension of credit;

          (b) Immediately  prior to and immediately  after giving effect to such
extension of credit, no Default or Event of Default shall exist; and

          (c) The Bank shall have  received a request for extension of credit in
accordance with Section 3.01.
                                       12
<PAGE>
     Each  request for an  extension  of credit  hereunder  shall  constitute  a
representation and warranty by the Borrower, as of the date of each such request
and as of the date of each  extension  of credit,  that the  conditions  in this
Section are satisfied.

                                    ARTICLE V

                         Representations and Warranties
                         ------------------------------

     The Borrower represents and warrants that:

     5.01  Corporate   Existence  and  Power.  The  Borrower  and  each  of  its
Subsidiaries: (a) is a corporation duly organized and existing under the laws of
the  jurisdiction of its  organization;  (b) has the power and authority and all
governmental  licenses,  authorizations,  consents,  and  approvals  to own  its
assets,  carry  on its  business,  and to  execute,  deliver,  and  perform  its
obligations  under, the Credit Documents to which it is a party; and (c) is duly
qualified  and  properly  licensed and in good  standing  under the laws of each
jurisdiction where its ownership, lease, or operation of property or the conduct
of its business requires such license or qualification.

     5.02  Authorization.  The  execution,  delivery,  and  performance  by  the
Borrower  of this  Agreement  and any  other  Credit  Document  have  been  duly
authorized by all necessary corporate action, and do not and will not:

          (a) contravene the terms of any organizational or charter documents;

          (b) conflict with or result in any breach or contravention  of, or the
creation  of any lien,  security  interest,  or  charge  under,  any  agreement,
contract, indenture, document, or instrument to which the Borrower is a party or
by which any property is bound, or any order, injunction, writ, or decree of any
governmental authority to which the Borrower or any property is subject; or

          (c)  violate  any  law,  rule,  regulation,  or  determination  of  an
arbitrator  or  of a  court  or  other  governmental  authority,  in  each  case
applicable to or binding upon the Borrower or any of its property.

     5.03  Enforceability.  This  Agreement  is  a  legal,  valid,  and  binding
agreement of the Borrower,  enforceable  against the Borrower in accordance with
its terms,  and the other Credit Documents and any other instrument or agreement
required  under this  Agreement,  when  executed and  delivered,  will be legal,
valid,  binding,  and  enforceable  in  accordance  with its terms  against  the
Borrower.

     5.04 Compliance with Laws. The Borrower and each of its  Subsidiaries is in
compliance with all foreign, federal, state
                                       13
<PAGE>
and local laws, rules, regulations and determinations of arbitrators, courts and
other governmental authorities materially affecting the business,  operations or
property of the Borrower and its Subsidiaries (including Environmental Laws).

     5.05 Permits,  Franchises.  The Borrower and its  Subsidiaries  possess all
permits,  memberships,  franchises,  contracts,  and  licenses  required and all
trademark rights,  trade name rights,  patent rights, and fictitious name rights
necessary to enable the Borrower and its  Subsidiaries to conduct the businesses
in which they are now engaged.

     5.06  Litigation.  Except as disclosed in  Borrower's  SEC Form 10-K Annual
Report for the year ending  December 31, 1996,  and Borrower's SEC Form 10-Q for
the quarter  ending March 31, 1997,  copies of which have been  furnished to the
Bank,  there  is  no  litigation,   tax  claim,   proceeding,   governmental  or
administrative action, investigation, arbitration proceeding or dispute pending,
or, to the  knowledge of the  Borrower,  threatened,  against or  affecting  the
Borrower  or any of its  Subsidiaries  or any of their  properties,  the adverse
determination of which would result in a Material Adverse Effect.

     5.07 No Event of Default. There exists no Default or Event of Default.

     5.08 Other  Obligations.  As of the  Closing  Date,  the  Borrower  and its
Subsidiaries  are  not in  default  under  any  other  agreement  involving  the
borrowing of money,  the  extension of credit,  or the lease of real or personal
property,  to  which  the  Borrower  or any of its  Subsidiaries  is a party  as
borrower,  guarantor,  installment purchaser,  or lessee, except as disclosed in
writing to the Bank prior to the Closing Date.

     5.09 Tax Returns.  The  Borrower  has no knowledge of any material  pending
assessments or adjustments with respect to its or its  Subsidiaries'  income tax
liabilities  for any year,  except as  disclosed in writing to the Bank prior to
the Closing Date.

     5.10 Information  Submitted.  All financial and other  information that has
been submitted by the Borrower or any of its Subsidiaries to the Bank, including
the Borrower's  financial statement delivered to the Bank most recently prior to
the  Closing  Date:  (a) in the case of  financial  statements,  is  prepared in
accordance with generally accepted accounting  principles  consistently applied;
and (b) is true and correct in all material  respects and is complete insofar as
may be  necessary  to give the Bank true and  accurate  knowledge of the subject
matter thereof.

     5.11 No Material Adverse Effect. Except as disclosed in Borrower's SEC Form
10-K Annual Report for the year ending  December 31, 1996,  and  Borrower's  SEC
Form 10-Q for the  quarter  ending  March 31,  1997,  copies of which  have been
furnished to
                                       14
<PAGE>
the Bank, since December 31, 1996, there has been no Material Adverse Effect.

     5.12 ERISA  Compliance.  Except as  specifically  disclosed  to the Bank in
writing  prior to the  Closing  Date:  (a)  each  Plan is in  compliance  in all
material  respects with the applicable  provisions of ERISA,  the Code and other
federal or state law;  (b) there are no  pending,  or to the best  knowledge  of
Borrower,  threatened claims, actions or lawsuits, or action by any governmental
authority,  with respect to any Plan which has resulted or could  reasonably  be
expected  to  result  in a  Material  Adverse  Effect;  (c)  there  has  been no
prohibited  transaction or other violation of the fiduciary  responsibility rule
with  respect to any Plan which could  reasonably  result in a Material  Adverse
Effect; (d) no ERISA Event has occurred or is reasonably  expected to occur with
respect to any  Pension  Plan;  (e) no  Pension  Plan has any  Unfunded  Pension
Liability;  (f) the Borrower has not incurred,  nor does it reasonably expect to
incur,  any  liability  under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (g) no
trade or business  (whether or not  incorporated  under common  control with the
Borrower  within the  meaning of Section  414(b),  (c),  (m) or (o) of the Code)
maintains  or  contributes  to any Pension Plan or other Plan subject to Section
412 of the Code;  and (h) neither the Borrower or entity  under  common  control
with  the  Borrower  in the  preceding  sentence  has  ever  contributed  to any
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

     5.13  Environmental  Matters.  (a)  Except  to  the  extent  that,  in  the
aggregate,  a  Material  Adverse  Effect  could not  result  therefrom,  (i) the
properties  of the  Borrower  and its  Subsidiaries  do not contain and have not
previously  contained  (at,  under,  or about any such  property)  any Hazardous
Substances  or  other  contamination  (A)  in  amounts  or  concentrations  that
constitute or constituted a violation of, or could give rise to liability under,
any  Environmental  Laws,  (B) which could  interfere  with the  continued  use,
occupation or operation of such property, (C) which could impair the fair market
value thereof,  or (D) in levels or  concentrations  requiring  cleanup or other
management under applicable standards or guidelines of foreign,  federal, state,
or local  environmental  agencies;  and (ii) there has been no transportation or
disposal of Hazardous  Substances from, nor any release or threatened release of
Hazardous  Substances  at or from,  any  property of the  Borrower or any of its
Subsidiaries in violation of or in any manner which could give rise to liability
under any Environmental Laws.

     (b) Neither the  Borrower  nor any of its  Subsidiaries  has received or is
aware of any material claim or notice of material  violation,  alleged  material
violation,   non-compliance,   liability   or  potential   liability   regarding
environmental  matters,  Hazardous  Substances or compliance with  Environmental
Laws with regard to the  properties  or operations of the Borrower or any of its
Subsidiaries, nor does the Borrower have knowledge
                                       15
<PAGE>
or reason to believe that any such action is being contemplated,  considered, or
threatened.

     5.14 Swap Obligations. Neither the Borrower nor any of its Subsidiaries has
incurred  any  outstanding  obligations  under any Swap  Contracts,  other  than
Permitted Swap Obligations.

                                   ARTICLE VI

                              Affirmative Covenants
                              ---------------------

     So long as credit is  available  under  this  Agreement  and until full and
final payment of all of the Borrower's  obligations under this Agreement and any
other Credit Document:

     6.01 Notices of Certain  Events.  The Borrower  shall promptly give written
notice to the Bank of:

          (a) all litigation,  proceedings or actions  affecting the Borrower or
its Subsidiaries where the amount claimed is $1,000,000 or more;

          (b) any  substantial  dispute  which may exist between the Borrower or
its  Subsidiaries  and  any  governmental  regulatory  body  or law  enforcement
authority;

          (c) any Default or Event of Default;

          (d) any of the  representations  and warranties in Article V ceases to
be true and correct; and

          (e) any  other  matter  which  has  resulted  or could  reasonably  be
expected to result in a Material Adverse Effect.

     6.02  Financial and Other  Information.  The Borrower  shall deliver to the
Bank in form and detail  satisfactory  to the Bank, and in such number of copies
as the Bank may request:

          (a) Within 100 days after the end of each fiscal year,  the Borrower's
consolidated  financial  statements for such year audited by a certified  public
accountant  together  with  an  unqualified  opinion  of such  certified  public
accountant  and  including,  at a  minimum,  the  Borrower's  balance  sheet and
statements of income, retained earnings, and cash flow;

          (b)  Within  45  days  after  the  end of  each  fiscal  quarter,  the
Borrower's  consolidated  financial  statements for such period  prepared by the
Borrower  and  including,  at  a  minimum,  the  Borrower's  balance  sheet  and
statements of income, retained earnings, and cash flow;

          (c)  Concurrently  with  the  delivery  of  the  financial  statements
referred to in subsections 6.02(a) and (b), a completed  Compliance  Certificate
executed by the chief financial
                                       16
<PAGE>
officer or controller of the Borrower or other officer having  substantially the
same authority and responsibility;

          (d) Within 15 days after the date of filing  with the  Securities  and
Exchange  Commission,  copies of any of the Borrower's Form 10-K Annual Reports,
Form 10-Q Quarterly Reports and Form 8-K Current Reports;

          (e) Promptly upon release thereof,  a copy of any press release issued
by the Borrower or any of its Subsidiaries; and

          (f)  Promptly  upon  request,  such other  materials  and  information
relating to the Borrower or its Subsidiaries as the Bank may request.

     6.03 Books, Records, Audits and Inspections.  The Borrower shall, and shall
cause its Subsidiaries to, maintain  adequate books,  accounts and records,  and
prepare all financial statements required hereunder in accordance with generally
accepted accounting principles  consistently applied, and in compliance with the
regulations of any  governmental  regulatory body having  jurisdiction  over the
Borrower or its Subsidiaries, or the Borrower's or its Subsidiaries' businesses,
and permit employees or agents of the Bank at any reasonable time to inspect the
Borrower's  and its  Subsidiaries'  properties,  and to  examine  or  audit  the
Borrower's and its Subsidiaries'  books,  accounts,  and records and make copies
and memoranda thereof.

     6.04 Use of Facility.  The Borrower shall use the credit facility  provided
herein solely for working  capital and other general  corporate  purposes not in
contravention of any requirement of law.

     6.05 Insurance.  The Borrower shall,  and shall cause its  Subsidiaries to,
maintain  and keep in force  insurance  of the types and in amounts  customarily
carried  in lines  of  businesses  similar  to  those  of the  Borrower  and its
Subsidiaries,  including fire,  extended coverage,  public liability  (including
coverage  for  contractual  liability),   property  damage  (including  use  and
occupance),  business interruption,  and workers'  compensation,  all carried by
insurers and in amounts satisfactory to the Bank, with loss payable endorsements
on such types of insurance as the Bank may request, and deliver to the Bank from
time to time, at the Bank's  request,  a copy of each  insurance  policy,  or if
permitted by the Bank, a  certificate  of insurance  setting forth all insurance
then in effect.

     6.06 Compliance with Laws. The Borrower shall at all times comply with, and
cause  its  Subsidiaries  to comply  with,  all laws,  statutes  (including  any
fictitious  name statute),  rules,  regulations,  orders,  and directions of any
governmental  authority  having  jurisdiction  over the  Borrower  or any of its
Subsidiaries  or the  business  of  the  Borrower  or  any  of its  Subsidiaries
(including all Environmental Laws).
                                       17
<PAGE>
     6.07 Change in Name,  Structure or Location.  The Borrower shall notify the
Bank in  writing  prior  to any  change  in (a)  the  Borrower's  name,  (b) the
Borrower's business or legal structure,  or (c) the Borrower's place of business
or chief executive office if the Borrower has more than one place of business.

     6.08 Existence and Properties.  The Borrower shall, and shall cause each of
its  Subsidiaries  to,  maintain  and  preserve  its  existence  and all rights,
privileges,  and  franchises  now  enjoyed,  conduct its business in an orderly,
efficient,  and customary  manner,  keep all the its  properties in good working
order and condition, and from time to time make all needed repairs, renewals, or
replacements  thereto and thereof so that the  efficiency of such property shall
be fully maintained and preserved.

                                   ARTICLE VII

                               Negative Covenants
                               ------------------

     So long as credit is  available  under  this  Agreement  and until full and
final payment of all of the Borrower's  obligations under this Agreement and any
other Credit Document:

     7.01 Other  Indebtedness.  The Borrower  shall not, and shall not suffer or
permit  any  Subsidiary  to,  create,  incur,  assume,  or  permit  to exist any
indebtedness  or liabilities  for or resulting from borrowed  money,  loans,  or
advances,  or for the deferred  purchase price of property under capital leases,
or under or in connection with any Swap Contract,  whether secured or unsecured,
matured or unmatured,  liquidated or unliquidated,  joint or several,  or become
liable as a surety, guarantor,  accommodation endorser, or otherwise for or upon
the obligation of any other Person;  provided,  however, that this Section shall
not prohibit:

          (a)  indebtedness and guarantees in favor of the Bank or any affiliate
of the Bank;

          (b) indebtedness,  liabilities,  and guarantees  outstanding as of the
date of this Agreement and specifically disclosed in Schedule 7.01;

          (c) the acquisition of goods, supplies, or merchandise on normal trade
credit;

          (d) the execution of bonds or  undertakings  in the ordinary course of
its business as presently conducted;

          (e) the endorsement of negotiable instruments received in the ordinary
course of its business as presently conducted;

          (f) Permitted Swap Obligations; and
                                       18
<PAGE>
          (g) indebtedness secured by liens permitted under subsection 7.02(f).

     7.02 Liens.  The Borrower  shall not, and shall not suffer or permit any of
its Subsidiaries to, create,  assume, or suffer to exist any security  interest,
deed of trust, mortgage, lien (including the lien of an attachment, judgment, or
execution), or encumbrance, securing a charge or obligation, on or of any of its
or their property,  real or personal,  whether now owned or hereafter  acquired,
except:  (a)  security  interests  and deeds of trust in favor of the Bank;  (b)
liens, security interests,  and encumbrances in existence as of the date of this
Agreement and  specifically  disclosed in Schedule  7.02;  (c) liens for current
taxes,  assessments,  or other governmental  charges which are not delinquent or
remain  payable  without any  penalty;  (d) liens in  connection  with  workers'
compensation,  unemployment insurance, or other social security obligations; (e)
mechanics', worker's, materialmen's,  landlords', carriers', or other like liens
arising  in  the  ordinary  and  normal  course  of  business  with  respect  to
obligations  which are not due; and (f)  purchase  money  security  interests in
personal or real property hereafter acquired when the security interest does not
extend beyond the property purchased.

     7.03 Dividends. The Borrower shall not, and shall not suffer or permit, any
of its Subsidiaries  that is not wholly-owned by the Borrower to, declare or pay
any dividends or distributions  on any of its shares now or hereafter  existing,
or  purchase,  repurchase,  redeem  or  otherwise  acquire  for value any of its
shares,  or create any sinking fund in relation  thereto,  except for  dividends
payable solely in its capital stock.

     7.04 Loans.  The Borrower  shall not, and shall not suffer or permit any of
its Subsidiaries to, make any loans,  advances, or other extensions of credit to
any of the Borrower's or such Subsidiary's executives, officers, or directors or
shareholders (or any relatives of any of the foregoing), or make loans, advances
or other  extensions of credit to or invest in any other Person,  other than (a)
investments  in cash  equivalents;  (b)  extensions  of credit in the  nature of
accounts  receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business;  (c) extensions of credit by the
Borrower to any of its  Subsidiaries or by any of its Subsidiaries to another of
its  Subsidiaries;  (d) investments  constituting  Permitted Swap Obligations or
payments  or  advances   under  Swap   Contracts   relating  to  Permitted  Swap
Obligations;  (e)  investments  incurred  in  order to  consummate  acquisitions
otherwise permitted under subsection 7.05(b);  and (f) employee relocation loans
made in the ordinary  course of business in an aggregate  outstanding  principal
amount not to exceed $250,000 at any time.

     7.05 Liquidations; Mergers; Acquisitions. The Borrower shall not, and shall
not suffer or permit any of its  Subsidiaries to, liquidate or dissolve or enter
into any
                                       19
<PAGE>
consolidation,  merger,  partnership,  joint venture,  or other combination,  or
acquire or purchase  control of, or the assets or business of, any other Person,
except that (a) any  Subsidiary  may merge (i) with the Borrower,  provided that
the Borrower shall be the continuing or surviving corporation,  or (ii) with any
one or more  Subsidiaries,  provided that if any transaction  shall be between a
Subsidiary and a wholly-owned  Subsidiary,  the wholly-owned Subsidiary shall be
the continuing or surviving corporation,  and (b) the Borrower or any Subsidiary
may enter into any consolidation,  merger,  partnership,  joint venture or other
combination,  or acquire or purchase  control of, or the assets or business  of,
any other  Person;  provided  that (i) such  transaction  does not  involve  the
payment of consideration in cash (other than cash payments, not in excess of the
aggregate  amount  of  $400,000,  made in  connection  with the  acquisition  of
Logicraft  to its minority  shareholders),  (ii) any such  acquisition  has been
approved by the board of  directors of the Person to be acquired or whose assets
are to be acquired,  (iii) any such transaction is undertaken in accordance with
all  applicable  requirements  of law,  (iv) in the  case of any  consolidation,
merger or other combination,  the Borrower or the applicable Subsidiary shall be
the continuing or surviving corporation, and (iv) immediately prior to and after
giving  effect to any such  transaction,  there  shall be no Default or Event of
Default.

     7.06 Sale of Assets. The Borrower shall not, and shall not suffer or permit
any of its  Subsidiaries  to,  (a) sell,  lease,  or  otherwise  dispose  of its
business or assets as a whole or such as in the opinion of the Bank  constitutes
a substantial  portion of its business or assets;  (b) sell or otherwise dispose
of any of its accounts  receivable  except in connection  with the collection of
same in the ordinary course of business; (c) sell or otherwise dispose of any of
its other  current  assets;  (d) sell or otherwise  dispose of any of its assets
except for full, fair and reasonable  consideration;  or (d) enter into any sale
and leaseback agreement covering any of its fixed or capital assets.

     7.07 Business  Activities.  The Borrower shall not, and shall not suffer or
permit  any  of its  Subsidiaries  to,  engage  in any  business  activities  or
operations  substantially  different  from  or  unrelated  to  present  business
activities and operations.

     7.08  Regulations  G, T, U, and X. The  Borrower  shall not,  and shall not
suffer or permit any of its  Subsidiaries to, use any portion of the proceeds of
any Advances or extensions of credit hereunder,  directly or indirectly,  (i) to
purchase or carry margin stock (within the meanings of  Regulations G, T, U, and
X of the FRB), (ii) to repay or otherwise refinance indebtedness of the Borrower
or others  incurred to purchase or carry any such margin stock,  (iii) to extend
credit for the purpose of purchasing or carrying any such margin stock,  or (iv)
to acquire any security in any transaction that is subject to
                                       20
<PAGE>
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

     7.09 Use of Proceeds - Ineligible  Securities.  The Borrower shall not, and
shall not suffer or permit any of its  Subsidiaries  to, directly or indirectly,
use any  portion  of the  proceeds  of any  Advances  or  extensions  of  credit
hereunder (i) knowingly to purchase  Ineligible  Securities from BASI during any
period  in  which  BASI  makes a  market  in such  Ineligible  Securities,  (ii)
knowingly to purchase  during the  underwriting or placement  period  Ineligible
Securities  being  underwritten  or privately  placed by BASI,  or (iii) to make
payments of  principal  or interest on  Ineligible  Securities  underwritten  or
privately placed by BASI and issued by or for the benefit of the Borrower or any
affiliate of the  Borrower.  As used in this Section,  "BASI" means  BancAmerica
Securities, Inc., a wholly-owned subsidiary of BankAmerica Corporation.  BASI is
a  registered  broker-dealer  and  permitted to  underwrite  and deal in certain
Ineligible  Securities;  and "Ineligible  Securities" means securities which may
not be  underwritten  or dealt in by member banks of the Federal  Reserve System
under  Section 16 of the Banking  Act of 1933 (12 U.S.C.  ss. 24,  Seventh),  as
amended.

     7.10 Modified  Quick Ratio.  The Borrower shall not permit at any time on a
consolidated  basis  the  sum  of  cash,  short-term   investments,   marketable
securities not classified as long-term  investments and net accounts  receivable
carried  as  current  assets  to be less  than 1.50  times  current  liabilities
(including Advances hereunder).

     7.11  Tangible Net Worth.  The  Borrower  shall not permit at any time on a
consolidated  basis its  Tangible  Net Worth to be less than 90% of its Tangible
Net Worth as of December  31,  1996 plus the sum of (i) 75% of net income  after
income taxes (without  subtracting  losses) earned in each quarterly  accounting
period commencing after December 31, 1996, (ii) the net proceeds from any equity
securities   issued  after   December  31,  1996,  and  (iii)  any  increase  in
stockholders'  equity resulting from the conversion of debt securities to equity
securities after December 31, 1996.

     7.12  Leverage  Ratio.  The  Borrower  shall  not  permit  at any time on a
consolidated  basis  the  Borrower's  total  liabilities  to exceed  0.75  times
Tangible Net Worth.

     7.13 Consecutive Quarterly Losses; Losses in One Quarter. The Borrower on a
consolidated  basis shall not incur,  (a) any quarterly net or operating loss in
any two consecutive fiscal quarters;  provided, that the Borrower may incur such
a two- quarter consecutive net and operating loss solely with respect to the two
fiscal  quarter  period  ended  March  29,  1997,  or (b) any  quarterly  net or
operating loss in excess of  $2,500,000.  For purposes of this Section 7.13, net
income (or loss)  shall mean net profit (or loss)  after  taxes,  and  operating
income (or
                                       21
<PAGE>
loss) shall mean income (or loss) before  interest  expense,  interest and other
income, and taxes.

                                  ARTICLE VIII

                                Events of Default
                                -----------------

     8.01 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement:

          (a)  Failure  to Pay.  The  Borrower  fails  to  pay,  when  due,  any
installment  of  principal,  or  within  five  days  after the date when due any
interest,  fee or any other sum due under  this  Agreement  or any other  Credit
Document in accordance with the terms hereof or thereof.

          (b)  Breach of  Representation  or  Warranty.  Any  representation  or
warranty  herein or in any other  Credit  Document  proves to have been false or
misleading in any material respect when made.

          (c) Specific  Defaults.  The Borrower  fails to perform or observe any
term, covenant or agreement contained in Section 6.01 or 6.03 or Article VII.

          (d) Other Defaults. The Borrower fails to perform or observe any other
term or covenant  contained in this Agreement or any Credit  Document,  and such
default shall  continue  unremedied for a period of 20 days after the earlier of
(i) the date upon which the chief  executive or chief  financial  officer of the
Borrower  knew or should have known of such  failure or (ii) the date upon which
written notice thereof is given to the Borrower by the Bank.

          (e) Judgments. One or more judgments or arbitration awards are entered
against the Borrower or any of its  Subsidiaries,  or the Borrower or any of its
Subsidiaries enters into any settlement agreement with respect to any litigation
or  arbitration,  in the  aggregate  amount of  $1,000,000 or more on a claim or
claims not covered by insurance.

          (f) Failure to Pay Debts;  Voluntary  Bankruptcy.  The Borrower or any
Subsidiary (i) fails to pay the Borrower's or such Subsidiary's  debts generally
as they come due, or (ii) files any  petition,  proceeding,  case, or action for
relief under any bankruptcy,  reorganization,  insolvency, or moratorium law, or
any other law or laws for the relief of, or relating to, debtors.

          (g) Involuntary Bankruptcy. An involuntary petition is filed under any
bankruptcy  or similar  statute  against the  Borrower or any  Subsidiary,  or a
receiver,  trustee,  liquidator,  assignee,  custodian,  sequestrator,  or other
similar official is
                                       22
<PAGE>
appointed  to  take  possession  of  the  properties  of  the  Borrower  or  any
Subsidiary;  provided, however, that such Event of Default shall be deemed cured
if such  petition or  appointment  is set aside or  withdrawn or ceases to be in
effect within 60 days from the date of said filing or appointment.

          (h) Default of Other  Financial  Obligations.  (i) Any default  occurs
under any other  agreement  involving the borrowing of money or the extension of
credit having an aggregate  principal  amount  (including  undrawn  committed or
available  amounts  and  including  amounts  owing to all  creditors  under  any
combined or syndicated  credit  arrangement)  of more than $500,000 to which the
Borrower or any Subsidiary may be a party as borrower, guarantor, or installment
purchaser,  if such default  consists of the failure to pay any obligation  when
due or if such default gives to the holder of the obligation concerned the right
to  accelerate  the  obligation  or (ii) there occurs under any Swap Contract an
Early  Termination  Date resulting from (1) any event of default under such Swap
Contract as to which the Borrower or any Subsidiary is the  Defaulting  Party or
(2) any  Termination  Event as to which the  Borrower  or any  Subsidiary  is an
Affected Party,  and, in either event,  the Swap  Termination  Value owed by the
Borrower or such  Subsidiary  as a result  thereof is greater than $500,000 (for
purposes of this clause (ii), the terms "Early  Termination  Date",  "Defaulting
Party",  "Termination  Event",  and  "Affected  Party"  shall have the  meanings
assigned to them in the relevant Swap Contract,  it being  understood  that such
definitions  contemplate Swap Contracts  documented on  International  Swaps and
Derivatives  Association  ("ISDA")  standard forms; if such Swap Contract is not
documented  on an ISDA  standard  form,  such  terms  shall be given  similar or
analogous meanings as used in such non-ISDA standard agreements).

          (i) Default of Other Bank  Obligations.  Any default  occurs under any
other  obligation  of the  Borrower  or any  Subsidiary  to the  Bank  or to any
affiliate of the Bank.

          (j) Material Adverse Effect. There occurs a Material Adverse Effect.

          (k) ERISA.  (i) An ERISA Event  shall occur with  respect to a Pension
Plan which has resulted or could  reasonably  be expected to result in liability
of the  Borrower  under  Title  IV of ERISA  to the  Pension  Plan or PBGC in an
aggregate amount in excess of 2% of Tangible Net Worth; (ii) the commencement or
increase of  contributions  to, or the adoption of or the amendment of a Pension
Plan by the  Borrower  which has  resulted  or could  reasonably  be expected to
result in an increase in Unfunded  Pension  Liability among all Pension Plans in
an aggregate  amount in excess of 2% of Tangible Net Worth;  or (iii) any of the
representations and warranties  contained in Section 5.12 shall cease to be true
and  correct  which,  individually  or in  combination,  has  resulted  or could
reasonably be expected to result in a Material Adverse Effect.
                                       23
<PAGE>
          (l) Change of Control. (i) any Person or two or more Persons acting in
concert  shall  acquire  beneficial  ownership,   directly  or  indirectly,   of
securities  of  the  Borrower  (or  other   securities   convertible  into  such
securities)  representing  30% or  more  of the  combined  voting  power  of all
securities  of the Borrower  entitled to vote in the election of  directors;  or
(ii)  during any period of up to 12  consecutive  months,  commencing  after the
Closing Date,  individuals  who at the  beginning of such  12-month  period were
directors of the Borrower shall cease for any reason to constitute a majority of
the Board of  Directors  of the  Borrower  unless  the  persons  replacing  such
individuals  were nominated by the Board of Directors of the Borrower;  or (iii)
any Person or two or more  Persons  acting in concert  acquiring  by contract or
otherwise,  or entering into a contract or arrangement  which upon  consummation
will result in its or their  acquisition of, or control over,  securities of the
Borrower (or other securities convertible into such securities) representing 30%
or more of the combined voting power of all securities of the Borrower  entitled
to vote in the election of directors.

     8.02 Remedies. If any Event of Default occurs,

          (a)  any  indebtedness  of  the  Borrower  under  any  of  the  Credit
Documents, any term thereof to the contrary notwithstanding, shall at the Bank's
option (but  automatically  upon the occurrence of an Event of Default described
in  subsection  8.01(f)(ii)  or  subsection  8.01(g) and without  notice  become
immediately due and payable without presentment,  demand,  protest, or notice of
dishonor,  or any other notice,  all of which are hereby expressly waived by the
Borrower to the full extent permitted by law;

          (b) the  obligation,  if any,  of the  Bank to make  further  loans or
extensions of credit hereunder shall immediately cease and terminate; and

          (c) the Bank shall have all rights,  powers,  and  remedies  available
under each of the Credit Documents,  or accorded by law,  including the right to
resort to any or all security for any credit accommodation described herein, and
to exercise any or all of the rights of a beneficiary  or secured party pursuant
to applicable law.

All rights, powers, and remedies of the Bank may be exercised at any time by the
Bank and from time to time  after the  occurrence  of an Event of  Default.  All
rights,  powers,  and remedies of the Bank in connection with each of the Credit
Documents are cumulative and not exclusive and shall be in addition to any other
rights, powers, or remedies provided by law or equity.
                                       24
<PAGE>
                                   ARTICLE IX

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

     9.01  Successors and Assigns.  This  Agreement  shall bind and inure to the
benefit of the  parties  hereto and their  respective  successors  and  assigns;
provided,  however,  that the  Borrower  shall not assign this  Agreement or any
other  Credit  Document  or any of the  rights,  duties  or  obligations  of the
Borrower hereunder without the prior written consent of the Bank.

     9.02  Consents  and  Waivers.  No  failure  to  exercise  and no  delay  in
exercising,  on the part of the Bank,  any right,  remedy,  power,  or privilege
hereunder,  shall operate as a waiver  thereof;  nor shall any single or partial
exercise of any right, remedy,  power, or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right,  remedy,  power,
or  privilege.  No consent or waiver  under this  Agreement  shall be  effective
unless in writing.  No waiver of any breach or default  shall be deemed a waiver
of any breach or default thereafter occurring.

     9.03 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California.

     9.04 Costs and  Attorneys'  Fees.  The Borrower  shall,  whether or not the
transactions contemplated hereby shall be consummated, pay or reimburse the Bank
on demand for all costs and expenses incurred by the Bank in connection with the
development,  preparation,  delivery,  administration, and execution of, and any
amendment,  supplement,  waiver or modification to, this Agreement and any other
Credit Document and the consummation of the transactions contemplated hereby and
thereby,  including reasonable attorney fees and disbursements and the allocated
cost of internal  counsel and  disbursements,  incurred by the Bank with respect
thereto;  and in  connection  with the  enforcement,  attempted  enforcement  or
preservation of any rights or remedies  hereunder or under any Credit  Document,
including  any  "workout"  or  restructuring  under  this  Agreement,  including
attorney fees and  disbursements  and the allocated cost of internal counsel and
disbursements. The agreements and obligations of the Borrower under this Section
shall survive the  expiration or  termination of the commitment to extend credit
hereunder and the payment of all other obligations of the Borrower hereunder.

     9.05 Integration; Amendment. This Agreement, together with the other Credit
Documents,  embodies the entire agreement and understanding between the Borrower
and the Bank. This Agreement may be amended or modified only in writing,  signed
by the Borrower and the Bank.

     9.06 Borrower's Documents.  The Bank shall be under no obligation to return
any schedules, invoices, statements,
                                       25
<PAGE>
budgets, forecasts,  reports or other papers delivered by the Borrower and shall
destroy  or  otherwise  dispose  of  same  at  such  time  as the  Bank,  in its
discretion, deems appropriate.

     9.07  Participations.  The  Bank  may  at  any  time  sell,  assign,  grant
participations  in, or otherwise  transfer to any other Person (a "Participant")
all or part of the  obligations  of the Borrower  under this  Agreement  and any
other Credit Document.  The Borrower  authorizes the Bank and each  Participant,
upon the  occurrence  of an Event of  Default,  to proceed  directly by right of
setoff,  banker's  lien, or otherwise,  against any assets of the Borrower which
may be in the hands of the Bank or such Participant,  respectively. The Borrower
authorizes  the  Bank  to  disclose  to  any  prospective  Participant  and  any
Participant  any and all  information  in the Bank's  possession  concerning the
Borrower and its Subsidiaries, this Agreement or any other Credit Document.

     9.08 General  Indemnification.  The Borrower  shall pay and  indemnify  the
Bank, the Bank's parent  company and  affiliates,  and each of their  respective
officers, directors,  employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified  Person")  harmless  from  and  against  any and  all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
charges, expenses, or disbursements (including attorneys' fees and disbursements
and the allocated  costs of internal  counsel) of any kind or nature  whatsoever
with  respect  to  the  execution,  delivery,   enforcement,   performance,  and
administration  of  this  Agreement  and  any  other  Credit  Documents,  or the
transactions   contemplated  hereby  and  thereby,   and  with  respect  to  any
investigation,   litigation,  or  proceeding  related  to  this  Agreement,  any
violation of any Environmental Law by the Borrower or its Subsidiaries, any use,
generation,  manufacture,  production,  storage,  release,  threatened  release,
discharge,  disposal  or  presence  (whether  actual or  alleged) of a Hazardous
Substance on, under or about the property or operations of or property leased to
the  Borrower  or any of its  Subsidiaries,  any  transportation  from or  other
off-site management of any Hazardous Substance generated or used by the Borrower
or any  of its  Subsidiaries,  or the  loans  and  other  extensions  of  credit
hereunder or the use of the  proceeds  thereof,  whether or not any  Indemnified
Person is a party thereto (all the  foregoing,  collectively,  the  "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified  Liabilities arising from the
gross  negligence  or  willful  misconduct  of  such  Indemnified   Person.  The
agreements and  obligations of the Borrower under this Section shall survive the
expiration or termination  of the commitment to extend credit  hereunder and the
payment of all other obligations of the Borrower hereunder.

     9.09  Arbitration;  Reference  Proceeding.  (a) Any  controversy  or  claim
between or among the parties,  including but not limited to those arising out of
or relating to this Agreement or any other Credit  Document or other  agreements
or
                                       26
<PAGE>
instruments  relating  hereto or delivered in connection  herewith and any claim
based on or arising from an alleged  tort,  shall at the request of any party be
determined by arbitration. The arbitration shall be conducted in accordance with
the United States  Arbitration  Act (Title 9, U.S.  Code),  notwithstanding  any
choice of law provision in this Agreement, and under the Commercial Rules of the
American  Arbitration  Association  ("AAA").  The arbitration shall be conducted
within the following California county or counties: San Francisco,  Santa Clara.
The arbitrator(s) shall give effect to statutes of limitation in determining any
claim.  Any  controversy  concerning  whether  an issue is  arbitrable  shall be
determined  by the  arbitrator(s).  Judgment upon the  arbitration  award may be
entered in any court having jurisdiction.  The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party,  including the plaintiff,  to
submit the  controversy or claim to arbitration if any other party contests such
action for judicial relief.

          (b)  Notwithstanding the provisions of subsection (a) of this Section,
no controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the  proposed  submission,  such  controversy  or
claim  arises from or relates to an  obligation  to the Bank which is secured by
real property collateral located in California. If all parties do not consent to
submission of such a controversy  or claim to  arbitration,  the  controversy or
claim shall be determined as provided in subsection (c) of this Section.

          (c) A controversy  or claim which is not submitted to  arbitration  as
provided and limited in subsections  (a) and (b) of this Section  shall,  at the
request of any party, be determined by a reference in accordance with California
Code of Civil  Procedure  Sections 638 et seq. If such an election is made,  the
parties shall  designate to the court a referee or referees  selected  under the
auspices  of the  AAA  in  the  same  manner  as  arbitrators  are  selected  in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single  referee,  shall  be an  active  attorney  or  retired  judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such  proceeding was commenced in accordance  with California
Code of Civil Procedure Sections 644 and 645.

          (d) No provision of this paragraph  shall limit the right of any party
to this Agreement to exercise  self-help  remedies such as setoff,  to foreclose
against or sell any real or personal  property  collateral  or  security,  or to
obtain provisional or ancillary remedies from a court of competent  jurisdiction
before,  after, or during the pendency of any  arbitration or other  proceeding.
The  exercise of a remedy does not waive the right of either  party to resort to
arbitration  or reference.  At the Bank's  option,  foreclosure  under a deed of
trust or mortgage may be accomplished either by exercise of
                                       27
<PAGE>
power of sale under the deed of trust or mortgage or by judicial foreclosure.

     9.10 Notices. (a) All notices,  requests and other communications  provided
for  hereunder  shall be in writing  and mailed or  delivered  to a party at its
address  specified on the signature  pages  hereof,  or to such other address as
shall be designated by such party in a written notice to the other parties.

          (b) All such notices and  communications  shall,  when  transmitted by
overnight delivery,  be effective when delivered for overnight  delivery,  or if
personally delivered,  upon such personal delivery, except that notices pursuant
to Article II shall not be effective until actually received by the Bank.

          (c) The  Borrower  acknowledges  and agrees that any  agreement of the
Bank  pursuant to Article II to receive  notices by  telephone  or  facsimile is
solely  for  the  convenience  and at the  request  of the  Borrower.  Telephone
requests may be made by any  individual  identified  in writing to the Bank on a
form acceptable to the Bank as being authorized to make such requests.  The Bank
shall be entitled to rely upon any written or telephone  request from persons it
reasonably  believes to be  authorized  by the  Borrower  to make such  requests
without making independent  inquiry.  The Borrower assumes the full risk of, and
the Bank shall not be responsible for, any delays or errors in transmission, and
the obligation of the Borrower to repay the loans and other extensions of credit
hereunder  shall not be  affected  in any way or to any extent by any failure by
the Bank to receive written  confirmation of any telephonic or facsimile  notice
or the receipt by the Bank of a confirmation which is at variance with the terms
understood by the Bank to be contained in the telephonic or facsimile notice.

     9.11 Headings; Interpretation. Article, section, and paragraph headings are
for  reference  only and shall not affect the  interpretation  or meaning of any
provisions  of this  Agreement.  The  meaning of defined  terms shall be equally
applicable  to the  singular and plural  forms of the defined  terms.  The words
"hereof",  "herein",  "hereunder"  and words of similar import when used in this
Agreement  shall refer to this  Agreement  as a whole and not to any  particular
provision of this  Agreement;  and Article,  subsection,  section,  schedule and
exhibit  references are to this Agreement unless otherwise  specified.  The term
"including" is not limiting and means  "including  without  limitation."  In the
computation of periods of time from a specified date to a later  specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including."

     9.12 Severability.  The illegality or  unenforceability of any provision of
this Agreement or any instrument or agreement  required  hereunder  shall not in
any way affect or impair the
                                       28
<PAGE>
legality or enforceability of the remaining  provisions of this Agreement or any
instrument or agreement required hereunder.

     9.13  Counterparts.  This Agreement may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto on
separate  counterparts  each of  which,  when so  executed,  shall be  deemed an
original  but all  such  counterparts  shall  constitute  but  one and the  same
agreement.

     9.14 Waiver of Jury Trial.  IF A  CONTROVERSY  OR CLAIM IS NOT SUBMITTED TO
ARBITRATION AS PROVIDED AND LIMITED IN  SUBSECTIONS  (a) AND (b) OF SECTION 9.09
OR IS NOT  DETERMINED BY A REFERENCE AS PROVIDED IN SUBSECTION (c) OF SUBSECTION
9.09, THEN THE BORROWER AND THE BANK WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT,  THE OTHER CREDIT  DOCUMENTS,  OR THE TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY,  IN ANY ACTION,  PROCEEDING  OR OTHER  LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE  PARTIES  AGAINST ANY OTHER  PARTY OR ANY  PARTICIPANT  OR
ASSIGNEE,  WHETHER WITH RESPECT TO CONTRACT CLAIMS,  TORT CLAIMS,  OR OTHERWISE.
THE  BORROWER  AND THE BANK EACH  AGREE  THAT ANY SUCH  CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING,
THE  PARTIES  FURTHER  AGREE THAT THEIR  RESPECTIVE  RIGHT TO A TRIAL BY JURY IS
WAIVED BY  OPERATION  OF THIS  SECTION AS TO ANY ACTION,  COUNTERCLAIM  OR OTHER
PROCEEDING  WHICH  SEEKS,  IN WHOLE OR IN PART,  TO  CHALLENGE  THE  VALIDITY OR
ENFORCEABILITY  OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION
HEREOF  OR  THEREOF.  THIS  WAIVER  SHALL  APPLY TO ANY  SUBSEQUENT  AMENDMENTS,
RENEWALS,  SUPPLEMENTS OR  MODIFICATIONS  TO THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS.
                                       29
<PAGE>
     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first above written.

                                        MICROTEST, INCORPORATED
                                   
                                        By: /s/ Richard G. Melse
                                           -------------------------------------
                                        Name: Richard G. Melse
                                             -----------------------------------
                                        Title: CHAIRMAN, CEO & PRESIDENT
                                              ----------------------------------
                                      
                                        By: /s/ R. R. Douglad
                                           -------------------------------------
                                        Name: R. R. Douglas
                                             -----------------------------------
                                        Title: CFO             
                                              ----------------------------------
                                      
                                        Address  where notices to 
                                        Borrower are to be sent:
                                      
                                        4747 North 22nd Street
                                        Phoenix, AZ  95016-4708
                                        Attention:  
                                                    ----------------------------
                                        Telephone:
                                                    ----------------------------
                                        Telecopier:
                                                    ----------------------------
                                      
                                        BANK OF AMERICA NATIONAL TRUST
                                        AND SAVINGS ASSOCIATION
                                                                            
                                        By: /s/ Debra G Staiger
                                           -------------------------------------
                                        Name: Debra G. Staiger
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------
                                                                            
                                        Address where notices to 
                                        Bank are to be sent:
                                         
                                        Bank of America National Trust
                                        and Savings Association
                                        The Mid-Cap Technology Group
                                        #5974
                                        530 Lytton Avenue, Second Floor
                                        Palo Alto, California 94301
                                        Attention:  Debra Staiger
                                                    Vice President
                                        Telephone:  (415) 853-4480
                                        Telecopier:  (415) 853-4687
                                       30
<PAGE>
                                 SCHEDULE 7.01

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

                                      None
<PAGE>
                                 SCHEDULE 7.02

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

                                      None
<PAGE>
                       FIRST AMENDMENT TO CREDIT AGREEMENT
                       -----------------------------------

     THIS FIRST  AMENDMENT TO CREDIT  AGREEMENT (the  "Amendment"),  dated as of
June 24,  1997,  effective  as of June 3, 1997,  is entered  into by and between
MICROTEST,  INC. (the "Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank").

                                    RECITALS
                                    --------

     A. The Borrower and the Bank are parties to a Credit  Agreement dated as of
June 3, 1997 (the "Credit  Agreement"),  pursuant to which the Bank has extended
certain credit facilities to the Borrower.

     B. The Borrower has requested that the Bank agree to certain  amendments of
the Credit Agreement.

     C. The Bank is willing to amend the Credit Agreement,  subject to the terms
and conditions of this Amendment.

     NOW,  THEREFORE,  for valuable  consideration,  the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:

     1. Defined Terms.  Unless otherwise defined herein,  capitalized terms used
herein  shall  have  the  meanings,  if any,  assigned  to  them  in the  Credit
Agreement.

     2. Amendments to Credit Agreement.

          (a)  Section  7.01 of the  Credit  Agreement  shall be  amended by (i)
deleting the word "and" at the end of  subsection  (f) thereof;  (ii) adding the
word  "and"  at the end of  subsection  (g)  thereof);  and  (ii)  adding  a new
subsection (h) to follow subsection (g) thereof to read as follows:

               "(h)   additional   unsecured   indebtedness   in  an   aggregate
          outstanding  principal  amount not to exceed $500,000 at any time and,
          to the extent  such  indebtedness  is incurred  by a  Subsidiary,  the
          guarantee by the Borrower of such indebtedness."

          (b) Subsection  7.04(f) of the Credit  Agreement  shall be amended and
restated in its entirety so as to read as follows:

               "(f)  employee  relocation  loans made in the ordinary  course of
          business in an aggregate  outstanding  principal  amount not to exceed
          $500,000 at any time."

     3.  Representations  and  Warranties.  The Borrower  hereby  represents and
warrants to the Bank as follows:

          (a) No Default or Event of Default has occurred and is continuing.
<PAGE>
          (b) The  execution,  delivery and  performance by the Borrower of this
Amendment have been duly authorized by all necessary  corporate and other action
and do not and will not require any registration  with,  consent or approval of,
notice to or action by, any Person  (including  any  governmental  authority) in
order to be effective and  enforceable.  The Credit Agreement as amended by this
Amendment  constitutes the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.

          (c) All  representations  and warranties of the Borrower  contained in
the Credit Agreement are true and correct as of the date hereof.

          (d) The Borrower is entering  into this  Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Bank or any
other Person.

     4.  Reservation of Rights.  The Borrower  acknowledges  and agrees that the
execution  and  delivery  by the Bank of this  Amendment  shall not be deemed to
create a course of dealing or  otherwise  obligate  the Bank to execute  similar
amendments under the same or similar circumstances in the future.

     5. Miscellaneous.

          (a)  Except as herein  expressly  amended,  all terms,  covenants  and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references  therein to such Credit  Agreement shall  henceforth refer to
the Credit  Agreement  as amended by this  Amendment.  This  Amendment  shall be
deemed incorporated into, and a part of, the Credit Agreement.

          (b) This  Amendment  shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective  successors and assigns.  No
third party beneficiaries are intended in connection with this Amendment.

          (c) This  Amendment  shall be governed by and  construed in accordance
with the law of the State of California.

          (d) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original,  but all such counterparts  together shall
constitute  but  one  and  the  same  instrument.  Each  of the  parties  hereto
understands  and agrees that this document may be delivered by any party thereto
either in the form of an  executed  original  or an  executed  original  sent by
facsimile  transmission  to be  followed  promptly  by  mailing  of a hard  copy
original,  and that  receipt  by the Bank of a  facsimile  transmitted  document
purportedly  bearing the signature of the Borrower  shall bind the Borrower with
the same force and effect as the delivery of a hard copy  original.  Any failure
by the Bank to receive the hard copy executed  original of such  document  shall
not diminish the binding effect of receipt of the facsimile
                                        2
<PAGE>
transmitted  executed  original  of such  document  which hard copy page was not
received by the Bank.

          (e) This Amendment,  together with the Credit Agreement,  contains the
entire and  exclusive  agreement  of the parties  hereto with  reference  to the
matters discussed herein and therein. This Amendment supersedes all prior drafts
and  communications  with respect  thereto.  This  Amendment  may not be amended
except  in  accordance  with  the  provisions  of  Section  9.05  of the  Credit
Agreement.

          (f) If any  term  or  provision  of this  Amendment  shall  be  deemed
prohibited  by or invalid under any  applicable  law,  such  provision  shall be
invalidated without affecting the remaining  provisions of this Amendment or the
Credit Agreement, respectively.

          (g) The  Borrower  covenants  to pay to or  reimburse  the Bank,  upon
demand, for all reasonable costs and expenses  (including  reasonable  allocated
costs  of  in-house  counsel)  incurred  in  connection  with  the  development,
preparation, negotiation, execution and delivery of this Amendment.

          IN WITNESS  WHEREOF,  the parties  hereto have  executed and delivered
this Amendment as of the date first above written.

                                        MICROTEST, INC.



                                        By: /s/ R. R. Douglas
                                           -------------------------------------
                                        Title: CFO



                                        By:
                                           -------------------------------------
                                        Title:


                                        BANK OF AMERICA NATIONAL TRUST
                                        AND SAVINGS ASSOCIATION



                                        By: /s/ Debra G. Staiger
                                           -------------------------------------
                                        Title: Vice President
                                        3