CREDIT AGREEMENT

                                  by and among

                             WATSON WYATT & COMPANY,

                                  as Borrower,

                 CERTAIN DOMESTIC SUBSIDIARIES OF THE BORROWER,

                            as Subsidiary Guarantors,

                               NATIONSBANK, N.A.,

                                    as Agent,

                                       and

                             THE BANKS PARTY HERETO


                            Dated as of June 30, 1998



                                                   $120,000,000

<PAGE>








                                TABLE OF CONTENTS

                                                                          PAGE

ARTICLE I.  DEFINITIONS......................................................1
         Section 1.1. Definitions............................................1
         Section 1.2. Accounting Terms and Determinations....................16
         Section 1.3. Other Definitional Provisions..........................16
ARTICLE II.  LOANS AND PAYMENTS..............................................17
         Section 2.1. Loans..................................................17
         Section 2.2. Loan Procedures; Servicing.............................19
         Section 2.3. The Banks' Obligations Under the Loans.................20
         Section 2.4. Extension and Conversion...............................20
         Section 2.5. Letters of Credit......................................21
         Section 2.6. Repayment..............................................26
         Section 2.7. Interest...............................................26
         Section 2.8. Prepayments; Commitment Increase; Reduction or
                      Termination............................................27
         Section 2.9. Fees...................................................29
         Section 2.10. Method of Payment.....................................30
         Section 2.11. Application of Collections............................30
         Section 2.12. Capital Adequacy......................................32
         Section 2.13. Inability To Determine Interest Rate..................32
         Section 2.14. Illegality............................................33
         Section 2.15. Requirements of Law...................................33
         Section 2.16. Taxes.................................................34
         Section 2.17. Indemnity.............................................36
ARTICLE III.  SUBSIDIARY GUARANTY............................................37
         Section 3.1 The Subsidiary Guarantee................................37
         Section 3.2 Obligations Unconditional...............................37
         Section 3.3 Reinstatement...........................................39
         Section 3.4 Certain Additional Waivers..............................39
         Section 3.5 Remedies................................................39
         Section 3.6 Rights of Contribution..................................39
         Section 3.7 Continuing Guarantee....................................40
ARTICLE IV.  REPRESENTATIONS AND WARRANTIES..................................40
         Section 4.1. Organization...........................................40
         Section 4.2. Authorization..........................................41
         Section 4.3. Validity...............................................41
         Section 4.4. Governmental Approvals.................................42
         Section 4.5. Litigation.............................................42
         Section 4.6. Financial Condition....................................42
         Section 4.7. Records, Business Location and Subsidiaries............42
         Section 4.8. ERISA..................................................42
         Section 4.9. Encumbrances...........................................43
         Section 4.10. Margin Stock..........................................43
         Section 4.11. Governmental Regulations..............................43
         Section 4.12. Taxes.................................................43
         Section 4.13. Burdensome Documents..................................43
         Section 4.14. Environmental Matters.................................44
         Section 4.15 Employee Loans; Stock Plan; Qualified Employee Status..44
         Section 4.16 Use of Proceeds........................................44
         Section 4.17 Year 2000 Compliance...................................44
         Section 4.18 Accuracy and Completeness of Information...............45
ARTICLE V.  CONDITIONS PRECEDENT.............................................45
         Section 5.1 Conditions Precedent to Closing.........................45
         Section 5.2. Conditions Precedent to Loans and Issuance of Letters
                      of Credit..............................................47
ARTICLE VI.  AFFIRMATIVE COVENANTS...........................................48
         Section 6.1. Payments Hereunder.....................................48
         Section 6.2. Existence and Good Standing; Insurance; Conduct........48
         Section 6.3. Taxes and Charges......................................48
         Section 6.4. Financial Statements...................................48
         Section 6.5 Reports.................................................50
         Section 6.6. Loan Balances..........................................50
         Section 6.7. Uncertificated Securities..............................50
         Section 6.8. Positive Net Worth.....................................51
         Section 6.9. Bylaws.................................................51
         Section 6.10. Year 2000 Compliance..................................51
         Section 6.11. Borrower Guaranty.....................................51
         Section 6.12. Employee Pledge Agreements; Employee Pledged Shares...51
         Section 6.13. Additional Guaranties, Stock Pledges and Further
                       Assurances............................................52
         Section 6.14. Post-Closing Matters..................................53
ARTICLE VII.  NEGATIVE COVENANTS.............................................54
         Section 7.1. Indebtedness...........................................54
         Section 7.2. Liens..................................................54
         Section 7.3. Consolidation, Merger, Sale or Purchase of Assets,
                      etc....................................................55
         Section 7.4. Fiscal Year; Governing Documents.......................56
         Section 7.5. Investments............................................56
         Section 7.6. Financial Covenants....................................56
         Section 7.7. Franchises.............................................57
         Section 7.8. Certificated Securities................................57
         Section 7.9. Capital Expenditures...................................57
         Section 7.10. Transaction with Affiliates...........................57
         Section 7.11. Limitation on Restrictions on Subsidiary Dividends
                       and Other.............................................58
         Distributions, etc..................................................58
         Section 7.12 Issuance and Sale of Subsidiary Stock..................58
ARTICLE VIII.  DEFAULT.......................................................58
         Section 8.1. Events of Default......................................58
         Section 8.2. Acceleration...........................................60
         Section 8.3. Right of Setoff........................................60
ARTICLE IX.  AGENCY PROVISIONS...............................................61
         Section 9.1 Appointment.............................................61
         Section 9.2 Delegation of Duties....................................61
         Section 9.3 Exculpatory Provisions..................................62
         Section 9.4 Reliance on Communications..............................62
         Section 9.5 Notice of Default.......................................63
         Section 9.6 Non-Reliance on Agent and Other Banks...................63
         Section 9.7 Indemnification.........................................64
         Section 9.8 Agent in its Individual Capacity........................64
         Section 9.9 Successor Agent.........................................64
ARTICLE X.  MISCELLANEOUS....................................................65
         Section 10.1. Rights and Waivers....................................65
         Section 10.2. Binding Effect; Assignment............................65
         Section 10.3. Severability..........................................67
         Section 10.4. Interpretation........................................67
         Section 10.5. Governing Law; Jury Trial.............................67
         Section 10.6. Payment of Expenses and Taxes; Indemnification........67
         Section 10.7. Survival of Representations and Warranties............68
         Section 10.8. Notices...............................................68
         Section 10.9. Execution.............................................69
         Section 10.10.  Amendments..........................................69
         Section 10.11.  Relationship of the Parties.........................71




<PAGE>


EXHIBITS

Exhibit  A        Form of Revolving Credit Note
Exhibit  B        Form of Employee Note
Exhibit  C        Form of Guaranty
Exhibit  D-1      Form of Individual Employee Pledge Agreement
Exhibit  D-2      Form of Personal Holding Company Employee Pledge Agreement
Exhibit  E        Form of Employee Stock Power
Exhibit  F        Truth in Lending Disclosure Statement
Exhibit  G        Initial Transaction Statement
Exhibit  H        Periodic Transaction Statement
Exhibit  I        Form of Agreement to Employee Pledge Agreements
Exhibit  J        Form of Notice of Borrowing
Exhibit  K        Form of Solvency Certificate
Exhibit  L        Form of Joinder Agreement

SCHEDULES

Schedule 1        Subsidiaries
Schedule 2        Permitted Noncompliance
Schedule 3        Litigation
Schedule 4        Burdensome Documents
Schedule 5        Real Property
Schedule 6        Indebtedness
Schedule 7        Investments


<PAGE>




                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT (this "Agreement", or this "Credit Agreement") is
entered  into as of this 30th day of June,  1998,  by and among  WATSON  WYATT &
COMPANY, a Delaware corporation (the "Borrower"),  certain Domestic Subsidiaries
of the Borrower named herein as "Subsidiary  Guarantors" and such other Domestic
Subsidiaries  of the  Borrower  as may become a party  hereto  (the  "Subsidiary
Guarantors"),  the banks named herein and such other banks as may become a party
hereto (the "Banks") and NationsBank,  N.A., a national banking  association and
one of the Banks hereunder,  as agent for the Banks (in such capacity,  together
with any successor in such capacity, the "Agent").

         WHEREAS, an $80 million credit facility was established in favor of the
Borrower and certain of its subsidiaries and affiliates pursuant to the terms of
that Third  Amended  and  Restated  Credit and  Security  Agreement  dated as of
January 5, 1996 (as amended and modified,  the "Prior Credit Agreement"),  among
the Borrower and certain of its subsidiaries and affiliates  identified therein,
the banks identified therein and the Agent;

         WHEREAS,  Borrower has requested,  and the Banks have agreed,  to amend
and modify the Prior Credit Agreement pursuant to the terms set forth herein;

         WHEREAS,  this  Agreement is given in amendment to,  restatement of and
substitution for the Prior Credit Agreement.

         NOW,  THEREFORE,   in  consideration  of  their  mutual  covenants  and
agreements  contained  herein,  the parties hereby  covenant and agree,  and the
Prior Agreement is hereby amended and restated in its entirety, as follows:


                             ARTICLE I. DEFINITIONS

         Section 1.1.      Definitions.

         For purposes of this  Agreement,  terms  bearing  initial  capitals and
defined in various  sections hereof shall have the meanings stated therein;  and
the following terms shall have the meanings stated below,  except as the context
otherwise requires:

         "Additional  Credit  Party" means each Person that becomes a Subsidiary
Guarantor after the Closing Date by execution of a Joinder Agreement.

         "Adjusted  Base Rate" means,  for any day, the rate per annum  (rounded
upwards,  if necessary,  to the nearest whole  multiple of 1/100 of 1%) equal to
the greater of (a) the  Federal  Funds Rate in effect on such day plus 1/2 of
1.0% or (b) the Prime Rate in effect on such day,  minus 1.0%. If for any reason
the Agent shall have determined (which  determination shall be conclusive absent
manifest  error) that it is unable  after due inquiry to  ascertain  the Federal
Funds Rate for any reason,  including  the  inability or failure of the Agent to
obtain sufficient  quotations in accordance with the terms hereof,  the Adjusted
Base Rate shall be determined without regard to clause (a) of the first sentence
of this  definition  until the  circumstances  giving rise to such  inability no
longer exist.  Any change in the Adjusted Base Rate due to a change in the Prime
Rate or the Federal Funds Rate shall be effective on the effective  date of such
change in the Prime Rate or the Federal Funds Rate, respectively.

         "Affiliate" means, as to any Person, any other Person which directly or
indirectly  controls,  is under common  control with, or is controlled  by, such
Person.

         "Agent" has the meaning  stated on page 1 hereof and,  with  respect to
the Employee Loans, shall include NationsBank in its individual capacity.

         "Agent's Fee" has the meaning stated in Section 2.9(c).

         "Agent's Fee Letter" means the letter  agreement  between the Agent and
the Borrower dated as of April 28, 1998.

         "Aggregate Revolving Credit Commitment" has the meaning stated in
Section 2.1(a).

         "Agreement" has the meaning stated on page 1 hereof.

         "Applicable   Percentage"   means,  for  purposes  of  calculating  the
applicable  interest rate for any day for any Eurodollar  Loan or Base Rate Loan
or the applicable  Unused Fee or the LOC Fee for any day for purposes of Section
2.9, the appropriate  applicable percentage  corresponding to the Leverage Ratio
in effect as of the most recent Calculation Date:


<PAGE>
<TABLE>

Pricing               Leverage    Applicable  Applicable  Applicable  Applicable
 Level                  Ratio     Percentage  Percentage  Percentage Percentage
                                     for         for       for           for
                                  Eurodollar  LOC Fee    Unused Fee   Base Rate
                                    Loans                               Loans
<CAPTION>
<S>                                  <C>      <C>       <C>          <C>
------------------------------------------------------------------------------
 V        Greater than or equal to   1.75%     1.75%    0.50%         0.50%
          2.25 to 1.0
 IV       Less than 2.25 to 1.0 but  1.50%     1.50%    0.45%            0%
          greater than or equal to
          1.75 to 1.0
III       Less than 1.75 to 1.0 but  1.25%     1.25%    0.375%           0%
          greater than or equal to
          1.25 to 1.0
 II       Less than 1.25 to 1.0 but  1.00%     1.00%    0.375%           0%
          greater than or equal to
          0.75 to 1.0
 I        Less than 0.75             0.75%     0.75%    0.30%            0%
</TABLE>

         Determination of the appropriate  Applicable  Percentages for the Loans
based on the  Leverage  Ratio  shall be made as of each  Calculation  Date.  The
Leverage Ratio in effect as of a Calculation Date shall establish the Applicable
Percentages  that shall be effective as of the date  designated  by the Agent as
the Applicable Percentage Change Date; provided,  however, that a new Applicable
Percentage  shall apply to  outstanding  Eurodollar  Loans only if and when such
Eurodollar  Loans are  extended  into new  Interest  Periods.  The  Agent  shall
determine  the  Applicable  Percentages  as of each  Calculation  Date and shall
promptly  notify the Borrower  and the Banks of the  Applicable  Percentages  so
determined  and  of  the  Applicable  Percentage  Change  Date.  The  Applicable
Percentage for the purpose of  calculating  LOC Fees shall be fixed for the term
of each related  Letter of Credit based on the  Applicable  Percentage in effect
for LOC Fees at the time of  issuance  thereof.  Any renewal or  extension  of a
Letter of Credit for the purpose of calculating  the LOC Fee shall be considered
a new  issuance  thereof.  Such  determinations  by the Agent of the  Applicable
Percentages  shall  be  conclusive  absent   demonstrable   error.  The  initial
Applicable  Percentages  shall be based on  Pricing  Level  III  until the first
Applicable  Percentage  Change  Date  to  occur  with  respect  to the  Required
Financial Information relating to the fiscal quarter ending September 30, 1998.

         "Applicable   Percentage  Change  Date"  means,  with  respect  to  any
Calculation  Date, a date  designated by the Agent that is not more than fifteen
(15)  Business  Days after the  receipt by the Agent of the  Required  Financial
Information for such Calculation  Date;  provided that in the event the Required
Financial  Information  is not  delivered  by the date  required by Section 6.4,
notwithstanding  the definition of Applicable  Percentage herein, the Applicable
Percentage  shall be based on Pricing  Level V until  such time as the  Required
Financial Information is delivered.

         "Applicable  Rate"  means (i) for all  periods  prior to and  including
January 5, 2001, the Adjusted Base Rate and (ii) for all periods  thereafter (a)
if no Cash Flow Deficiency  exists as of the immediately  preceding  Calculation
Date, the Adjusted Base Rate and (b) if a Cash Flow Deficiency  exists as of the
immediately preceding Calculation Date, the Prime Rate.

         "Authorized  Financial Officer" means any of the Borrower's  Treasurer,
Controller or Vice President and Chief Financial Officer.

         "Bank" and "Banks" have the meanings  stated on page 1 hereof and shall
include any assignees thereof in accordance with Section 10.2.

         "Base Rate" means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of
(a) the  Federal  Funds Rate in effect on such day plus  1/2 of 1% or (b) the
Prime  Rate in effect on such  day.  If for any  reason  the  Agent  shall  have
determined (which  determination shall be conclusive absent manifest error) that
it is unable  after due  inquiry to  ascertain  the  Federal  Funds Rate for any
reason,  including  the  inability or failure of the Agent to obtain  sufficient
quotations  in  accordance  with  the  terms  hereof,  the  Base  Rate  shall be
determined without regard to clause (a) of the first sentence of this definition
until the  circumstances  giving rise to such  inability  no longer  exist.  Any
change in the Base Rate due to a change in the Prime Rate or the  Federal  Funds
Rate shall be effective on the  effective  date of such change in the Prime Rate
or the Federal Funds Rate, respectively.

         "Base Rate Loan" means any Loan bearing  interest at a rate  determined
by reference to the Base Rate.

         "Borrower" means Watson Wyatt & Company, a Delaware corporation.

         "Borrower Guaranty" has the meaning stated in Section 6.11.

         "Business  Day" means a day other than a Saturday,  Sunday or other day
on which commercial banks in Charlotte, North Carolina or Bethesda, Maryland are
authorized  or required by law to close,  except that,  when used in  connection
with a Revolving Credit Loan that is a Eurodollar Loan, such day shall also be a
day on which dealings  between banks are carried on in U.S.  dollar  deposits in
London, England and New York, New York.

         "Calculation Date" means the last day of each fiscal quarter of the
Borrower.

         "Canadian  Loan  Program"  means the  Borrower's  employee loan program
established for the benefit of its Canadian employees.

         "Capital  Expenditures"  means amounts expended for (i) the acquisition
of assets, whether tangible or intangible, having a useful life in excess of one
year and not intended for resale in the normal course of business, including but
not limited to land, buildings,  fixtures, equipment and computer software, (ii)
additions  or   improvements  to  or  rebuilding  of  existing   assets,   (iii)
improvements  to leased  property,  and (iv) such other  purposes  typically and
customarily considered to be capital expenditures.

         "Capital  Lease"  means,  as  applied to any  Person,  any lease of any
property  (whether real,  personal or mixed) by that Person as lessee which,  in
accordance  with GAAP,  is or should be accounted  for as a capital lease on the
balance sheet of that Person.

         "Cash  Equivalents"  means (i) demand deposits in Selected Banks;  (ii)
marketable  obligations  of  the  United  States  or  Canada;  (iii)  marketable
obligations  guaranteed by or insured by the United  States or Canada,  or those
for which the full faith and  credit of the  United  States or Canada is pledged
for the repayment of principal and interest thereon; (iv) marketable obligations
issued,  guaranteed,  or  fully  insured  by  any  agency,  instrumentality,  or
corporation  of the United States or Canada  established or to be established by
the Congress or Parliament,  respectively,  for which the credit of such agency,
instrumentality,  or  corporation  is pledged for the repayment of the principal
and interest thereof; (v) marketable general obligations of a state, a territory
or a possession of the United States, or any political subdivision of any of the
foregoing, or the District of Columbia (each, in this subsection,  an "Entity"),
unconditionally  secured by the full faith and  credit of such  Entity,  if such
Entity has general  taxing  authority and the power to levy such taxes as may be
required  for the  payment of  principal  and  interest  thereof,  and that such
obligations  have a credit  rating  equal to at least Baa  issued by  Standard &
Poor's  Corporation  ("S&P") or BBB issued by Moody's  Investors  Service,  Inc.
("Moody's");  (vi)  domestic  and  LIBOR,  negotiable  time  and  variable  rate
certificates  of deposit issued by Selected  Banks;  (vii)  marketable  bankers'
acceptances  and  finance  bills  accepted  by  Selected  Banks;   (viii)  prime
commercial paper having a credit rating equal to at least A-2 issued by S&P, P-2
issued by  Moody's,  or Duff-2  issued by Duff & Phelps  Inc.;  (ix)  marketable
corporate  debt  securities  having an A credit  rating  issued by either S&P or
Moody's; and (x) repurchase,  reverse repurchase agreements and security lending
agreements  collateralized  by securities of the type described in clauses (ii),
(iv), (viii) and (ix).

         "Cash  Flow  Deficiency"  means  and  shall  exist at any time when the
Leverage Ratio of the Borrower, on a consolidated basis, is 2.5 or greater.

         "Change of Control"  means if any Person or two or more Persons  acting
in concert shall have acquired beneficial ownership, directly or indirectly, of,
or shall have  acquired by contract or  otherwise,  or shall have entered into a
contract or arrangement  that,  upon  consummation,  will result in its or their
acquisition  of or  control  over,  Voting  Stock  of  the  Borrower  (or  other
securities  convertible into such Voting Stock)  representing 20% or more of the
combined  voting  power of all Voting  Stock of the  Borrower.  As used  herein,
"beneficial  ownership"  shall have the  meaning  provided  in Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934.

         "Closing  Date"  means the later of the date  stated on the first  page
hereof and the date on which all of the conditions  precedent  stated in Section
5.1 have been satisfied and all of the parties have executed this Agreement.

         "Collateral"  has the  meaning  given to such term in the Credit  Party
Pledge Agreement and the Security Agreement.

         "Collections" means all monies or other assets received by the Agent or
any Bank, as repayment of amounts  advanced  under the Notes,  on account of the
Subsidiary Guaranteed Obligations,  as proceeds of Collateral or otherwise,  for
credit against principal, interest, commitment fees, costs or expenses, or other
amounts due under the Notes.

         "Consolidated  EBITDA"  means,  for any period of  calculation  for the
Consolidated Group, the sum of (i) Consolidated Net Income for such period, plus
(ii) to the extent deducted in the calculation of Consolidated  Net Income,  the
sum of interest expense, income taxes, depreciation and amortization, plus (iii)
nonrecurring  cash and non-cash  charges  incurred in  connection  with the Well
Spring  Joint  Venture  write-down,   determined  on  a  consolidated  basis  in
accordance with GAAP.

         "Consolidated  EBITDAR"  means,  for any period of calculation  for the
Consolidated  Group, the sum of (i) Consolidated EBITDA for such period and (ii)
Lease Expenses for such period, determined on a consolidated basis in accordance
with GAAP.

         "Consolidated  Funded Debt" means Funded Debt of the Consolidated Group
determined on a consolidated basis in accordance with GAAP.

         "Consolidated   Group"  means  the   Borrower   and  its   consolidated
subsidiaries, as determined in accordance with GAAP.

         "Consolidated  Net Income" means for any period of calculation  for the
Consolidated  Group, net income on a consolidated basis determined in accordance
with GAAP.

         "Controller" means the person holding the office, under whatever title,
most  closely  corresponding  to  the  typical  duties  of  a  controller  of  a
corporation or the person acting in such capacity.

         "Credit  Documents"  means  a  collective   reference  to  this  Credit
Agreement,  the Revolving  Credit Notes,  the Employee Notes, the LOC Documents,
the  Borrower  Guaranty,  the  Credit  Party  Pledge  Agreement,   the  Security
Agreement, the Employee Pledge Agreements, the Agent's Fee Letter, and all other
related agreements and documents issued or delivered  hereunder or thereunder or
pursuant hereto or thereto.

         "Credit Party Pledge  Agreement" means the Pledge Agreement dated as of
the  Closing  Date  given by the  Credit  Parties  to the  Agent,  to secure the
obligations hereunder, as amended and modified.

         "Credit Party" means any of the Borrower and the Subsidiary Guarantors.

         "CSAP"  means  the  Borrower's  Canadian   Separation   Allowance  Plan
established for the benefit of the Borrower's  Canadian  employees in connection
with the Canadian Loan Program.

         "Defaulting  Bank" means, at any time, any Bank that, at such time, (i)
has failed to make a Loan or purchase a participation interest required pursuant
to the terms of this Credit  Agreement within one Business Day of when due, (ii)
other than as set forth in (i) above, has failed to pay to the Agent or any Bank
an amount owed by such Bank pursuant to the terms of the Credit Agreement or any
other of the Credit  Documents within one Business Day of when due, or (iii) has
been  deemed  insolvent  or has become  subject to a  bankruptcy  or  insolvency
proceeding  or to a receiver,  trustee or similar  proceeding or with respect to
which (or with respect to any of assets of which) a receiver, trustee or similar
official has been appointed.

         "Domestic  Subsidiary"  means any Subsidiary  which is  incorporated or
organized  under the laws of any State of the United  States or the  District of
Columbia.

         "Employee Loan Commitment" has the meaning stated in Section 2.1(d).

         "Employee Loan Commitment Period" has the meaning stated in Section
2.1(e).

         "Employee Loan Participation" has the meaning stated in Section 2.1(d).

         "Employee Loan" and "Employee Loans" have the meanings stated in
Section 2.1(d).

         "Employee Note" and "Employee Notes" have the meanings stated in
Section 2.1(g).

         "Employee Pledge Agreements" has the meaning stated in Section 6.12(a).

         "Employee Pledged Shares" has the meaning stated in Section 6.12(a).

         "Employee Stock Powers" has the meaning stated in Section 6.12(b).

         "ERISA" has the meaning stated in Section 4.8.

         "Eurodollar Loan" means any Revolving Credit Loan bearing interest at a
rate determined by reference to the Eurodollar Rate.

         "Eurodollar  Rate" means,  for the Interest  Period for each Eurodollar
Loan comprising part of the same borrowing  (including  conversions,  extensions
and renewals),  a per annum interest rate  determined  pursuant to the following
formula:


                   Eurodollar Rate  =                Interbank Offered Rate
                        1 - Eurodollar Reserve Percentage

         "Eurodollar  Reserve  Percentage"  means for any day,  that  percentage
(expressed as a decimal) which is in effect from time to time under Regulation D
of the Board of Governors of the Federal Reserve System (or any  successor),  as
such regulation may be amended from time to time or any successor regulation, as
the maximum  reserve  requirement  (including,  without  limitation,  any basic,
supplemental,  emergency, special, or marginal reserves) applicable with respect
to Eurocurrency  liabilities as that term is defined in Regulation D (or against
any other category of liabilities  that includes  deposits by reference to which
the interest rate of Eurodollar Loans is determined),  whether or not a Bank has
any Eurocurrency  liabilities  subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute  Eurocurrency  liabilities and as
such shall be deemed subject to reserve requirements without benefits of credits
for proration,  exceptions or offsets that may be available from time to time to
a Bank. The  Eurodollar  Rate shall be adjusted  automatically  on and as of the
effective date of any change in the Eurodollar Reserve Percentage.

         "Event of Default" has the meaning stated in Section 8.1.

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

         "Fixed  Charge  Coverage  Ratio"  means the  ratio of (i)  Consolidated
EBITDAR to (ii) the sum of interest  expense plus Lease  Expenses plus scheduled
maturities  of  Funded  Debt  (excluding  Employee  Loans),  in  each  case on a
consolidated basis determined in accordance with GAAP.

         "Foreign Subsidiary" means a Subsidiary which is not a Domestic
Subsidiary.

         "Funded Debt" means, with respect to any Person,  without  duplication,
(a) all  Indebtedness of such Person other than the  Indebtedness of such Person
of the types referred to in clauses (iv), (v), (vii),  (ix), (x) and (xi) of the
definition of "Indebtedness" set forth in this Section 1.1, (b) all Indebtedness
of another Person of the type referred to in clause (a) above secured by (or for
which the  holder of such  Funded  Debt has an  existing  right,  contingent  or
otherwise,  to be secured  by) any Lien on, or payable  out of the  proceeds  of
production from,  property owned or acquired by such Person,  whether or not the
obligations secured thereby have been assumed,  (c) all guaranty  obligations of
such Person with respect to  Indebtedness  of the type referred to in clause (a)
above of another Person and (d)  Indebtedness  of the type referred to in clause
(a) above of any  partnership  or  unincorporated  joint  venture  in which such
Person is a general partner or a joint venturer (but only to the extent to which
such Person's assets are at risk in such joint venture).

         "GAAP" means  generally  accepted  accounting  principles in the United
States applied on a consistent basis.

         "General  Counsel" means the person holding the office,  under whatever
title, most closely  corresponding to the typical duties of a general counsel of
a corporation or the person acting in such capacity.

         "General Exceptions" has the meaning stated in Section 4.3.

         "Governmental  Authority"  means any Federal,  state,  local or foreign
court or governmental agency, authority, instrumentality or regulatory body.

         "Incipient Default" has the meaning stated in Section 5.2(a).

         "Indebtedness" means, with respect to any Person,  without duplication.
(i) all obligations of such Person for borrowed  money,  (ii) all obligations of
such Person under conditional sale or other title retention  agreements relating
to property  purchased  by such Person  (other than  customary  reservations  or
retentions of title under agreements with suppliers entered into in the ordinary
course of business),  (iii) all  obligations of such Person issued or assumed as
the  deferred  purchase  price of property or services  purchased by such Person
(other than trade debt  incurred  in the  ordinary  course of  business  and due
within six months of the  incurrence  thereof) which would appear as liabilities
on a balance  sheet of such Person,  (iv) all  obligations  of such Person under
take-or-pay or similar  arrangements or under  commodities  agreements,  (v) all
Indebtedness of others secured by (or for which the holder of such  Indebtedness
has an existing right,  contingent or otherwise,  to be secured by) any Lien on,
or payable out of the proceeds of production from, property owned or acquired by
such Person,  whether or not the obligations  secured thereby have been assumed,
(vi) the  principal  portion of all  obligations  of such Person  under  Capital
Leases,  (vii) all  obligations  of such  Person in  respect  of  Interest  Rate
Protection  Agreements  and/or any other  hedging or  interest  rate  protection
agreements  or other  arrangements,  (viii) the  maximum  amount of all  standby
letters of credit  issued or  bankers'  acceptances  facilities  created for the
account of such Person and, without duplication, all drafts drawn thereunder (to
the extent  unreimbursed),  (ix) all  preferred  stock issued by such Person and
required by the terms  thereof to be redeemed,  or for which  mandatory  sinking
fund  payments  are due,  by a fixed  date,  (x) the  principal  portion  of all
obligations of such Person under synthetic lease  transactions and other similar
offbalance  sheet  financing  arrangements,  and (xi)  all  guaranty  and  other
contingent  obligations of such Person in respect of  Indebtedness as defined in
this  definition.  The Indebtedness of any Person shall include the Indebtedness
of any partnership or joint venture in which such Person is a general partner or
a joint  venturer (but only to the extent to which such  Person's  assets are at
risk in such joint venture).

         "Interbank  Offered  Rate"  means,  for the  Interest  Period  for each
Eurodollar Loan comprising  part of the same borrowing  (including  conversions,
extensions  and  renewals),  a per annum  interest  rate  (rounded  upwards,  if
necessary,  to the nearest  whole  multiple of 1/100 of 1%) equal to the rate of
interest, determined by the Agent on the basis of the offered rates for deposits
in dollars  for a period of time  corresponding  to such  Interest  Period  (and
commencing on the first day of such Interest Period), appearing on Telerate Page
3750 (or, if, for any reason,  Telerate Page 3750 is not available,  the Reuters
Screen LIBO Page) as of approximately  11:00 A.M. (London time) two (2) Business
Days before the first day of such  Interest  Period.  As used herein,  "Telerate
Page 3750" means the display designated as page 3750 by Dow Jones Markets,  Inc.
(or such other page as may replace  such page on that service for the purpose of
displaying the British Bankers  Association  London interbank offered rates) and
"Reuters  Screen LIBO Page" means the display  designated  as page "LIBO" on the
Reuters  Monitor Money Rates Service (or such other page as may replace the LIBO
page on that  service for the purpose of  displaying  London  interbank  offered
rates of major banks).

         "Interest  Payment Date" means (i) as to any Employee  Loan,  the third
Business Day of the month following the immediately  preceding Calculation Date,
any date of repayment  of  principal  of such Loan and the relevant  Termination
Date, (ii) as to any Revolving  Credit Loan which is a Base Rate Loan, the third
Business Day of the month immediately following the end of each preceding month,
any date of repayment  of  principal  of such Loan and the relevant  Termination
Date, and (iii) as to any Revolving  Credit Loan which is a Eurodollar Loan, the
last day of each  Interest  Period  for such  Loan,  any  date of  repayment  of
principal of such Loan and the relevant  Termination Date, and in addition where
the  applicable  Interest  Period is more than three months,  then also the date
three months from the  beginning of the Interest  Period,  and each three months
thereafter.  If an Interest Payment Date falls on a date which is not a Business
Day,  such  Interest  Payment  Date  shall be deemed  to be the next  succeeding
Business  Day,  except  that in the  case of  Eurodollar  Loans  where  the next
succeeding  Business Day falls in the next succeeding  calendar month,  then the
next preceding Business Day.

         "Interest  Period"  means,  as  to  Revolving  Credit  Loans  that  are
Eurodollar  Loans, a period of one, two, three or six month's  duration,  as the
Borrower  may  elect,  commencing  in each  case,  on the date of the  borrowing
(including conversions,  extensions and renewals); provided, however, (A) if any
Interest  Period would end on a day which is not a Business  Day,  such Interest
Period shall be extended to the next succeeding Business Day (except that in the
case of  Eurodollar  Loans where the next  succeeding  Business Day falls in the
next succeeding calendar month, then on the next preceding Business Day), (B) no
Interest  Period  shall extend  beyond the  Termination  Date,  and (C) where an
Interest Period begins on a day for which there is no numerically  corresponding
day in the calendar month in which the Interest  Period is to end, such Interest
Period shall end on the last day of such calendar month.

         "Interest Rate Protection  Agreement"  means an interest rate swap, cap
or collar agreement or similar  arrangement  between the Borrower and a Bank, or
an Affiliate of a Bank,  providing  for the transfer or  mitigation  of interest
risks either generally or under specific contingencies.

         "Interest Swap Provider" means a Bank, or an Affiliate of a Bank, party
to an Interest Rate Protection Agreement with the Borrower.

         "Investment" in any Person by the Borrower  means:  (i) the amount paid
or committed  to be paid,  or the value of property or services  contributed  or
committed  to be  contributed,  by the Borrower  for or in  connection  with the
acquisition by the Borrower of any stock, bonds, note,  debentures,  partnership
or other  ownership  interests or other  securities of or equity in such Person;
and (ii) the amount of any advance,  loan or extension of credit to, or guaranty
or other similar  obligation with respect to any Indebtedness of, such Person by
the  Borrower  and (without  duplication)  any amount  committed to be advanced,
loaned,  or extended to, or the payment of which is committed to be assured by a
guaranty or similar obligation for the benefit of, such Person by the Borrower.

         "Issuing Bank" means NationsBank.

         "Issuing Bank Fees" has the meaning stated in Section 2.9.

         "Joinder Agreement" means a Joinder Agreement substantially in the form
of Exhibit L hereto,  executed and  delivered by an  Additional  Credit Party in
accordance with the provisions of Section 6.13.

         "KPMG  Acquisition"  means the  acquisition  by the Borrower of the New
York,  Boston and Cleveland  retirement and healthcare  consulting  practices of
KPMG Peat Marwick

         "Lease Expenses"  means, for any period,  all rental payments due under
leases for such period,  irrespective of the term of any thereof,  determined in
accordance with GAAP.

         "Letter  of Credit"  means any  irrevocable,  standby  letter of credit
issued by the Issuing Bank for the account of the Borrower or any  subsidiary in
accordance with the terms of Section 2.5 and those letters of credit outstanding
on the Closing Date and listed on Schedule 6 hereto.

         "Leverage  Ratio"  means the ratio of (i)  Consolidated  Funded Debt to
(ii) Consolidated  EBITDA.  For purposes of the Employee Notes, the Debt to Cash
Flow Ratio referred to therein used to calculate Cash Flow  Deficiency  referred
to therein shall be the Leverage Ratio as used herein.

         "Lien" means any mortgage, pledge, hypothecation,  assignment,  deposit
arrangement,  security  interest,  encumbrance,  lien  (statutory or otherwise),
preference,  priority or charge of any kind (including any agreement to give any
of the foregoing,  any conditional sale or other title retention agreement,  any
financing or similar statement or notice filed under the Uniform Commercial Code
as adopted and in effect in the relevant jurisdiction or other similar recording
or notice statute, and any lease in the nature thereof).

         "Loan" and "Loans" have the meanings  stated in Section  2.2(a)  herein
and shall include all loans made under the Prior Agreement which are outstanding
on the date hereof.

         "LOC  Documents"  means,  with  respect to any  Letter of Credit,  such
Letter of Credit, any amendments thereto,  any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other  documents  (whether  general in application or applicable only to such
Letter of Credit)  governing or providing for (i) the rights and  obligations of
the  parties  concerned  or at risk or (ii)  any  collateral  security  for such
obligations.

         "LOC Fees" has the meaning stated in Section 2.9.

         "LOC Obligations" means, at any time, the sum of (i) the maximum amount
which is, or at any time  thereafter  may  become,  available  to be drawn under
Letters of Credit then  outstanding,  assuming  compliance with all requirements
for  drawings  referred  to in such  Letters of Credit  plus (ii) the  aggregate
amount of all drawings  under Letters of Credit  honored by the Issuing Bank but
not theretofore reimbursed.

         "Majority  Banks" means the Banks the Ratable Shares of which aggregate
51  percent  or  more  of all  Ratable  Shares  at  any  time,  or if the  Total
Commitments  have been  terminated,  Banks having more than 51% of the aggregate
principal  amount of the  Obligations  outstanding  (taking into account in each
case  participation  interests or obligation to participate  therein);  provided
that the  Ratable  Share of, and  outstanding  principal  amount of  Obligations
(taking into account  participation  interests  therein)  owing to, a Defaulting
Bank shall be excluded for purposes hereof in making a determination of Majority
Banks.

         "Margin Stock Event" has the meaning stated in Section 2.8(b)(ii).

         "Material  Adverse  Effect" means a material  adverse effect on (i) the
financial  condition,  business,  properties,  operations  or  prospects  of the
Borrower and its consolidated subsidiaries taken as a whole, (ii) the ability of
the Borrower to perform any material  obligation  under the Credit  Documents to
which it is a party or (iii) the  rights  and  remedies  of the Banks  under the
Credit Documents.

         "Material Domestic Subsidiary" means a Domestic Subsidiary which is a
Material Subsidiary.

         "Material  Subsidiary"  means  a  Subsidiary  of the  Borrower  (i) the
accounts receivable of which comprise two percent (2%) or more of the Borrower's
consolidated  accounts  receivable  or (ii) the  assets  of which  comprise  two
percent (2%) or more of the Borrower's consolidated assets.

         "Maturity  Date"  means  (i)  with  respect  to  the  Revolving  Credit
Commitments,  June  30,  2003,  and  (ii)  with  respect  to the  Employee  Loan
Commitments, June 30, 2001.

         "NationsBank" means NationsBank, N.A., and its successors.

         "Net Worth" means, for any period of calculation,  the redemption value
of the total issued and outstanding  shares of the Borrower's  redeemable common
stock,  as adjusted  for  redemption  value  greater  than  amounts  paid by the
Borrower's  shareholders,  for such period, plus retained earnings plus or minus
cumulative translation adjustments, if any, for such period.

         "Notes" has the meaning stated in Section 2.1(g).

         "Notice of Borrowing"  has the meaning  stated in Section 5.2(b) hereof
and shall be in substantially the form of Exhibit J.

         "Obligations"  means,  collectively,  all  of  the  obligations  of the
Borrower, the Subsidiary Guarantors and the Qualified Employees under the Credit
Documents.

         "Official" has the meaning stated in Section 8.1(e).

         "PBGC" has the meaning stated in Section 4.8.

         "Permitted  CSAP Loan" means a loan  extended  under the Canadian  Loan
Program  to one of the  Borrower's  Canadian  employees  for which a  Separation
Allowance  Account is  maintained  having a balance  not in excess of 90% of the
dollar amount credited from time to time to such account.

         "Permitted Investments" means Investments which are either (i) cash and
Cash  Equivalents;  (ii) accounts  receivable  created,  acquired or made in the
ordinary  course of business and payable or  dischargeable  in  accordance  with
customary  trade terms;  (iii)  Investments  consisting  of stock,  obligations,
securities  or other  property  received in  settlement  of accounts  receivable
(created in the  ordinary  course of  business)  from  bankrupt  obligors;  (iv)
Investments  existing as of the  Closing  Date and to be set forth on Schedule 7
hereto  within 30 days of the Closing  Date,  (v) guaranty and other  contingent
obligations  permitted by Section 7.1; (vi)  acquisitions and other  Investments
permitted by Section 7.3(c); (vii)(A) advances or loans to employees, directors,
officers or agents not to exceed  $200,000  with respect to each such loan,  (B)
short  term  loans to new or  relocating  employees  to cover  moving  and other
relocation  costs not to exceed  $500,000 with respect to each such loan,  which
loans under both  clauses (A) and (B) shall not exceed in the  aggregate  at any
time  outstanding  $2,500,000;  and  (viii)  Permitted  CSAP Loans not to exceed
$6,000,000 in the aggregate at any time outstanding.

         "Permitted  Liens" means (i) encumbrances  granted to the Agent and the
Banks  hereunder;  (ii)  encumbrances for taxes not yet due or contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
being  maintained in accordance  with GAAP;  (iii)  encumbrances  arising out of
equipment leases in the ordinary course of business;  (iv) encumbrances  arising
out of the purchase of equipment in the ordinary  course of business and limited
to the specific  equipment  purchased,  provided,  however,  that the underlying
Indebtedness is permitted  under Section 7.1(d) hereof;  (v) pledges or deposits
in the ordinary course of business in connection  with worker's  compensation or
other forms of  governmental  insurance or benefits or to secure  performance of
statutory  obligations,  leases and  contracts  (other than for borrowed  money)
entered  into in the  ordinary  course of business or to secure  obligations  on
surety or  appeal  bonds;  (vi)  encumbrances  of  mechanics  and other  similar
encumbrances   arising  in  the  ordinary  course  of  business  in  respect  of
obligations  not delinquent or being  contested in good faith and by appropriate
proceedings and with respect to which adequate  reserves are being maintained in
accordance with GAAP; and (vii)  encumbrances  arising in the ordinary course of
business for sums being  contested in good faith and by appropriate  proceedings
and with respect to which adequate  reserves are being  maintained in accordance
with GAAP, or for sums not due, and in either case not involving any deposits or
advances  for  borrowed  money or the  deferred  purchase  price of  property or
services.

         "Person" means any individual, corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization or a government or
any agency or political subdivision thereof.

         "Plan" has the meaning stated in Section 4.8.

         "Prime Rate" means the per annum rate of interest established from time
to time by the Agent at its principal office in Charlotte, North Carolina as its
Prime Rate. Any change in the interest rate resulting from a change in the Prime
Rate shall  become  effective as of 12:01 a.m. of the Business Day on which each
change  in the  Prime  Rate is  announced  by the  Agent.  The  Prime  Rate is a
reference rate used by the Agent in determining  interest rates on certain loans
and is not intended to be the lowest rate of interest  charged on any  extension
of credit to any debtor.

         "Prior Agreement" has the meaning stated in the recitals hereof.

         "Pro Forma Basis"  means,  with respect to any  transaction,  that such
transaction  shall be  deemed to have  occurred  as of the first day of the four
fiscal-quarter  period ending as of the most recent fiscal quarter end preceding
the date of such transaction.

         "Qualified  Employees"  means  "Eligible  Purchasers"  as such  term is
defined in Section 9.9(a) of the Borrower's  Bylaws excluding  therefrom outside
directors,  Watson Wyatt  Partners  and any other Person  permitted to own stock
pursuant to the Borrower's Bylaws which is not a natural person.

         "Ratable Share" has the meaning stated in Section 2.1(a) hereof.

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

         "Required Financial  Information" means, with respect to the applicable
Calculation  Date, (i) the financial  statements of the Borrower  required to be
delivered  pursuant to Section 6.4 for the fiscal period or quarter ending as of
such  Calculation  Date,  and (ii) the  certificate  of an Authorized  Financial
Officer  required by Section 6.4 to be delivered  with the financial  statements
described in clause (i) above.

         "Requirement  of Law"  means,  as to any  Person,  the  certificate  of
incorporation and by-laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule  or  regulation  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or  binding  upon such  Person or to which any of its  material  property  is
subject.

         "Revolving Credit Commitment" has the meaning stated in Section 2.1(a).

         "Revolving Credit Loan Commitment Period" has the meaning stated in
Section 2.1(b).

         "Revolving Credit Loans" has the meaning stated in Section 2.1(a).

         "Revolving Credit Note" has the meaning stated in Section 2.1(c).

         "Security  Agreement"  means  the  Security  Agreement  dated as of the
Closing  Date  given by the  Borrower  to the  Agent to secure  the  obligations
hereunder, as amended and modified.

         "Selected  Banks"  (A) means the Banks  which are  signatories  to this
Agreement  and (B) the one hundred  largest  commercial  banks which  either are
United States national banking associations or are chartered under the laws of a
state of the United  States and which have ratings by Thompson  BankWatch,  Inc.
(or successor) no lower than the  following:  (i) for the largest fifty banks in
asset size:  "C";  and (ii) for the next fifty banks in asset size:  "B" and (C)
banks  chartered  under  the  laws of  Canada  and of a  quality  and/or  rating
equivalent to or not less than the rating identified in (B)(ii) above.

         "Separation  Allowance  Account" means the account  established for the
Borrower's  qualified  Canadian  employees  to  which,  from  time to time,  the
Borrower may credit  dollar  amounts  allocated to such  employee  based on such
employee's  share in the CSAP. For the avoidance of doubt, no such account shall
be funded with actual dollars,  but the dollar amount credited  thereto shall be
reflected as a liability on the balance sheet of the Borrower.

         "Subsidiaries" means the Persons identified on Schedule 1 and any other
Person in which,  at any time  subsequent  to the Closing  Date,  the  Borrower,
directly  or  indirectly,  beneficially  or  legally,  (i) owns more than  fifty
percent  (50%) of the stock  having  ordinary  voting  power for the election of
Directors,  in the case of a  corporation,  or (ii) owns more than fifty percent
(50%) of the ownership  interests of a partnership,  limited liability  company,
joint venture or other Person or is a general partner of a partnership.

         "Subsidiary  Guaranteed  Obligations"  means,  as  to  each  Subsidiary
Guarantor,  without duplication,  (i) all obligations of the Borrower (including
interest  accruing  after an event  described in Section  8.1(e),  regardless of
whether such interest is allowed as a claim under the Federal  Bankruptcy  Code)
to the Banks and the Agent, whenever arising,  under this Credit Agreement,  the
Notes or the other Credit  Documents,  and (ii) all liabilities and obligations,
whenever  arising,  owing from the Borrower to any Bank,  or any  Affiliate of a
Bank,  arising  under  any  Interest  Rate  Protection   Agreement  relating  to
obligations hereunder.

         "Subsidiary  Guarantor" means each of the Domestic  Subsidiaries of the
Borrower  identified as a "Subsidiary  Guarantor" on the signature pages hereto,
and each other  Person  which may  hereafter  become a  Subsidiary  Guarantor by
execution of a Joinder  Agreement,  together with their successors and permitted
assigns

         "Termination  Date" means (i) as to the  Revolving  Credit  Loans,  the
Maturity Date and (ii) as to any Employee  Loan,  the date of the final maturity
of such Employee Loan.

         "Total Commitment" has the meaning stated in Section 2.1(a).

         "Treasurer" means the person holding the office,  under whatever title,
most closely corresponding to the typical duties of a treasurer of a corporation
or the person acting in such capacity.

         "Unused Aggregate Total Commitment" means, for any date of calculation,
the amount by which (a) the aggregate of the then applicable  Total  Commitments
exceeds (b) the sum of (i) the  outstanding  aggregate  principal  amount of all
Revolving Credit Loans, (ii) the outstanding  aggregate  principal amount of all
Employee Loans and (iii) the LOC Obligations outstanding.

         "Unused Fee" has the meaning stated in Section 2.9(b).

         "Unused Fee Calculation Period" has the meaning stated in Section
2.9(b).

         "Vice President and Chief  Financial  Officer" means the person holding
the office,  under whatever  title,  most closely  corresponding  to the typical
duties of a chief  financial  officer of a  corporation  or the person acting in
such capacity.

         "Voting Stock" means, with respect to any Person,  capital stock issued
by  such  Person  the  holders  of  which  are  ordinarily,  in the  absence  of
contingencies,  entitled  to vote for the  election  of  directors  (or  persons
performing similar  functions) of such Person,  even though the right so to vote
has been suspended by the happening of such a contingency.

         "Wellspring  Joint Venture" means the joint venture known as Wellspring
Resources,  LLC,  which was created by the  Borrower  and State  Street Bank and
Trust  Company  effective  March 31,  1996,  with each of the Borrower and State
Street Bank and Trust  Company  having been,  initially,  a 50% co-owner in such
joint venture.

         "Year 2000 Compliant" has the meaning stated in Section 4.17.


         Section 1.2.      Accounting Terms and Determinations.

         Unless otherwise  specified herein,  all financial and accounting terms
used herein shall be interpreted,  all accounting determinations hereunder shall
be made, and all financial  statements  required to be delivered hereunder shall
be prepared in accordance with GAAP,  applied on a basis consistent  (except for
changes concurred in by the Borrower's  independent public accountants) with the
most recent audited  consolidated  financial  statements of the Borrower and its
consolidated subsidiaries delivered to the Banks.

         Section 1.3.      Other Definitional Provisions.

         References in this Agreement to "Articles",  "Sections", "Schedules" or
"Exhibits" shall be to Articles,  Sections,  Schedules or Exhibits of or to this
Agreement  unless otherwise  specifically  provided.  Wherever used herein,  the
singular number shall include the plural, and vice versa,  whenever  appropriate
to protect the  interests of the Banks,  and the  conjunctive  shall include the
disjunctive, and vice versa, whenever so appropriate.  "Include", "includes" and
"including"  shall be deemed to be followed by "without  limitation"  whether or
not they are in fact followed by such words or words of like import.  "Writing",
"written"  and  comparable  terms refer to  printing,  typing and other means of
reproducing words in a visible form. References to any agreement or contract are
to such agreement or contract as amended,  modified or supplemented from time to
time in accordance  with the terms hereof and thereof.  References to any Person
include  the  successors  and  assigns  of such  Person.  References  "from"  or
"through" any date mean,  unless  otherwise  specified,  "from and including" or
"through and including", respectively.


                         ARTICLE II. LOANS AND PAYMENTS

         Section 2.1.      Loans.

                  (a)  Revolving  Credit  Commitment.  Each of the Banks  hereby
         severally agrees to lend and the Borrower agrees to accept,  subject to
         the terms and conditions of this Agreement,  revolving credit loans not
         to exceed at any one time  outstanding  to the Borrower,  together with
         the LOC  Obligations,  such Bank's  Ratable Share of  $95,000,000  (the
         "Aggregate  Revolving Credit Commitment," and each Bank's Ratable Share
         of the Aggregate  Revolving Credit Commitment being a "Revolving Credit
         Commitment"),  as such amount may be  increased or reduced from time to
         time pursuant to Section 2.8. Each Bank's Revolving Credit  Commitment,
         as such amount may be increased  or reduced from time to time  pursuant
         to Section 2.8, is set forth  beneath such Bank's name on the signature
         pages hereof  opposite the caption  "Revolving  Credit  Commitment." As
         used herein,  "Ratable  Share" shall mean the proportion  that a Bank's
         Total Commitment bears to the Total Commitments of all of the Banks. As
         to any Bank, "Total Commitment" shall mean the amount set forth beneath
         such Bank's name on the  signature  pages  hereof  opposite the caption
         "Total  Commitment,"  as such  amount may be reduced  from time to time
         pursuant  to  Section  2.8.  A  "Revolving  Credit  Loan"  shall mean a
         revolving  credit loan made by a Bank to the Borrower  pursuant to this
         Section  2.1, and  "Revolving  Credit  Loans" shall mean the  Revolving
         Credit Loans of all the Banks to the Borrower.

                  (b) Availability of Revolving  Credit Loans.  Revolving Credit
         Loans will be made in accordance  with Section 2.2 and may be requested
         during  the  period  beginning  on the  Closing  Date and ending on the
         Maturity Date for Revolving  Credit Loans (the  "Revolving  Credit Loan
         Commitment  Period").  All  Revolving  Credit Loans shall be in minimum
         principal  amounts of $100,000  and  integral  multiples of $100,000 in
         excess thereof.  Revolving  Credit Loans for less than $1,000,000 shall
         consist of Base Rate Loans;  Revolving  Credit Loans for $1,000,000 and
         greater  may  consist  of Base Rate  Loans or  Eurodollar  Loans,  or a
         combination  thereof, as the Borrower may request;  provided,  however,
         that no more  than  five (5)  Eurodollar  Loans  shall  be  outstanding
         hereunder at any time; provided, further, that no Eurodollar Loan shall
         be made for less than $1,000,000.  Revolving Credit Loans may be repaid
         and reborrowed in accordance with the provisions  hereof.  For purposes
         hereof,  Eurodollar  Loans with  different  Interest  Periods  shall be
         considered as separate Eurodollar Loans, even if they begin on the same
         date and have the same duration,  although  borrowings,  extensions and
         conversions may, in accordance with the provisions  hereof, be combined
         at the end of existing  Interest Periods to constitute a new Eurodollar
         Loan with a single Interest Period.

                  (c) Revolving Credit Notes. Each Revolving Credit Loan made by
         a  Bank  under  this  Agreement  shall  be  evidenced  by  a  revolving
         promissory  note  issued  by the  Borrower  to  the  Bank  making  such
         Revolving  Credit  Loan  substantially  in the  form of  Exhibit  A and
         maturing on the  Maturity  Date for  Revolving  Credit Loans (each such
         note, together with all amendments, extensions, renewals, replacements,
         or refundings thereof in whole or in part, is a "Revolving Credit Note"
         and such  Revolving  Credit  Notes are,  collectively,  the  "Revolving
         Credit Notes").

                  (d)  Employee  Loan  Commitment.  Subject  to  the  terms  and
         conditions of this  Agreement,  NationsBank  hereby also agrees to make
         term loans to Qualified Employees  (collectively,  the "Employee Loans"
         and  each  an  "Employee  Loan")  not to  exceed  (i) at any  one  time
         outstanding   in  the  aggregate   $25,000,000   (the   "Employee  Loan
         Commitment"),  as such amount may be  increased or reduced from time to
         time  pursuant to Section 2.8, and (ii) with respect to any single such
         Employee Loan, the book value of the shares of stock to be purchased or
         refinanced with the proceeds of the Employee Loan, computed at the time
         such  Employee  Loan is made  in  accordance  with  the  Bylaws  of the
         Borrower.  Subject to the terms and conditions of this Agreement,  each
         Bank  hereby  irrevocably  agrees to  purchase a  participation  in the
         Employee Loans made or to be made hereunder, and a participation in all
         security now or hereafter  provided with respect  hereto,  equal to its
         Ratable Share of such Employee Loans and security, not to exceed in the
         aggregate such Bank's  Employee Loan  Participation  (as defined below)
         notwithstanding  (i) the amount of such  borrowing  may not comply with
         the minimum  amount for advances of Employee Loans  otherwise  required
         hereunder,  (ii)  whether any  conditions  specified in Section 5.2 are
         then  satisfied,  (iii)  whether  an  Incipient  Default or an Event of
         Default  then  exists,  (iv)  failure  for any such  request  or deemed
         request for an Employee Loan to be made by the time otherwise  required
         hereunder,  (v) whether the date of such  borrowing  is a date on which
         Employee Loans are otherwise permitted to be made hereunder or (vi) any
         termination of the Total Commitments relating thereto immediately prior
         to or contemporaneously with such borrowing.  NationsBank shall have no
         obligation  under this  Agreement to make any Employee  Loan unless and
         until  it  shall  have  received  from  each  of the  other  Banks,  in
         accordance with this Agreement, such Bank's Ratable Share of such Loans
         in   accordance   with  this   Section   2.1(d)  and  Section   5.2(c).
         Simultaneously  with the  making of each such  payment  of its  Ratable
         Share of  Employee  Loans by a Bank to  NationsBank,  such Bank  shall,
         automatically and without any further action on the part of NationsBank
         or such  Bank,  acquire  a  participation  in an  amount  equal to such
         payment in the related Employee Loan and in the interest thereon and in
         the  related  Employee  Notes,  and  shall  have a  claim  against  the
         Qualified  Employees with respect  thereto.  As to any Bank,  "Employee
         Loan Participation" shall mean the amount set forth beneath such Bank's
         name on the signature pages hereof opposite the caption  "Employee Loan
         Participation," as such amount may be increased or reduced from time to
         time pursuant to Section 2.8.

                  (e)  Availability  of Employee  Loans.  Employee Loans will be
         made in accordance with Section 2.2. During the period from the Closing
         Date through the Maturity Date for Employee  Loans (the  "Employee Loan
         Commitment  Period"),  Employee  Loans  hereunder  may be made (i) once
         during each fiscal year of the Borrower on the  ordinary  sale date for
         purchases  by  or  for  the  benefit  of  Qualified  Employees  of  the
         Borrower's common stock, which occurs during the period from December 1
         to March 31, and (ii) on such other dates as the Borrower and the Agent
         may agree in writing.  No single Employee Loan hereunder shall be in an
         initial amount less than $500.00.  Employee Loans shall consist of Base
         Rate Loans. Amounts repaid on an Employee Loan may be reborrowed during
         the Employee Loan Commitment Period.

                  (f) Delivery of Employee Loan Documents. Within 30 days of the
         funding of an Employee  Loan, the Borrower shall provide to NationsBank
         in connection  with such Employee Loan the following  documents:  (i) a
         completed  documentation  checksheet  in a form  approved in writing by
         NationsBank,  an Employee Stock Power (for all Employee  Pledged Shares
         consisting of  certificated  securities,  if any), an executed Truth in
         Lending  Disclosure  Statement  in the form of Exhibit  F, an  Employee
         Note, and an Employee Pledge  Agreement,  all executed by the Qualified
         Employee  to whom the  Employee  Loan is to be made (or,  as to a Note,
         Employee  Pledge  Agreement  and  Employee  Stock  Power,  if any,  for
         Employee Pledged Shares to be pledged by a personal holding company, by
         such  personal  holding  company  and by  the  Qualified  Employee,  as
         appropriate)  (the  Employee  Stock  Power,  if any, in all cases to be
         undated and executed in blank) and (ii) an Agreement to Employee  Stock
         Pledge Agreements, executed by the Borrower,  substantially in the form
         of Exhibit J and  identifying  by schedule each of the funded  Employee
         Loans.

                  (g)  Employee  Notes.  Each of the  Employee  Loans  shall  be
         evidenced  by  a  promissory   note  (together  with  all   amendments,
         extensions,  renewals, or replacements thereof, an "Employee Note" and,
         collectively,  all such notes,  "Employee Notes") issued to NationsBank
         by  the   Qualified   Employee  to  whom  the  Employee  Loan  is  made
         substantially in the form of Exhibit B. Each Employee Note shall mature
         on the earliest of (i) the seventh  September 30 following  the funding
         of the  corresponding  Employee Loan,  (ii) one calendar year after the
         Qualified  Employee to or for the benefit of whom the Employee  Loan is
         made  ceases to be a Qualified  Employee  and (iii) the date upon which
         any of the common stock  purchased  with the Employee Loan is sold. The
         Revolving  Credit Notes and the  Employee  Notes are  sometimes  herein
         referred to collectively as the "Notes".

         Section 2.2.      Loan Procedures; Servicing

                  (a) Requests. Each request by the Borrower for a Loan shall be
         submitted to the Agent in  accordance  with  Section  5.2(b) or (c), as
         applicable,  of this  Agreement.  As used  herein,  "Loans"  means  the
         Revolving  Credit  Loans and  Employee  Loans and "Loan" means any such
         Revolving  Credit Loan or Employee Loan  individually.  Employee  Loans
         shall be made to the  Borrower  and duly applied by the Borrower to the
         purchase of such stock.

                  (b) Notice to Banks.  The Agent shall notify each of the other
         Banks  as  soon  as  practicable  upon  receipt  of any  request  for a
         Revolving  Credit  Loan or an  Employee  Loan,  and that  notice  shall
         include the date that the Borrower desires the Loan to be made and such
         Bank's  Ratable  Share of such Loan.  All funds  constituting  a Bank's
         Ratable  Share  of  such  Loan  shall  be  received  by  the  Agent  in
         immediately  available  funds or other funds  satisfactory to the Agent
         not later than 2:00 p.m.,  Charlotte,  North Carolina time, on the date
         on which the Borrower  has  requested  the Loan to be made.  Unless the
         Agent shall have been notified by telephone,  confirmed in writing,  by
         any Bank by 12:00 noon, Charlotte,  North Carolina time, on the day the
         Borrower has requested that such Loan be made,  that such Bank will not
         make  available the amount which would  constitute its Ratable Share of
         such  requested  Loan on the date  specified  therefor,  the  Agent may
         assume that such Bank has made such amount  available to the Agent and,
         in reliance upon such assumption,  make available to the Borrower or to
         an appropriate escrow account, as appropriate,  a corresponding amount.
         If and to the  extent  that such Bank  shall not have made such  amount
         available to the Agent,  such Bank and the Borrower agrees to repay the
         Agent  forthwith  on demand such  corresponding  amount,  and such Bank
         further agrees to pay to the Agent, upon demand,  interest thereon, for
         each day from the date the Agent  made  such  amount  available  to the
         Borrower  to the date  such  amount  is  repaid  to the  Agent,  at the
         interest  rate  applicable at the time to Loans of the same type funded
         by the Agent.

                  (c) Servicing.  The Borrower agrees to act as servicer for the
         Agent and  NationsBank  with  respect  to the  Employee  Loans (in such
         capacity, the "Servicer"). On behalf of the Agent and NationsBank,  the
         Servicer will  administer,  service and collect  payments in respect of
         all Employee Loans, which duties shall include, without limitation, (i)
         prior to the funding of an Employee Loan to a Qualified  Employee,  (A)
         compiling and ensuring  completion  and execution,  as  applicable,  of
         those documents provided by such Qualified Employee pursuant to Section
         2.1(f), and (B) confirming such person's status as a Qualified Employee
         and (ii)  subsequent  to the funding of an Employee Loan to a Qualified
         Employee,  (A) collecting payments submitted by such Qualified Employee
         pursuant to the relevant  Employee  Note, (B)  recordkeeping  regarding
         current loan balances and other matters relating to such Employee Loan,
         (C)  responding  to  questions  about  such  Employee  Loan  from  such
         Qualified Employee and (D) providing to the Agent, within 30 days after
         the end of each calendar quarter,  an Employee Loan delinquency  report
         for the immediately  preceding  calendar quarter.  The Agent shall have
         the  exclusive  right to remove the  Servicer at any time for cause and
         during  the  continuation  of an Event of  Default,  and,  upon 30 days
         written notice,  without cause. Upon any such removal,  the Agent shall
         promptly   appoint  a  successor   Servicer  who  shall  be  reasonably
         acceptable to the Borrower;  provided, however, that no approval of the
         Borrower  shall  be  required  during  the  continuance  of an Event of
         Default.  The Borrower,  with the prior  written  consent of the Agent,
         which consent shall not be unreasonably withheld, shall be permitted to
         appoint a  subservicer  to perform its  obligations  under this Section
         2.2(c).

         Section 2.3.      The Banks' Obligations Under the Loans.

         Each Bank shall be obligated to fund Revolving  Credit Loans  requested
under Section 5.2(b) and its  participation  in Employee Loans  requested  under
Section  5.2(c) in  accordance  with its Ratable Share and Sections 2.1 and 2.2.
The obligations of each Bank hereunder are several and not joint. The failure of
any Bank to perform its  obligations  hereunder shall not affect the obligations
of any other Bank or the Borrower to any other party,  nor shall any other party
be liable for the failure of such Bank to perform its obligations hereunder.

         Section 2.4.      Extension and Conversion.

         Subject  to the terms of  Section  5.2,  the  Borrower  shall  have the
option,  on any Business Day, to extend existing  Revolving  Credit Loans into a
subsequent permissible Interest Period or to convert Revolving Credit Loans into
Revolving Credit Loans of another type;  provided,  however,  that (i) except as
provided in Section 2.14, Eurodollar Loans may be converted into Base Rate Loans
only on the last day of the Interest Period applicable thereto,  (ii) Eurodollar
Loans may be  extended,  and Base Rate Loans may be  converted  into  Eurodollar
Loans,  only if no Incipient  Default or Event of Default is in existence on the
date of extension or conversion,  (iii)  Revolving  Credit Loans extended as, or
converted into, Eurodollar Loans shall be subject to the terms of the definition
of "Interest Period" and shall be in such minimum amounts as provided in Section
2.1(b),  (iv) no more than 5  separate  Eurodollar  Loans  shall be  outstanding
hereunder  at any time and (v) any  request for  extension  or  conversion  of a
Eurodollar  Loan which shall fail to specify an Interest  Period shall be deemed
to be a request  for an Interest  Period of one month.  Each such  extension  or
conversion   shall  be  effected   by  the   Borrower  by  giving  a  Notice  of
Extension/Conversion  (or telephone notice promptly confirmed in writing) to the
Agent prior to 11:00 A.M.  (Charlotte,  North Carolina time) on the Business Day
of, in the case of the  conversion  of a Eurodollar  Loan into a Base Rate Loan,
and on the  third  Business  Day prior  to,  in the case of the  extension  of a
Eurodollar  Loan as, or conversion of a Base Rate Loan into, a Eurodollar  Loan,
the date of the proposed  extension or  conversion,  specifying  the date of the
proposed  extension or conversion,  the Revolving Credit Loans to be so extended
or  converted,  the types of Revolving  Credit  Loans into which such  Revolving
Credit Loans are to be converted and, if  appropriate,  the applicable  Interest
Periods with respect  thereto.  Each request for extension or  conversion  shall
constitute  a  representation  and  warranty  by the  Borrower  of  the  matters
specified  in  Section  5.2(a).  In the  event  the  Borrower  fails to  request
extension or conversion of any Eurodollar  Loan in accordance with this Section,
or any such  conversion  or  extension  is not  permitted  or  required  by this
Section,  then such Loan shall be automatically  converted into a Base Rate Loan
at the end of the Interest Period applicable thereto.  The Agent shall give each
Bank  notice as  promptly  as  practicable  of any such  proposed  extension  or
conversion affecting any Loan.

         Section 2.5.      Letters of Credit.

                  (a) Issuance.  Subject to the terms and conditions  hereof and
         of the LOC Documents,  if any, and any other terms and conditions which
         the Issuing Bank may reasonably  require,  the Issuing Bank agrees from
         time to time to issue  Letters of Credit  during the  Revolving  Credit
         Loan  Commitment  Period  as  the  Borrower  may  request,  in  a  form
         acceptable to the Issuing  Bank;  provided,  however,  that (i) the LOC
         Obligations  outstanding  shall not at any time exceed  $10,000,000 and
         (ii) the sum of the aggregate principal amount of outstanding Revolving
         Credit  Loans plus LOC  Obligations  outstanding  shall not at any time
         exceed the Aggregate  Revolving Credit Commitment.  Except as otherwise
         expressly  agreed upon by all the Banks, no Letter of Credit shall have
         an original  expiry date more than two years from the date of issuance;
         provided, further, that no Letter of Credit, as originally issued or as
         extended, shall have an expiry date extending beyond the day before the
         Maturity Date for Revolving  Credit Loans.  Each Letter of Credit shall
         comply with the related LOC Documents.  The issuance and expiry date of
         each Letter of Credit shall be a Business Day.

                  (b) Notice and  Reports.  The  request  for the  issuance of a
         Letter of Credit shall be submitted by the Borrower to the Issuing Bank
         at  least  three  (3)  Business  Days  prior to the  requested  date of
         issuance. The Issuing Bank will, at least quarterly and more frequently
         upon  request,  disseminate  to each of the  Banks  a  detailed  report
         specifying the Letters of Credit which are then issued and  outstanding
         and any activity with respect thereto which may have occurred since the
         date of the prior report,  and including  therein,  among other things,
         the account party, the beneficiary,  the face amount and expiry date as
         well as any payment or expirations which may have occurred.

                  (c)  Participation.  Each Bank,  upon  issuance of a Letter of
         Credit,  shall be  deemed to have  purchased  without  recourse  a risk
         participation  from the  Issuing  Bank in such Letter of Credit and the
         obligations arising thereunder,  in each case in an amount equal to its
         pro rata share of the obligations under such Letter of Credit (based on
         the  respective  Ratable  Shares of the  Banks)  and shall  absolutely,
         unconditionally  and irrevocably  assume, as primary obligor and not as
         surety,  and be  obligated  to pay to the  Issuing  Bank  therefor  and
         discharge when due, its pro rata share of the obligations arising under
         such Letter of Credit.  Without  limiting  the scope and nature of each
         Bank's  participation  in any Letter of Credit,  to the extent that the
         Issuing Bank has not been reimbursed as required hereunder or under any
         such Letter of Credit, each such Bank shall pay to the Issuing Bank its
         pro rata  share of such  unreimbursed  drawing in same day funds on the
         day of  notification  by the Issuing  Bank of an  unreimbursed  drawing
         pursuant to the provisions of subsection (d) hereof.  The obligation of
         each Bank to so  reimburse  the  Issuing  Bank  shall be  absolute  and
         unconditional  and  shall  not  be  affected  by the  occurrence  of an
         Incipient  Default,  an Event of  Default  or any other  occurrence  or
         event. Any such reimbursement shall not relieve or otherwise impair the
         obligation  of the  Borrower to  reimburse  the Issuing  Bank under any
         Letter of Credit, together with interest as hereinafter provided.

                  (d)  Reimbursement.  In the  event of any  drawing  under  any
         Letter of Credit,  the Issuing Bank will promptly  notify the Borrower.
         Unless the Borrower shall immediately  notify the Issuing Bank that the
         Borrower  intends to otherwise  immediately  reimburse the Issuing Bank
         for such drawing,  the Borrower  shall be deemed to have requested that
         the Banks make a Revolving  Credit Loan in the amount of the drawing as
         provided in subsection (e) hereof on the related Letter of Credit,  the
         proceeds  of which will be used to satisfy  the  related  reimbursement
         obligations. The Borrower promises to reimburse the Issuing Bank on the
         day of drawing under any Letter of Credit  (either with the proceeds of
         a Revolving  Credit Loan  obtained  hereunder or otherwise) in same day
         funds.  If the  Borrower  shall fail to  reimburse  the Issuing Bank as
         provided  hereinabove  (and Revolving Credit Loans are not available to
         effect such  reimbursement),  the  unreimbursed  amount of such drawing
         shall bear interest at a per annum rate equal to the Base Rate plus two
         percent (2%). The Borrower's reimbursement  obligations hereunder shall
         be absolute and unconditional  under all circumstances  irrespective of
         any rights of setoff,  counterclaim  or defense to payment the Borrower
         may claim or have against the Issuing Bank, the Agent,  the Banks,  the
         beneficiary  of the Letter of Credit  drawn  upon or any other  Person,
         including  without  limitation  any defense based on any failure of the
         applicable  account party or the Borrower to receive  consideration  or
         the legality, validity, regularity or unenforceability of the Letter of
         Credit.  The Issuing Bank will  promptly  notify the other Banks of the
         amount of any unreimbursed  drawing and each Bank shall promptly pay to
         the  Agent  for the  account  of the  Issuing  Bank in  dollars  and in
         immediately  available  funds, the amount of such Bank's pro rata share
         of such  unreimbursed  drawing.  Such payment  shall be made on the day
         such  notice is  received  by such Bank from the  Issuing  Bank if such
         notice is received at or before 2:00 P.M.  (Charlotte,  North  Carolina
         time);  otherwise  such  payment  shall be made at or before 12:00 Noon
         (Charlotte,  North Carolina  time) on the Business Day next  succeeding
         the day such notice is received.  If such Bank does not pay such amount
         to the Issuing  Bank in full upon such  request,  such Bank  shall,  on
         demand,  pay to the Agent for the account of the Issuing Bank  interest
         on the unpaid  amount  during the period from the date of such  drawing
         until such Bank pays such amount to the Issuing  Bank in full at a rate
         per annum equal to, if paid within two (2) Business Days of the date of
         drawing,  the Federal Funds Rate and  thereafter at a rate equal to the
         Base Rate.  Each Bank's  obligation to make such payment to the Issuing
         Bank,  and the right of the Issuing Bank to receive the same,  shall be
         absolute and  unconditional,  shall not be affected by any circumstance
         whatsoever and without  regard to the  termination of this Agreement or
         the Total Commitments hereunder,  the existence of an Incipient Default
         or Event of  Default  or the  acceleration  of the  obligations  of the
         Borrower  hereunder  and shall be made  without any offset,  abatement,
         withholding or reduction whatsoever.  Simultaneously with the making of
         each such  payment  by a Bank to the  Issuing  Bank,  such Bank  shall,
         automatically and without any further action on the part of the Issuing
         Bank or such Bank,  acquire a participation  in an amount equal to such
         payment  (excluding the portion of such payment  constituting  interest
         owing to the Issuing Bank) in the related  unreimbursed drawing portion
         of the LOC  Obligation  and in the interest  thereon and in the related
         LOC Documents, and shall have a claim against the Borrower with respect
         thereto.

                  (e) Repayment with Revolving Credit Loans. On any day on which
         the Borrower shall have requested,  or been deemed to have requested, a
         Revolving  Credit Loan to reimburse a drawing under a Letter of Credit,
         the Agent shall give  notice to the Banks that a Revolving  Credit Loan
         has been  requested  or deemed  requested by the Borrower to be made in
         connection  with a drawing  under a Letter of  Credit,  in which case a
         Revolving  Credit  Loan  comprised  solely of Base Rate Loans  shall be
         immediately  made to the  Borrower  by all Banks  (notwithstanding  any
         termination of the Total Commitments  pursuant to Section 8.2) pro rata
         based on the respective  Ratable Shares of the Banks (determined before
         giving effect to any termination of the Total  Commitments  pursuant to
         Section 8.2) and the  proceeds  thereof  shall be paid  directly to the
         Issuing Bank for  application to the respective LOC  Obligations.  Each
         such Bank hereby  irrevocably agrees to make its pro rata share of each
         such Revolving  Credit Loan immediately upon any such request or deemed
         request in the amount,  in the manner and on the date  specified in the
         preceding sentence notwithstanding (i) the amount of such borrowing may
         not comply with the minimum  amount for  advances of  Revolving  Credit
         Loans  otherwise  required  hereunder,   (ii)  whether  any  conditions
         specified in Section 5.2 are then satisfied, (iii) whether an Incipient
         Default or an Event of Default  then  exists,  (iv) failure of any such
         request or deemed request for Revolving  Credit Loans to be made by the
         time  otherwise  required  hereunder,  (v)  whether  the  date  of such
         borrowing  is a date on which  Revolving  Credit  Loans  are  otherwise
         permitted  to be made  hereunder or (vi) any  termination  of the Total
         Commitments  relating thereto immediately prior to or contemporaneously
         with such borrowing. In the event that any Revolving Credit Loan cannot
         for any reason be made on the date otherwise required above (including,
         without  limitation,  as a result of the  commencement  of a proceeding
         under the Federal Bankruptcy Code with respect to any of the Borrower),
         then each such Bank hereby agrees that it shall forthwith  purchase (as
         of the date such borrowing would otherwise have occurred,  but adjusted
         for any payments  received  from the Borrower on or after such date and
         prior to such purchase) from the Issuing Bank such participation in the
         outstanding  LOC  Obligations  as shall be necessary to cause each such
         Bank  to  share  in  such  LOC  Obligations  ratably  (based  upon  the
         respective Ratable Shares of the Banks (determined before giving effect
         to any termination of the Total Commitments  pursuant to Section 8.2)),
         provided  that at the time any  purchase of  participation  pursuant to
         this sentence is actually made,  the purchasing  Bank shall be required
         to pay to the Issuing  Bank, to the extent not paid to the Issuing Bank
         by the Borrower in accordance  with the terms of subsection (d) hereof,
         interest on the principal  amount of  participation  purchased for each
         day  from  and  including  the day  upon  which  such  borrowing  would
         otherwise  have  occurred to but excluding the date of payment for such
         participation,  at the rate equal to, if paid  within two (2)  Business
         Days of the date of the Revolving  Credit Loan, the Federal Funds Rate,
         and thereafter at a rate equal to the Base Rate.

                  (f)   Designation   of   Subsidiaries   as  Account   Parties.
         Notwithstanding  anything to the contrary set forth in this  Agreement,
         including without limitation  subsection (a) hereof, a Letter of Credit
         issued hereunder may contain a statement to the effect that such Letter
         of Credit is issued for the account of a  Subsidiary  of the  Borrower,
         provided that notwithstanding such statement, the Borrower shall be the
         actual account party for all purposes of this Agreement for such Letter
         of  Credit  and  such   statement   shall  not  affect  the  Borrower's
         reimbursement  obligations  hereunder  with  respect to such  Letter of
         Credit.

                  (g)      Renewal, Extension.  The renewal or extension of any
         Letter of Credit shall, for purposes hereof, be treated in all respects
         the same as the issuance of a new Letter of Credit hereunder.

                  (h) Uniform  Customs and Practices.  The Issuing Bank may have
         the  Letters of Credit be subject to The Uniform  Customs and  Practice
         for  Documentary  Credits,  as published as of the date of issue by the
         International  Chamber of Commerce  (the "UCP"),  in which case the UCP
         may be  incorporated  therein  and deemed in all  respects to be a part
         thereof.

                  (i)      Indemnification; Nature of Issuing Bank's Duties.

                           (i) In addition to its other  obligations  under this
                  Section 2.5, the Borrower hereby agrees to protect, indemnify,
                  pay and save the Issuing  Bank  harmless  from and against any
                  and all claims, demands, liabilities,  damages, losses, costs,
                  charges and expenses  (including  reasonable  attorneys' fees)
                  that  the  Issuing  Bank  may  incur  or  be  subject  to as a
                  consequence,  direct or  indirect,  of (A) the issuance of any
                  Letter of Credit or (B) the  failure  of the  Issuing  Bank to
                  honor a  drawing  under a Letter  of Credit as a result of any
                  act or omission,  whether rightful or wrongful, of any present
                  or  future  de jure or de  facto  government  or  governmental
                  authority   (all  such  acts  or   omissions,   herein  called
                  "Government Acts").

                           (ii) As between the  Borrower  and the Issuing  Bank,
                  the Borrower shall assume all risks of the acts,  omissions or
                  misuse of any Letter of Credit by the beneficiary thereof. The
                  Issuing  Bank  shall  not be  responsible:  (A) for the  form,
                  validity,  sufficiency,  accuracy, genuineness or legal effect
                  of any document  submitted by any party in connection with the
                  application for and issuance of any Letter of Credit,  even if
                  it should in fact prove to be in any or all respects  invalid,
                  insufficient,  inaccurate,  fraudulent or forged;  (B) for the
                  validity or  sufficiency  of any  instrument  transferring  or
                  assigning  or  purporting  to transfer or assign any Letter of
                  Credit  or the  rights  or  benefits  thereunder  or  proceeds
                  thereof,  in whole or in part, that may prove to be invalid or
                  ineffective  for  any  reason;  (C)  for  errors,   omissions,
                  interruptions  or delays in  transmission  or  delivery of any
                  messages,  by mail,  cable,  telegraph,  telex  or  otherwise,
                  whether or not they be in cipher; (D) for any loss or delay in
                  the  transmission  or otherwise  of any  document  required in
                  order to make a  drawing  under a Letter  of  Credit or of the
                  proceeds  thereof;  and (E) for any consequences  arising from
                  causes  beyond the  control of the  Issuing  Bank,  including,
                  without  limitation,  any Government  Acts.  None of the above
                  shall  affect,  impair,  or prevent the vesting of the Issuing
                  Bank's rights or powers hereunder.

                           (iii)  In  furtherance   and  extension  and  not  in
                  limitation of the specific  provisions  hereinabove set forth,
                  any action taken or omitted by the Issuing  Bank,  under or in
                  connection   with  any   Letter  of  Credit  or  the   related
                  certificates, if taken or omitted in good faith, shall not put
                  such  Issuing  Bank  under  any  resulting  liability  to  the
                  Borrower.  It is  the  intention  of  the  parties  that  this
                  Agreement  shall be  construed  and  applied  to  protect  and
                  indemnify the Issuing Bank against any and all risks  involved
                  in the  issuance of the Letters of Credit,  all of which risks
                  are  hereby  assumed  by  the  Borrower   including,   without
                  limitation,  any and all  Government  Acts.  The Issuing  Bank
                  shall  not,  in any way,  be  liable  for any  failure  by the
                  Issuing  Bank or  anyone  else to pay any  drawing  under  any
                  Letter of Credit  as a result  of any  Government  Acts or any
                  other cause beyond the control of the Issuing Bank.

                           (iv)  Nothing in this  subsection  (i) is intended to
                  limit the reimbursement  obligations of the Borrower contained
                  in subsection (d) above. The obligations of the Borrower under
                  this  subsection  (i) shall  survive the  termination  of this
                  Agreement.  No  act  or  omissions  of any  current  or  prior
                  beneficiary  of a Letter of Credit  shall in any way affect or
                  impair the rights of the  Issuing  Bank to enforce  any right,
                  power or benefit under this Agreement.

                           (v)   Notwithstanding   anything   to  the   contrary
                  contained in this  subsection  (i), the Borrower shall have no
                  obligation  to  indemnify  the Issuing  Bank in respect of any
                  claims, demands, liabilities,  damages, losses, costs, charges
                  or expenses  incurred  by the Issuing  Bank (A) arising out of
                  the gross  negligence  or willful  misconduct  of the  Issuing
                  Bank, as determined by a court of competent  jurisdiction,  or
                  (B)  caused by the  Issuing  Bank's  failure  to pay under any
                  Letter  of  Credit  after  presentation  to  it  of a  request
                  strictly  complying  with the  terms  and  conditions  of such
                  Letter  of  Credit,  as  determined  by a court  of  competent
                  jurisdiction,  unless such payment is  prohibited  by any law,
                  regulation, court order or decree.

                  (j) Responsibility of Issuing Bank. It is expressly understood
         and agreed that the  obligations  of the Issuing Bank  hereunder to the
         Banks are only those expressly set forth in this Agreement and that the
         Issuing Bank shall be entitled to assume that the conditions  precedent
         set forth in  Section  5.2 have  been  satisfied  unless it shall  have
         acquired  actual  knowledge that any such  condition  precedent has not
         been  satisfied;  provided,  however,  that  nothing  set forth in this
         Section  2.5  shall be  deemed  to  prejudice  the right of any Bank to
         recover from the Issuing  Bank any amounts made  available by such Bank
         to the Issuing  Bank  pursuant to this Section 2.5 in the event that it
         is  determined  by a court of competent  jurisdiction  that the payment
         with  respect to a Letter of Credit  constituted  gross  negligence  or
         willful misconduct on the part of the Issuing Bank.

                  (k)      Conflict with LOC Documents.  In the event of any
         conflict between this Agreement and any LOC Document, this Agreement
         shall control.

         Section 2.6.      Repayment.

         The Borrower shall repay the  outstanding  principal  balance under the
Revolving  Credit Notes in full on the Maturity Date for Revolving Credit Loans.
The Borrower shall also repay the amount of the  outstanding  principal  balance
under any  Employee  Note that is due and  payable  under  such  Employee  Note,
whether by  acceleration  of  maturity or  otherwise,  30 days after such amount
becomes due and payable if such amount is then unpaid,  provided,  however, that
at any time that defaults under all or  substantially  all of the Employee Notes
have  occurred and are  continuing,  the Borrower  shall  immediately  repay the
aggregate  principal  amount  outstanding  under the Employee  Notes upon demand
therefor by the Agent.

         Section 2.7.      Interest.

                  (a)      Revolving Credit Loans. Subject to the provisions of
         subsection (d) below, each Revolving Credit Loan shall bear interest
         on the outstanding principal balance thereunder at a per annum
         rate equal to:

                           (i) Base  Rate  Loans.  During  such  periods  as any
                  Revolving  Credit Loan (or portion  thereof)  shall consist of
                  Base Rate  Loans,  at a per annum  rate equal to the Base Rate
                  plus the  Applicable  Percentage for Base Rate Loans in effect
                  from time to time.

                           (ii)  Eurodollar  Loans.  During such  periods as any
                  Revolving  Credit Loan (or any portion  thereof) shall consist
                  of Eurodollar  Loans,  at a per annum rate equal to the sum of
                  the Eurodollar Rate for the Interest Period in effect for such
                  Eurodollar Loan plus the Applicable  Percentage for Eurodollar
                  Loans in effect from time to time.

                  (b)      Employee Loans.  Subject to the provisions of
         subsection (d) below, each Employee Loan shall bear interest on the
         outstanding principal balance thereunder at a per annum rate equal to
         the Applicable Rate.

                  (c)  Payments  and  Accruals.  Interest  shall be  payable  in
         arrears  on each  Interest  Payment  Date  applicable  to the  Loan (or
         portion thereof) unless otherwise specified herein. The interest due on
         each  Interest  Payment  Date shall be (i) with  respect  to  Revolving
         Credit Loans that are Base Rate Loans,  the interest accrued during the
         immediately  preceding  month,  (ii) with respect to  Revolving  Credit
         Loans  that are  Eurodollar  Loans,  the  interest  accrued  during the
         applicable  Interest Period or, where the applicable Interest Period is
         more than three months, the immediately  preceding  three-month portion
         thereof and (iii) with respect to Employee Loans,  the interest accrued
         during the immediately  preceding  calendar  quarter.  Unless otherwise
         specifically  provided  herein or in the Notes,  all late  payments  of
         principal  and interest  shall bear  interest at the rate  specified in
         clause (d) immediately below.

                  (d) During an Event of Default. Notwithstanding the foregoing,
         upon  the  occurrence,  and  during  the  continuance,  of an  Event of
         Default, the principal of and, to the extent permitted by law, interest
         on the Loans and any other amounts owing  hereunder or under the Notes,
         the Borrower  Guaranty,  the Employee  Pledge  Agreements and any other
         Credit Documents shall bear interest, payable on demand, at a per annum
         rate 2% greater than the rate which would  otherwise be applicable  (or
         if no rate is applicable, whether in respect of interest, fees or other
         amounts, then 2% greater than the Base Rate).

         Section 2.8.      Prepayments; Commitment Increase; Reduction or
Termination.

         (a) Voluntary Prepayments.  The Borrower shall have the right to prepay
the Revolving Credit Loans in whole or in part from time to time on any Business
Day without premium or penalty;  provided,  however,  that (i) Revolving  Credit
Loans that are  Eurodollar  Loans may only be prepaid  on three  Business  Days'
prior written notice to the Agent specifying the applicable Loans to be prepaid;
(ii) any prepayment of Revolving  Credit Loans that are Eurodollar Loans will be
subject to Section  2.17;  (iii) each such partial  prepayment of Loans shall be
(A) in the case of  Revolving  Credit  Loans  that are  Eurodollar  Loans,  in a
minimum principal amount of $1,000,000 and in integral  multiples of $100,000 in
excess thereof and (B) in the case of Revolving  Credit Loans that are Base Rate
Loans, in a minimum  principal  amount of $100,000 and in integral  multiples of
$100,000 in excess  thereof.  Subject to the foregoing  terms,  amounts  prepaid
hereunder  shall be applied as the  Borrower  may elect;  provided,  that if the
Borrower shall fail to specify  application of a voluntary  prepayment then such
prepayment  shall be  applied  first to Base Rate  Loans and then to  Eurodollar
Loans in direct order of Interest Period maturities.

         (b)      Mandatory Prepayments; Purchase of Employee Notes.

                  (i)  Overadvance.  (A) If at any time the sum of the aggregate
         amount of  outstanding  Revolving  Credit  Loans  plus LOC  Obligations
         outstanding shall exceed the Aggregate Revolving Credit Commitment, the
         Borrower  promises  to prepay  immediately  the  outstanding  principal
         balance  on the  Revolving  Credit  Loans in an  amount  sufficient  to
         eliminate such excess.

                           (B) If at any time the sum of the aggregate amount of
                  outstanding  Employee  Loans shall  exceed the  Employee  Loan
                  Commitment, then the Borrower shall purchase from NationsBank,
                  Employee  Notes in an  amount  sufficient  to  eliminate  such
                  excess.

                  (ii) Margin Stock Event. In the event that any of the Employee
         Pledged  Shares  become  "margin  stock" as defined by  Regulation U (a
         "Margin Stock Event"),  the Borrower promises to prepay immediately the
         outstanding  principal  balance on the Revolving Credit Loans and/or to
         purchase Employee Loans in an amount sufficient to bring the Loans into
         compliance with Regulation U.

                  (iii) Noncompliance with Section 2.1(f). In the event that the
         Borrower shall have failed timely to deliver the documentation required
         to be  delivered  in  accordance  with  Section  2.1(f),  the  Borrower
         promises to purchase the applicable Employee Loans.

                  (iv)  Application.  All  prepayments  made  pursuant  to  this
Section 2.8(b) shall (A) be subject to Section 2.17, and (B) be applied first to
Base Rate Loans and then to Eurodollar  Loans in direct order of Interest Period
maturities.

         (c) Notice of  Prepayments;  Reborrowing.  The  Borrower  will  provide
notice to the Agent of any prepayment by 12:00 noon  (Charlotte,  North Carolina
time) on the date of  prepayment in the case of  prepayments  of Base Rate Loans
and on the third  Business  Day prior to the date of  prepayment  in the case of
prepayments of Revolving Credit Loans that are Eurodollar Loans. Amounts paid on
the  Revolving  Credit  Loans  under  this  Section  2.8  may be  reborrowed  in
accordance with the provisions hereof.

         (d) Commitment Increase.  Upon 15 days' advance written notice from the
Borrower to the Banks, and in increments of $2.5 million, up to $12.5 million of
the amount  available  under the Aggregate  Revolving  Credit  Commitment may be
converted to amounts  available  under the Employee Loan  Commitment,  and up to
$12.5 million of the amount  available  under the Employee Loan  Commitment  may
similarly be converted to amounts available under the Aggregate Revolving Credit
Commitment;  provided,  however,  that such conversions may be implemented on no
more than two occasions  during any fiscal year of the  Borrower;  and provided,
further,  that any Loans outstanding which would cause the applicable Commitment
as a result of such  conversions to be exceeded shall be repaid in the amount of
such  excess  before  giving  effect  to any  such  conversions.  Each  increase
hereunder in the Employee  Loan  Commitment or the  Aggregate  Revolving  Credit
Commitment  shall  reduce,  dollar for dollar,  the amount  available  under the
Aggregate   Revolving  Credit   Commitment  or  the  Employee  Loan  Commitment,
respectively.   The   Revolving   Credit   Commitment   and  the  Employee  Loan
Participation  of  each  Bank  shall  be  ratably  increased  or  decreased,  as
appropriate,  with each increase or decrease in the Aggregate  Revolving  Credit
Commitment and the Employee Loan Commitment.  At no time shall (i) the Aggregate
Revolving  Credit  Commitment  exceed  $107.5  million,  (ii) the Employee  Loan
Commitment exceed $37.5 million, or (iii) the aggregate of the Total Commitments
exceed $120 million.  The Aggregate Revolving Credit Commitment in effect on the
Maturity  Date  for  Employees  Loans,  as such  amount  has been  increased  or
decreased  pursuant  to this  subsection  (d),  shall  continue in effect as the
Aggregate Revolving Credit Commitment  thereafter,  except as such amount may be
reduced pursuant to subsection (e) below.

         (e) Reduction or Termination.  The Borrower may (i) terminate the Total
Commitments at any time if no Loans or LOC  Obligations  are outstanding at such
time, and (ii) ratably and permanently reduce from time to time, by an aggregate
amount of not less than $3,000,000 and additional increments of $1,000,000,  the
unused portion of the Total  Commitments,  and may, in increments of $1,000,000,
allocate  such  reductions  to  amounts  available  under the  Revolving  Credit
Commitments and the Employee Loan Participations.

         Section 2.9.      Fees.

         (a)      Arrangement Fee.  The Borrower agrees to pay to the Agent
(or its designee) in immediately available funds on or before the Closing Date
the arrangement fee set forth in the Agent's Fee Letter.

         (b) Unused Fee. In  consideration  of the aggregate  Total  Commitments
made available by the Banks  hereunder,  the Borrower agrees to pay to the Agent
for the account of the Banks a fee (the  "Unused  Fee") on the Unused  Aggregate
Total Commitment computed at a per annum rate for each day during the applicable
Unused Fee  Calculation  Period  (hereinafter  defined)  equal to the Applicable
Percentage  for such Unused Fee. The Unused Fee shall  commence to accrue on the
Closing Date and shall be due and payable in arrears on the third (3rd) Business
Day of each January,  April, July and October (and the Termination Date) for the
immediately  preceding  fiscal  quarter (or portion  thereof)  (each such fiscal
quarter or portion  thereof for which the Unused Fee is payable  hereunder being
herein  referred to as an "Unused Fee Calculation  Period"),  beginning with the
first of such dates to occur after the Closing Date.

         (c)      Administrative Fees.  The Borrower agrees to pay to the
Agent, for its own account, the annual administrative fee set forth in the
Agent's Fee Letter, payable on each anniversary of the Closing Date until and
including the last occurring Termination Date (the "Agent's Fee").

         (d)      Letter of Credit Fees.

                  (i) The Borrower agrees to pay to the Agent for account of the
         Banks, a fee for each Letter of Credit issued hereunder (the "LOC Fee")
         on the  available  amount  to be drawn  under  such  Letter  of  Credit
         computed  at a per annum rate for each day during  the  applicable  LOC
         Term (hereinafter  defined) equal to the Applicable Percentage for such
         LOC Fee. The LOC Fee shall  commence to accrue on the issuance date for
         each  Letter of Credit  and shall be due and  payable in arrears on the
         third (3rd) Business Day of each January,  April, July and October (and
         on the  expiry  date  thereof)  for the  immediately  preceding  fiscal
         quarter  (or  portion  thereof)  (each such  fiscal  quarter or portion
         thereof  for  which  the  LOC Fee is  payable  hereunder  being  herein
         referred to as an "LOC Term"),  beginning  with the first of such dates
         to occur after the date of issuance of each Letter of Credit.

                  (ii) In addition to the Letter of Credit Fee payable  pursuant
         to clause (i) above, the Borrower shall pay to the Issuing Bank for its
         own  account  without  sharing by the other  Banks the letter of credit
         fronting fees of (i) 0.125% on the  available  amount to be drawn under
         such Letter of Credit  computed at a per annum rate for each day during
         the  applicable  LOC Term and (ii) the  customary  charges from time to
         time of the  Issuing  Bank with  respect  to the  issuance,  amendment,
         transfer,  administration,  cancellation and conversion of, and drawing
         under, such Letters of Credit (collectively, the "Issuing Bank Fees").

         Section 2.10.     Method of Payment.

         Unless otherwise  provided  herein,  whenever any payment of principal,
interest,  fees or any other payment to be made  hereunder  becomes due on a day
other than a  Business  Day,  such  payment  may be made on the next  succeeding
Business  Day, and such  extension of time shall in such case be included in the
computation  of the  amount  of  interest  then to be  paid.  All  payments  and
prepayments by the Borrower  hereunder and the makers of Employee Notes shall be
made to the Agent,  at its address stated in Section 10.8 hereof,  in such money
of the  United  States as at the time of payment  shall be legal  tender for the
payment of public and private debts and in immediately  available funds, without
setoff,  deduction or counterclaim.  The Borrower and the Banks hereby authorize
the Agent to debit the deposit accounts of the Borrower, or to advance Revolving
Credit Loans on the Borrower's  behalf,  at the time any payment by the Borrower
to the Agent under this Agreement is due, in the amount of the required payment.
A payment  must be  received  by the Agent or an  instruction  must be given the
Agent to debit one or more deposit accounts of the Borrower and having collected
balances  sufficient  to make such  payment no later than 2:00 p.m.,  Charlotte,
North  Carolina,  time,  in order to be credited  to the  Borrower on the day of
receipt.  Except as expressly  provided  otherwise  herein,  all computations of
interest  and fees shall be made on the basis of actual  number of days  elapsed
over a year of 360 days,  except with respect to computation of interest on Base
Rate Loans and Employee Loans which (unless such rate is determined by reference
to the Federal  Funds Rate)  shall be  calculated  based on a year of 365 or 366
days, as appropriate.

         Section 2.11.     Application of Collections.

                  (a)   Distribution  to  Banks.   All  payments  of  principal,
         interest,  fees,  and costs or  expenses by the  Borrower  prior to the
         occurrence  and  continuance  of an Event of Default under Article VIII
         hereof,  or by the issuer of an Employee  Note prior to the  occurrence
         and  continuance  of a  default  under  such  Employee  Note,  shall be
         distributed  to the Banks by the Agent as provided in this Section.  If
         any other Bank shall at any time receive  payment on any Loans directly
         or  indirectly  from any  assets of the  Borrower  (including,  without
         limitation, through exercise of setoff rights under Section 8.3 hereof)
         or the  maker  of any  Employee  Note  in a  greater  amount  than  the
         proportionate  amount  of  principal  and  interest  due it under  this
         Agreement, then such Bank shall purchase for cash (immediately prior to
         such  payment,  if  necessary) a ratable  proportion  of the  Revolving
         Credit  Loans  or  the  amounts   outstanding   under   Employee   Loan
         Participations  held by the other Banks,  including the Agent,  so that
         all  recoveries of principal and interest  shall be shared by the Banks
         in accordance with their Ratable Shares.  If all or any portion of such
         excess payment is thereafter  recovered  from such Bank,  such purchase
         shall be  rescinded  and the purchase  price  restored to the extent of
         such recovery, but without interest.

                  (b)  Application  of  Collections  Prior to Event of  Default.
         Prior  to  the  occurrence  and  continuance  of an  Event  of  Default
         hereunder or of a default under an Employee Note, the Agent shall apply
         all  Collections to the payment of costs or expenses,  interest,  fees,
         and principal attributable to the Notes to which the Collections apply,
         in that order.  After the  occurrence  and  continuance of any Event of
         Default  hereunder  or a  default  under  an  Employee  Note,  all such
         applications  shall be made in accordance  with the terms of clause (c)
         immediately  below.  The Agent shall remit to the Banks in  immediately
         available funds, or retain for its own account, as applicable:  (i) out
         of  the  principal  portion  of  any  such  Collections,  each  Bank's,
         including  the Agent's,  Ratable  Share  thereof;  (ii) out of the fees
         portion of any such  Collections  each Bank's,  including  the Agent's,
         Ratable Share  thereof;  (iii) out of the interest  portion of any such
         Collections, each Bank's, including the Agent's, Ratable Share thereof;
         and (iv) out of the costs or expenses portion of any such  Collections,
         each  Bank's,  including  the Agent's,  costs or expenses,  pursuant to
         Section  10.6  hereof,  as  incurred.  All  remittances  of  principal,
         interest,  fees,  and costs or expenses  hereunder to each of the other
         Banks shall be made as soon as  practicable,  but in no instance  later
         than the  Business  Day of their  receipt  by the Agent in  immediately
         available  funds,  if such  receipt  occurs no later  than  12:00  noon
         Charlotte,  North  Carolina  time,  or the next  Business  Day, if such
         receipt occurs later than 12:00 noon, and all such remittances shall be
         effected  by the Agent's  initiating  wire  transfers  or by such other
         means as are agreed in writing by both the Agent and such Bank.  Unless
         otherwise  dictated  by a court of  competent  jurisdiction,  the Agent
         shall,  however,  have no obligation to pay any Bank any amounts except
         out  of  those  amounts  actually   received  in  collected  funds  for
         application  to  the  Obligations,  except  as  otherwise  specifically
         provided in clause (c) immediately below.

                  (c)  Application  of  Collections   After  Event  of  Default.
         Notwithstanding  any other  provisions of this Credit  Agreement to the
         contrary,  after the occurrence and during the  continuance of an Event
         of Default,  all amounts collected or received by the Agent or any Bank
         in  connection  with  the  Loans  or the  Notes  or on  account  of the
         Subsidiary  Guaranteed  Obligations  or any other  amounts  outstanding
         under any of the Credit  Documents  shall be paid over or  delivered as
         follows:

                  FIRST,  to the payment of all reasonable  out-of-pocket  costs
         and expenses (including without limitation  reasonable attorneys' fees)
         of the Agent in connection with enforcing the rights of the Banks under
         the Credit Documents;

                  SECOND, to payment of any fees owed to the Agent;

                  THIRD,  to the payment of all reasonable  out-of-pocket  costs
         and expenses (including without limitation, reasonable attorneys' fees)
         of each of the Banks in connection  with enforcing its rights under the
         Credit Documents or otherwise with respect to the Obligations  owing to
         such Bank;

                  FOURTH, to the payment of all accrued interest and fees on or
          in respect of the Obligations;

                  FIFTH, to the payment of the outstanding  principal  amount of
         the Subsidiary  Guaranteed  Obligations  (including the payment or cash
         collateralization of the outstanding LOC Obligations);

                  SIXTH, to all other  Obligations and other  obligations  which
         shall  have  become  due and  payable  under the  Credit  Documents  or
         otherwise and not repaid  pursuant to clauses  "FIRST"  through "FIFTH"
         above; and

                  SEVENTH, to the payment of the surplus, if any, to whoever may
         be lawfully entitled to receive such surplus.

In carrying  out the  foregoing,  (i) amounts  received  shall be applied in the
numerical  order  provided  until  exhausted  prior to  application  to the next
succeeding category; and (ii) each of the Banks shall receive an amount equal to
its  pro  rata  share  (based  on  the  proportion  that  the  then  outstanding
Obligations   held  by  such  Bank  bears  to  the  aggregate  then  outstanding
Obligations)  of amounts  available to be applied  pursuant to clauses  "THIRD",
"FOURTH",  "FIFTH" and "SIXTH"  above;  and (iii) to the extent that any amounts
available for distribution  pursuant to clause "FIFTH" above are attributable to
the issued but undrawn  amount of  outstanding  Letters of Credit,  such amounts
shall be held by the Agent in a cash  collateral  account and applied (A) first,
to reimburse the Issuing Bank for any drawings  under such Letters of Credit and
(B) then,  following  the  expiration  of all  Letters of  Credit,  to all other
obligations of the types  described in clauses  "FIFTH" and "SIXTH" above in the
manner provided in this Section 2.11(c).

         Section 2.12.     Capital Adequacy.

         If, after the date hereof, any Bank has determined that the adoption or
the becoming  effective of, or any change in, or any change by any  Governmental
Authority,  central bank or comparable agency charged with the interpretation or
administration   thereof  in  the   interpretation  or  administration  of,  any
applicable law, rule or regulation regarding capital adequacy,  or compliance by
such Bank with any request or directive  regarding  capital adequacy (whether or
not having the force of law) of any such  authority,  central bank or comparable
agency,  has or would  have the  effect of  reducing  the rate of return on such
Bank's  capital or assets as a consequence  of its  commitments  or  obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption,  effectiveness,  change or compliance  (taking into consideration such
Bank's policies with respect to capital  adequacy),  then, upon notice from such
Bank to the Borrower,  the Borrower  shall be obligated to pay to such Bank such
additional  amount or amounts as will  compensate  such Bank for such reduction.
Each  determination  by any such Bank of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.

         Section 2.13.     Inability To Determine Interest Rate.

         If prior to the first day of any Interest Period,  the Agent shall have
determined  (which  determination  shall  be  conclusive  and  binding  upon the
Borrower,  absent manifest error) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar  Rate for such  Interest  Period,  the Agent  shall give  telecopy or
telephonic  notice  thereof to the Borrower and the Banks as soon as practicable
thereafter.  If such notice is given (x) any  Eurodollar  Loans  requested to be
made on the first day of such Interest  Period shall be made as Base Rate Loans,
(y) any Revolving Credit Loans that were to have been converted on the first day
of such Interest  Period to or continued as Eurodollar  Loans shall be converted
to or  continued  as Base Rate Loans and (z) any  outstanding  Eurodollar  Loans
shall be  converted,  on the first  day of such  Interest  Period,  to Base Rate
Loans.  Until such notice has been withdrawn by the Agent, no further Eurodollar
Loans shall be made or continued as such,  nor shall the Borrower have the right
to convert Base Rate Loans to Eurodollar Loans.

         Section 2.14.     Illegality.

         Notwithstanding  any other provision  herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring  after the Closing Date shall make it unlawful for any Bank to make or
maintain  Eurodollar  Loans as contemplated by this Credit  Agreement,  (a) such
Bank shall  promptly give written notice of such  circumstances  to the Borrower
and the Agent (which notice shall be withdrawn  whenever such  circumstances  no
longer  exist),  (b) the  commitment of such Bank  hereunder to make  Eurodollar
Loans,  continue  Eurodollar  Loans  as such  and  convert  Base  Rate  Loans to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Bank to make or maintain Eurodollar Loans, such Bank
shall  then have a  commitment  only to make a Base Rate Loan when a  Eurodollar
Loan is  requested  and (c) such Bank's  Loans then  outstanding  as  Eurodollar
Loans,  if any,  shall be  converted  automatically  to Base  Rate  Loans on the
respective last days or the then current  Interest  Periods with respect to such
Loans or within such earlier  period as required by law. If any such  conversion
of a  Eurodollar  Loan  occurs  on a day  which  is not the last day of the then
current  Interest  Period with respect  thereto,  the Borrower shall pay to such
Bank such amounts, if any, as may be required pursuant to Section 2.17.

         Section 2.15.     Requirements of Law.

         If the  adoption of or any change in any  Requirement  of Law or in the
interpretation or application  thereof  applicable to any Bank, or compliance by
any Bank with any request or directive  (whether or not having the force of law)
from any  central  bank or  other  Governmental  Authority,  in each  case  made
subsequent  to the  Closing  Date  (or,  if later,  the date on which  such Bank
becomes a Bank):

                  (a) shall subject such Bank to any tax of any kind  whatsoever
         with respect to any Letter of Credit or any Eurodollar Loans made by it
         or its  obligation  to make  Eurodollar  Loans,  or change the basis of
         taxation  of  payments  to such Bank in  respect  thereof  (except  for
         Non-Excluded  Taxes  covered by Section  2.16  (including  Non-Excluded
         Taxes  imposed  solely by reason of any  failure of such Bank to comply
         with its obligations  under Section 2.16) and changes in taxes measured
         by or imposed upon the overall net income, or franchise tax (imposed in
         lieu of such net income tax),  of such Bank or its  applicable  lending
         office, branch, or any affiliate thereof);

                  (b) shall  impose,  modify  or hold  applicable  any  reserve,
         special deposit,  compulsory loan or similar requirement against assets
         held  by,  deposits  or other  liabilities  in or for the  account  of,
         advances,  loans  or  other  extensions  of  credit  by,  or any  other
         acquisition of funds by, any office of such Bank which is not otherwise
         included in the determination of the Eurodollar Rate hereunder; or

                  (c)      shall impose on such Bank any other condition
         (excluding any tax of any kind whatsoever);

         and the result of any of the  foregoing is to increase the cost to such
         Bank,  by an amount  which such Bank deems to be  material,  of making,
         converting  into,  continuing  or  maintaining  Eurodollar  Loans or to
         reduce any amount receivable hereunder in respect thereof, then, in any
         such case,  upon  notice to the  Borrower  from such Bank,  through the
         Agent,  in  accordance  herewith,  the  Borrower  shall be obligated to
         promptly  pay  such  Bank,  upon its  demand,  any  additional  amounts
         necessary to compensate  such Bank for such  increased  cost or reduced
         amount  receivable,  provided  that, in any such case, the Borrower may
         elect to convert the  Eurodollar  Loans made by such Bank  hereunder to
         Base Rate Loans by giving the Agent at least one Business  Day's notice
         of such election, in which case the Borrower shall promptly pay to such
         Bank, upon demand, without duplication, such amounts, if any, as may be
         required  pursuant to Section  2.17.  If any Bank  becomes  entitled to
         claim any  additional  amounts  pursuant to this  subsection,  it shall
         provide  prompt  notice  thereof to the  Borrower,  through  the Agent,
         certifying  (x) that one of the events  described in this paragraph (a)
         has occurred and  describing  in  reasonable  detail the nature of such
         event,  (y) as to the increased cost or reduced  amount  resulting from
         such event and (z) as to the  additional  amount  demanded by such Bank
         and a reasonably detailed explanation of the calculation thereof.  Such
         a certificate as to any  additional  amounts  payable  pursuant to this
         subsection  submitted by such Bank,  through the Agent, to the Borrower
         shall be conclusive and binding on the parties hereto in the absence of
         manifest  error.  This covenant  shall survive the  termination of this
         Agreement  and the payment of the Loans and all other  amounts  payable
         hereunder.

         Section 2.16.     Taxes.

                  (a) Except as provided below in this subsection,  all payments
         made by the  Borrower  on  behalf  of  itself or on behalf of any other
         Person in connection with the Employee Loans under this Agreement,  the
         Revolving  Credit Notes and the  Employee  Notes shall be made free and
         clear of, and without  deduction or  withholding  for or on account of,
         any present or future income,  stamp or other taxes,  levies,  imposts,
         duties,  charges,  fees,  deductions or withholdings,  now or hereafter
         imposed,  levied,  collected,  withheld or  assessed  by any court,  or
         governmental  body, agency or other official,  excluding taxes measured
         by or imposed upon the overall net income of any Bank or its applicable
         lending office, or any branch or affiliate  thereof,  and all franchise
         taxes,  branch taxes,  taxes on doing  business or taxes on the overall
         capital or net worth of any Bank or its applicable  lending office,  or
         any branch or  affiliate  thereof,  in each case imposed in lieu of net
         income taxes,  imposed: (i) by the jurisdiction under the laws of which
         such Bank,  applicable lending office, branch or affiliate is organized
         or is located,  or in which its principal  executive office is located,
         or  any  nation  within  which  such  jurisdiction  is  located  or any
         political  subdivision  thereof;  or (ii) by reason  of any  connection
         between the  jurisdiction  imposing such tax and such Bank,  applicable
         lending  office,  branch or affiliate  other than a connection  arising
         solely from such Bank  having  executed,  delivered  or  performed  its
         obligations,  or received payment under or enforced, this Agreement. If
         any such non-excluded taxes, levies,  imposts,  duties,  charges, fees,
         deductions or  withholdings  ("Non-Excluded  Taxes") are required to be
         withheld from any amounts  payable to the Agent or any Bank  hereunder,
         (A) the amounts so payable to the Agent or such Bank shall be increased
         to the  extent  necessary  to yield to the  Agent or such  Bank  (after
         payment of all  Non-Excluded  Taxes) interest or any such other amounts
         payable  hereunder  at the rates or in the  amounts  specified  in this
         Agreement,  provided,  however,  that the Borrower shall be entitled to
         deduct and withhold any Non-Excluded Taxes and shall not be required to
         increase  any such  amounts  payable to any Bank that is not  organized
         under the laws of the United  States of  America or a state  thereof if
         such Bank fails to comply with the  requirements  of  paragraph  (b) of
         this  subsection  whenever  any  Non-Excluded  Taxes are payable by the
         Borrower, and (B) as promptly as possible thereafter the Borrower shall
         send to the Agent for its own  account or for the account of such Bank,
         as the case may be, a certified  copy of an original  official  receipt
         received by the Borrower showing payment thereof. If the Borrower fails
         to pay  any  Non-Excluded  Taxes  when  due to the  appropriate  taxing
         authority or fail to remit to the Agent the required  receipts or other
         required documentary  evidence,  the Borrower shall indemnify the Agent
         and the Banks for any incremental taxes, interest or penalties that may
         become  payable  by the  Agent  or any  Bank as a  result  of any  such
         failure.   The  agreements  in  this   subsection   shall  survive  the
         termination  of this  Agreement  and the  payment  of the Loans and all
         other amounts payable hereunder.

                  (b)      Each Bank that is not incorporated under the laws of
         the United States of America or a state thereof shall:

                           (X) (i) on or before  the date of any  payment by the
                  Borrower  under this  Agreement  to such Bank,  deliver to the
                  Borrower  and the Agent (A) two (2) duly  completed  copies of
                  United States  Internal  Revenue Service Form 1001 or 4224, or
                  successor applicable form, as the case may be, certifying that
                  it is  entitled  to  receive  payments  under  this  Agreement
                  without  deduction or withholding of any United States federal
                  income taxes and (B) an Internal  Revenue  Service Form W-8 or
                  W-9,  or  successor  applicable  form,  as the  case  may  be,
                  certifying  that it is  entitled to an  exemption  from United
                  States backup withholding tax;

                           (ii)  deliver to the  Borrower  and the Agent two (2)
                  further copies of any such form or  certification on or before
                  the date  that  any  such  form or  certification  expires  or
                  becomes  obsolete  and  after  the  occurrence  of  any  event
                  requiring  a  change  in  the  most  recent  form   previously
                  delivered by it to the Borrower; and

                           (iii) obtain such  extensions  of time for filing and
                  complete  such forms or  certifications  as may  reasonably be
                  requested by the Borrower or the Agent; or

                           (Y) in the case of any such Bank that is not a "bank"
                  within the  meaning of Section  881(c)(3)(A)  of the  Internal
                  Revenue  Code,  (i) represent to the Borrower (for the benefit
                  of the  Borrower  and the Agent)  that it is not a bank within
                  the meaning of Section  881(c)(3)(A)  of the Internal  Revenue
                  Code,  (ii) agree to furnish to the  Borrower on or before the
                  date of any payment by the Borrower,  with a copy to the Agent
                  two (2)  accurate  and  complete  original  signed  copies  of
                  Internal  Revenue  Service Form W-8, or  successor  applicable
                  form  certifying to such Bank's legal  entitlement at the date
                  of such certificate to an exemption from U.S.  withholding tax
                  under the provisions of Section 881(c) of the Internal Revenue
                  Code with respect to payments to be made under this  Agreement
                  (and to deliver to the  Borrower and the Agent two (2) further
                  copies  of such  form on or  before  the  date it  expires  or
                  becomes  obsolete  and  after  the  occurrence  of  any  event
                  requiring a change in the most recently  provided form and, if
                  necessary,  obtain any extensions of time reasonably requested
                  by the  Borrower or the Agent for filing and  completing  such
                  forms),  and (iii) agree, to the extent legally entitled to do
                  so, upon reasonable request by the Borrower, to provide to the
                  Borrower  (for the benefit of the Borrower and the Agent) such
                  other  forms  as  may  be  reasonably  required  in  order  to
                  establish the legal  entitlement  of such Bank to an exemption
                  from   withholding   with  respect  to  payments   under  this
                  Agreement;

                  unless  in  any  such  case  any  change  in  treaty,  law  or
                  regulation  has occurred  after the date such Person becomes a
                  Bank hereunder  which renders all such forms  inapplicable  or
                  which  would  prevent  such  Bank  from  duly  completing  and
                  delivering  any such form with  respect to it and such Bank so
                  advises  the  Borrower  and the Agent.  Each Person that shall
                  become a Bank or a  participant  of a Bank pursuant to Section
                  10.2 shall, upon the effectiveness of the related transfer, be
                  required  to  provide  all of the  forms,  certifications  and
                  statements required pursuant to this subsection, provided that
                  in the case of a participant of a Bank the obligations of such
                  participant of a Bank pursuant to this subsection (b) shall be
                  determined as if the  participant of a Bank were a Bank except
                  that  such  participant  of a  Bank  shall  furnish  all  such
                  required forms, certifications and statements to the Bank from
                  which the related participation shall have been purchased.

         Section 2.17.     Indemnity.

         The  Borrower  promises  to  indemnify  each Bank and to hold each Bank
harmless  from any loss or expense  which such Bank may sustain or incur  (other
than  through  such  Bank's  gross  negligence  or  willful   misconduct)  as  a
consequence of (a) default by the Borrower in making a borrowing of,  conversion
into or continuation  of Eurodollar  Loans after the Borrower has given a notice
requesting  the same in accordance  with the provisions of this  Agreement,  (b)
default by the Borrower in making any prepayment of a Eurodollar  Loan after the
Borrower has given a notice  thereof in accordance  with the  provisions of this
Agreement or (c) the making of a prepayment of  Eurodollar  Loans on a day which
is not the last day of an Interest Period with respect thereto.  With respect to
Revolving  Credit Loans that are  Eurodollar  Loans,  such  indemnification  may
include an amount  equal to the  excess,  if any,  of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of the applicable Interest Period
(or,  in the case of a failure to  borrow,  convert or  continue,  the  Interest
Period that would have  commenced  on the date of such  failure) in each case at
the applicable  rate of interest for such  Eurodollar  Loans provided for herein
(excluding,  however,  the Applicable  Percentage included therein, if any) over
(ii) the amount of interest (as reasonably  determined by such Bank) which would
have accrued to such Bank on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank  Eurodollar  market.  This
covenant shall survive the  termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.


                        ARTICLE III. SUBSIDIARY GUARANTY

         Section 3.1       The Subsidiary Guarantee.

         Each  of  the  Subsidiary   Guarantors  hereby  jointly  and  severally
guarantees  to each  Bank,  to each  Affiliate  of a Bank  that  enters  into an
Interest Rate Protection  Agreement and to the Agent as hereinafter provided the
prompt  payment  of the  Subsidiary  Guaranteed  Obligations  in full  when  due
(whether at stated  maturity,  as a mandatory  prepayment,  by  acceleration,  a
mandatory cash  collateralization  or otherwise) strictly in accordance with the
terms thereof. The Subsidiary Guarantors hereby further agree that if any of the
Subsidiary  Guaranteed  Obligations  are not paid in full when due  (whether  at
stated maturity, as a mandatory prepayment,  by acceleration,  as mandatory cash
collateralization  or otherwise),  the Subsidiary  Guarantors will,  jointly and
severally,  promptly pay the same, without any demand or notice whatsoever,  and
that in the case of any  extension  of time of  payment or renewal of any of the
Subsidiary Guaranteed  Obligations,  the same will be promptly paid in full when
due (whether at extended maturity, as a mandatory prepayment, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.

         Notwithstanding  any provision to the contrary  contained  herein or in
any other of the Credit Documents or Interest Rate Protection Agreements, to the
extent the  obligations  of a Subsidiary  Guarantor  shall be  adjudicated to be
invalid or unenforceable for any reason (including,  without limitation, because
of any  applicable  state or federal law relating to fraudulent  conveyances  or
transfers) then the obligations of each Subsidiary  Guarantor hereunder shall be
limited to the maximum amount that is permissible  under applicable law (whether
federal or state and  including,  without  limitation,  the  Federal  Bankruptcy
Code).

         Section 3.2       Obligations Unconditional.

         The obligations of the Subsidiary  Guarantors  under Section 3.1 hereof
are joint and several,  absolute and  unconditional,  irrespective of the value,
genuineness,  validity,  regularity  or  enforceability  of any  of  the  Credit
Documents or Interest  Rate  Protection  Agreements,  or any other  agreement or
instrument referred to therein, or any substitution,  release or exchange of any
other guarantee of or security for any of the Subsidiary Guaranteed Obligations,
and, to the fullest  extent  permitted by applicable  law,  irrespective  of any
other  circumstance  whatsoever  which  might  otherwise  constitute  a legal or
equitable discharge or defense of a surety or Subsidiary Guarantor, it being the
intent of this Section 3.2 that the  obligations  of the  Subsidiary  Guarantors
hereunder shall be absolute and unconditional  under any and all  circumstances.
Each Subsidiary  Guarantor  agrees that such Subsidiary  Guarantor shall have no
right of  subrogation,  indemnity,  reimbursement  or  contribution  against the
Borrower  or  any  other  Subsidiary  Guarantor  of  the  Subsidiary  Guaranteed
Obligations for amounts paid under this  Subsidiary  Guaranty until such time as
the Banks (and any  Affiliates of Banks  entering into Interest Rate  Protection
Agreements)  have been paid in full,  the Total  Commitments  under this  Credit
Agreement have been  terminated and no Person or  Governmental  Authority  shall
have any right to request any return or reimbursement of funds from the Banks in
connection  with monies  received  under the Credit  Documents or Interest  Rate
Protection Agreements.  Without limiting the generality of the foregoing,  it is
agreed that, to the fullest  extent  permitted by law, the occurrence of any one
or more of the  following  shall  not  alter  or  impair  the  liability  of any
Subsidiary  Guarantor hereunder which shall remain absolute and unconditional as
described above:

                  (i) at any time or from  time to time,  without  notice to any
         Subsidiary  Guarantor,  the time for any  performance  of or compliance
         with any of the Subsidiary Guaranteed Obligations shall be extended, or
         such performance or compliance shall be waived;

                  (ii) any of the acts mentioned in any of the provisions of any
         of the Credit Documents,  any Interest Rate Protection Agreement or any
         other  agreement or instrument  referred to in the Credit  Documents or
         Interest Rate Protection Agreements shall be done or omitted;

                  (iii)  the  maturity  of  any  of  the  Subsidiary  Guaranteed
         Obligations shall be accelerated,  or any of the Subsidiary  Guaranteed
         Obligations shall be modified,  supplemented or amended in any respect,
         or any right  under any of the  Credit  Documents,  any  Interest  Rate
         Protection  Agreement or any other agreement or instrument  referred to
         in the Credit Documents or Interest Rate Protection Agreements shall be
         waived  or any  other  guarantee  of any of the  Subsidiary  Guaranteed
         Obligations or any security  therefor shall be released or exchanged in
         whole or in part or otherwise dealt with;

                  (iv) any Lien  granted  to, or in favor  of,  the Agent or any
         Bank  or  Banks  as  security  for  any  of the  Subsidiary  Guaranteed
         Obligations shall fail to attach or be perfected; or

                  (v) any of the  Subsidiary  Guaranteed  Obligations  shall  be
         determined to be void or voidable (including,  without limitation,  for
         the benefit of any creditor of any  Subsidiary  Guarantor)  or shall be
         subordinated   to  the  claims  of  any  Person   (including,   without
         limitation, any creditor of any Subsidiary Guarantor).

With respect to its  obligations  hereunder,  each Subsidiary  Guarantor  hereby
expressly  waives  diligence,  presentment,  demand of payment,  protest and all
notices  whatsoever,  and any requirement that the Agent or any Bank exhaust any
right,  power or remedy or proceed  against  any Person  under any of the Credit
Documents,  any Interest  Rate  Protection  Agreement or any other  agreement or
instrument  referred  to in the Credit  Documents  or Interest  Rate  Protection
Agreements,  or  against  any other  Person  under any  other  guarantee  of, or
security for, any of the Subsidiary Guaranteed Obligations.

         Section 3.3       Reinstatement.

         The obligations of the Subsidiary Guarantors under this Section 3 shall
be automatically reinstated if and to the extent that for any reason any payment
by  or on  behalf  of  any  Person  in  respect  of  the  Subsidiary  Guaranteed
Obligations  is rescinded or must be otherwise  restored by any holder of any of
the Subsidiary Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise,  and each Subsidiary Guarantor agrees
that it will  indemnify  the Agent and each  Bank on demand  for all  reasonable
costs and expenses (including, without limitation, fees and expenses of counsel)
incurred  by the  Agent or such  Bank in  connection  with  such  rescission  or
restoration, including any such costs and expenses incurred in defending against
any claim  alleging  that such  payment  constituted  a  preference,  fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.

         Section 3.4       Certain Additional Waivers.

         Without  limiting the  generality of the  provisions of this Section 3,
each Subsidiary  Guarantor hereby  specifically waives the benefits of N.C. Gen.
Stat. ss.ss.  26-7 through 26-9,  inclusive.  Each Subsidiary  Guarantor further
agrees  that  such  Subsidiary  Guarantor  shall  have no right of  recourse  to
security for the Subsidiary Guaranteed Obligations,  except through the exercise
of the rights of subrogation pursuant to Section 3.2.

         Section 3.5       Remedies.

         The Subsidiary  Guarantors  agree that, to the fullest extent permitted
by law, as between the Subsidiary Guarantors, on the one hand, and the Agent and
the Banks,  on the other hand,  the  Subsidiary  Guaranteed  Obligations  may be
declared to be forthwith  due and payable as provided in Section 8.2 hereof (and
shall  be  deemed  to  have  become   automatically   due  and  payable  in  the
circumstances  provided in said  Section 8.2) for purposes of Section 3.1 hereof
notwithstanding  any  stay,  injunction  or other  prohibition  preventing  such
declaration (or preventing the Subsidiary  Guaranteed  Obligations from becoming
automatically  due and  payable)  as against any other  Person and that,  in the
event of such declaration (or the Subsidiary Guaranteed Obligations being deemed
to  have  become  automatically  due and  payable),  the  Subsidiary  Guaranteed
Obligations (whether or not due and payable by any other Person) shall forthwith
become due and payable by the Subsidiary Guarantors for purposes of said Section
3.1.

         Section 3.6       Rights of Contribution.

         The Subsidiary  Guarantors hereby agree, as among  themselves,  that if
any Subsidiary Guarantor shall become an Excess Funding Subsidiary Guarantor (as
defined below), each other Subsidiary  Guarantor shall, on demand of such Excess
Funding Subsidiary  Guarantor (but subject to the succeeding  provisions of this
Section 3.6), pay to such Excess Funding Subsidiary Guarantor an amount equal to
such Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for
this purpose, without reference to the properties, assets, liabilities and debts
of such Excess Funding Subsidiary  Guarantor) of such Excess Payment (as defined
below). The payment obligation of any Subsidiary Guarantor to any Excess Funding
Subsidiary  Guarantor under this Section 3.6 shall be subordinate and subject in
right  of  payment  to the  prior  payment  in full of the  obligations  of such
Subsidiary  Guarantor  under the other  provisions  of this  Section 3, and such
Excess Funding Subsidiary  Guarantor shall not exercise any right or remedy with
respect to such excess  until  payment and  satisfaction  in full of all of such
obligations.  For purposes  hereof,  (i) "Excess Funding  Subsidiary  Guarantor"
shall mean, in respect of any obligations  arising under the other provisions of
this Section 3 (hereafter, the "Guarantied Obligations"), a Subsidiary Guarantor
that has paid an  amount  in  excess  of its Pro  Rata  Share of the  Guarantied
Obligations;  (ii) "Excess  Payment"  shall mean,  in respect of any  Guarantied
Obligations, the amount paid by an Excess Funding Subsidiary Guarantor in excess
of its Pro Rata  Share of such  Guarantied  Obligations;  and  (iii)  "Pro  Rata
Share",  for the purposes of this Section 3.6,  shall mean,  for any  Subsidiary
Guarantor,  the ratio (expressed as a percentage) of (a) the amount by which the
aggregate  present  fair  saleable  value of all of its  assets  and  properties
exceeds the amount of all debts and  liabilities  of such  Subsidiary  Guarantor
(including contingent,  subordinated,  unmatured, and unliquidated  liabilities,
but excluding the obligations of such Subsidiary Guarantor hereunder) to (b) the
amount by which the  aggregate  present  fair  saleable  value of all assets and
other  properties of the Borrower and all of the Subsidiary  Guarantors  exceeds
the  amount  of  all  of  the  debts  and  liabilities   (including  contingent,
subordinated,   unmatured,  and  unliquidated  liabilities,  but  excluding  the
obligations  of the Borrower and the  Subsidiary  Guarantors  hereunder)  of the
Borrower and all of the  Subsidiary  Guarantors,  all as of the Closing Date (if
any Subsidiary  Guarantor becomes a party hereto subsequent to the Closing Date,
then for the purposes of this Section 3.6 such subsequent  Subsidiary  Guarantor
shall be deemed to have been a  Subsidiary  Guarantor as of the Closing Date and
the information pertaining to, and only pertaining to, such Subsidiary Guarantor
as of the date such Subsidiary  Guarantor became a Subsidiary Guarantor shall be
deemed true as of the Closing Date).

         Section 3.7       Continuing Guarantee.

         The  guarantee in this Section 3 is a continuing  guarantee,  and shall
apply to all Subsidiary Guaranteed Obligations whenever arising.


                   ARTICLE IV. REPRESENTATIONS AND WARRANTIES

         In order  to  induce  the  Agent  and the  Banks  to  enter  into  this
Agreement,  each Credit Party hereby  warrants and  represents  to the Agent and
each of the Banks,  as of the Closing Date and as of the date of funding of each
Loan, as follows:

         Section 4.1.      Organization.

         Each of the  Borrower and the other  Credit  Parties is a  corporation,
limited  liability company or limited  partnership,  as the case may be, validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
organization,  is duly qualified to do business in every jurisdiction where such
qualification  is necessary  (except for  jurisdictions  the failure in which to
qualify  would not  reasonably be expected to have a Material  Adverse  Effect),
will  promptly  correct  any failure to qualify  upon  receipt of notice of such
failure, has the power and authority to own its assets and transact the business
in which it is engaged, and has obtained all necessary certificates, franchises,
and  licenses  (collectively  "Licenses")  for the  operation of the business in
which it is  engaged,  except  for  Licenses  the  absence  of which  would  not
reasonably be expected to have a Material Adverse Effect.

         Section 4.2.      Authorization.

                  (a)      The execution, delivery and performance of the
         Credit Documents required to be delivered by each Credit Party

                           (i)      are within the organizational powers of
         such Credit Party;

                           (ii)     have been duly authorized by all necessary
         organizational action of such Credit Party;

                           (iii) do not violate any provision of the Articles or
                  Certificate of Incorporation or Bylaws of such Credit Party or
                  of any law or material rule,  regulation  (including,  without
                  limitation,  Regulation U), order, writ, judgment, injunction,
                  decree,  determination or award presently in effect and having
                  applicability to such Credit Party;

                           (iv) are not in conflict  with and do not result in a
                  breach  of  or   constitute  a  default   under  any  material
                  indenture,  loan or credit  agreement,  or any other  material
                  agreement, lease or instrument to which such Credit Party is a
                  party  or by  which  it or  its  properties  may be  bound  or
                  affected; and

                           (v) do not  result  in, or require  the  creation  or
                  imposition  of, any  mortgage,  deed of trust,  pledge,  lien,
                  security,  interest  or other  charge  or  encumbrance  of any
                  nature upon or with respect to any of the properties now owned
                  or  hereafter  acquired by such Credit  Party,  except for the
                  encumbrances  granted or to be  granted to the Agent,  for the
                  benefit of the Banks,  pursuant to the Security  Agreement and
                  the Credit Party Pledge Agreement.

                  (b) Except as listed on Schedule 2, the  Borrower  and each of
         its  Subsidiaries  (if any) is in compliance with all applicable  laws,
         rules, regulations,  writs, judgments,  orders,  injunctions,  decrees,
         determinations  or awards  applicable  to it and is not  materially  in
         default under any indenture, agreement, lease or instrument, where such
         noncompliance  or  default  would  reasonably  be  expected  to  have a
         Material Adverse Effect (the term "default" as used herein includes any
         Event of Default or Incipient  Default,  as defined in Sections 8.1 and
         5.2(a), respectively).

         Section 4.3.      Validity.

         Each Credit  Document to which it is a party have been or shall be duly
executed and  delivered by each Credit Party under the terms of this  Agreement,
and, when so executed,  constitute the legal,  valid and binding  obligations of
such Credit Party,  enforceable  against such Credit Party and the Collateral in
accordance  with  their  terms,  except as such  enforcement  may be  limited by
applicable   bankruptcy,   reorganization,   or  similar  laws   affecting   the
enforceability  of  creditors'  rights  in  general  and  except  for  generally
applicable principles of equity (collectively, the "General Exceptions").

         Section 4.4.      Governmental Approvals.

         No filing with or action or approval of any  Governmental  Authority is
or will be required under existing law in connection  with the valid  execution,
delivery or performance by each of the Credit Parties of the Credit Documents to
which it is a party,  or in connection with the validity and  enforceability  of
the security  interests in the  Collateral,  except as has been  accomplished or
obtained and none of which has been or is  threatened to be rejected or revoked,
and  except  for the  filing  of the  financing  statements  required  under the
Security Agreement.

         Section 4.5.      Litigation.

         Except as  identified  on  Schedule  3,  there are no  actions,  suits,
investigations or other  proceedings  pending or, to the knowledge of the Credit
Parties, threatened against or affecting the Borrower or any of its Subsidiaries
or any of their properties before any court or Governmental  Authority which, if
determined  adversely to the Borrower or any  Subsidiary,  would  reasonably  be
expected to have a Material Adverse Effect.

         Section 4.6.      Financial Condition.

                  (a) The financial  statements  delivered to the Agent pursuant
         to  Section  5.1(k)  fairly  present  the  financial  condition  of the
         Borrower and its consolidated subsidiaries, on a consolidated basis, as
         of the dates stated  therein,  and the results of the operations of the
         Borrower and its consolidated  subsidiaries,  on a consolidated  basis,
         for the  accounting  periods  covered  therein;  except  as  stated  on
         Schedule  2,  as of the  Closing  Date  the  Borrower  has no  material
         contingent tax or other liability not disclosed by or reserved  against
         in the balance sheets  delivered as part of such financial  statements;
         there  are no  material  unrealized  or  anticipated  losses  from  any
         commitment  of the Borrower;  and since the date and period  covered by
         such financial statements, there has been no circumstance,  development
         or event which would  reasonably be expected to have a Material Adverse
         Effect.

                  (b)      As of the Closing Date, each Credit Party had a
         positive net worth of at least one dollar.

         Section 4.7.      Records, Business Location and Subsidiaries.

         The chief  executive  office and principal place of business of each of
the Credit  Parties and the office  where each of the Credit  Parties  keeps its
corporate and accounting  records (including records relating to the Collateral)
is and,  in the  absence  of 15 days'  prior  written  notice to the Agent  will
remain,  located at 6707 Democracy Blvd., Suite 800,  Bethesda,  Maryland 20817.
The Subsidiaries,  including all Domestic and Foreign  Subsidiaries,  of each of
the Credit Parties are identified on Schedule 1, hereto.

         Section 4.8.      ERISA.

         With respect to any employee  benefit plan for the benefit of employees
of the  Borrower  or any of its  subsidiaries  ("Plan")  that is  subject to the
Employee  Retirement  Income  Security Act of 1974,  as amended  ("ERISA"),  and
regulations  issued pursuant to ERISA,  the Borrower and its Subsidiaries are in
compliance  in all material  respects with the  applicable  provisions of ERISA,
except as stated in Schedule 2; no Plan maintained by the Borrower or any of its
subsidiaries  has incurred any  "accumulated  funding  deficiency" as defined in
Section 302 of ERISA or Section 412 of the Internal  Revenue Code; no Reportable
Event as defined in Section  4043(b) of ERISA that requires  notification of the
Pension Benefit Guaranty  Corporation  ("PBGC") has occurred with respect to any
Plan; and no provision of this  Agreement  will result in a Reportable  Event or
violation of ERISA.

         Section 4.9.      Encumbrances.

         None of the  Collateral is subject to any  assignment,  lien,  security
interest,  charge or  encumbrance,  except for  Permitted  Liens.  No  effective
financing  statement or other  instrument  similar in effect covering any of the
Collateral is on file in any recording office,  except such as have been or will
promptly  be filed in favor of the Agent  relating  to the  Security  Agreement,
Credit Party  Pledge  Agreement or the Prior  Agreement  and as permitted  under
Section 7.2.

         Section 4.10.     Margin Stock.

         The Credit  Parties are not and will not be engaged in the  business of
purchasing,  carrying,  or  extending  credit for the purpose of  purchasing  or
carrying "margin stock," as defined by Regulation U, the Employee Pledged Shares
are not "margin  stock" as defined by  Regulation U, and no proceeds of any Loan
hereunder will be used for the purpose of purchasing or carrying margin stock or
extending credit for such purpose.

         Section 4.11.     Governmental Regulations.

         Neither  the  Borrower  nor  any  of its  Subsidiaries  is  subject  to
regulation  under the Public  Utility  Holding  Company Act of 1935, the Federal
Power Act or the Investment  Company Act of 1940, each as amended.  In addition,
neither the Borrower nor any of its Subsidiaries is (i) an "investment  company"
registered  or required to be  registered  under the  Investment  Company Act of
1940, as amended,  and is not  controlled by such a company,  or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding  company" or of a  "subsidiary"  of a "holding  company",  within the
meaning of the Public Utility Holding Company Act of 1935, as amended.

         Section 4.12.     Taxes.

         The Borrower and each of its  Subsidiaries  has filed all United States
income tax returns and all state and municipal tax returns which are required to
be filed,  and has paid,  or made  provision for the payment of, all taxes which
have become due pursuant to said returns or pursuant to any assessment  received
by it, except such taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided or which the failure to pay would not
reasonably be expected to have a Material Adverse Effect.

         Section 4.13.     Burdensome Documents.

         Except as identified on Schedule 4, neither the Borrower nor any of its
Subsidiaries  is a  party  to or  bound  by,  nor are  any of  their  respective
properties  or  operations  materially  affected by, any  agreement,  ordinance,
decree,  regulation,  order,  injunction,  award or judgment that, to the actual
knowledge  of the  Borrower's  Vice  President  and Chief  Financial  Officer or
General Counsel, would reasonably be expected to have a Material Adverse Effect.

         Section 4.14.     Environmental Matters.

         Neither the Borrower nor any of its Subsidiaries owns any real property
except as listed on Schedule 5. Neither the Borrower's  Vice President and Chief
Financial  Officer nor its General  Counsel has received any actual  notice that
any  property  owned,  leased  or  operated  by  the  Borrower  or  any  of  its
Subsidiaries has been listed or proposed for listing on the National  Priorities
List established by the United States Environmental Protection Agency, or on any
other list developed or maintained by any federal,  state or local  governmental
entity and purporting to identify  properties  posing the threat of pollution or
contamination  due to the  presence  of  hazardous  substances,  nor has  either
received notice or knowledge of such pollution or  contamination of any property
owned, leased, or operated by the Borrower or any of its Subsidiaries.

         Section 4.15      Employee Loans; Stock Plan; Qualified Employee
Status.

         The Borrower's annual stock purchase plan for Qualified  Employees (the
"Stock  Plan"),  and the Qualified  Employee loan program  offered in connection
therewith  under the terms and  provisions  of this  Agreement  and the Employee
Notes (the  "Employee Loan  Program")  comply in all material  respects with all
applicable laws. The Borrower has complied with all applicable federal and state
securities  laws in its  disclosure to the Qualified  Employees of the attendant
risks and burdens of  purchasing  the  Borrower's  common  stock under the Stock
Plan.  Each person  receiving  an Employee  Loan,  was at the time of the making
thereof, a Qualified Employee.

         Section 4.16      Use of Proceeds.

         Letters of Credit and all proceeds of the Revolving  Credit Loans shall
be used by the Borrower for working capital,  capital expenditures,  shareholder
loans and general corporate purposes,  provided,  however,  that proceeds of the
Revolving  Credit  Loans  shall  not be  used  to make  payments  of  principal,
interest,  or fees under or in  connection  with the Employee  Loans at any time
that defaults under all or substantially all of the Employee Notes have occurred
and are  continuing.  All  proceeds  of the  Employee  Loans  shall  be used for
purchases  by or for the benefit of  Qualified  Employees of common stock of the
Borrower.

         Section 4.17      Year 2000 Compliance.

         The Borrower  has (i)  initiated a review and  assessment  of all areas
within its and each of its  Subsidiaries'  business  and  operations  (including
those  affected  by  principal  suppliers  or vendors)  that could be  adversely
affected  by  the  "Year  2000  Problem"   (that  is,  the  risk  that  computer
applications  used by the  Borrower  or any of its  Subsidiaries  (or  principal
suppliers  or  vendors)  may  be  unable  to  recognize  and  perform   properly
date-sensitive  functions  involving  certain  dates prior to and any date after
December 31, 1999),  (ii) developed a plan and timeline for addressing the "Year
2000  Problem"  on a timely  basis and (iii) to date,  implemented  that plan in
accordance with that timetable.  Based on the foregoing,  the Borrower  believes
that all computer  applications  (including those of its principal  suppliers or
vendors)  that are  material  to its or any of its  Subsidiaries'  business  and
operations  are  reasonably  expected  on a timely  basis to be able to  perform
properly date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000  Compliant"),  except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.

         Section 4.18      Accuracy and Completeness of Information.

         All factual  information  heretofore,  contemporaneously  or  hereafter
furnished by or on behalf of the Borrower or any of its  Subsidiaries in writing
to the Agent or any Bank for  purposes  of or in  connection  with  this  Credit
Agreement or any Credit  Documents,  or any transaction  contemplated  hereby or
thereby is or will be true and accurate in all material  respects on the date as
of which such  information  is dated or certified and not incomplete by omitting
to state any material fact necessary to make such  information not misleading at
such time.  There is no fact now known to the  President,  CEO,  any  Authorized
Financial  Officer  or  the  General  Counsel  of  the  Borrower  or  any of its
Subsidiaries,  after due inquiry,  which has, or would have, a Material  Adverse
Effect which fact has not been set forth herein,  in the  financials  statements
previously delivered to the Agent and the Banks, or any certificate,  opinion or
other written statement made or furnished by the Borrower to the Agent.


                         ARTICLE V. CONDITIONS PRECEDENT

         Section 5.1       Conditions Precedent to Closing.

         The Banks'  obligations under this Agreement are subject to the receipt
by the Agent,  in form and substance  satisfactory to the Agent and its counsel,
of each of the following:

                  (a)      the Revolving Credit Notes, executed by the Borrower;

                  (b)      this Agreement, with all Exhibits and Schedules,
                           executed by the Credit Parties;

                  (c)      the Borrower Guaranty, executed by the Borrower;

                  (d)      the Credit Party Pledge Agreement, executed by the
                           Credit Parties;

                  (e)      the Security Agreement, executed by the Credit
                           Parties;

                  (f)      financing statements executed by appropriate
                           officers of the Credit Parties and covering the
                           Collateral;

                  (g) a certificate of good standing  issued by the  appropriate
         state  officer with respect to the good  standing of each of the Credit
         Parties and their organizational documents on file;

                  (h)      copies, certified by its Secretary or other
         authorized representative, of each Credit
         Party's organizational documents, with any amendments thereto;

                  (i) resolutions of the Board of Directors or other appropriate
         authorizations  of each Credit  Party,  certified  by its  Secretary or
         other authorized representative authorizing the execution, delivery and
         performance,  as applicable,  of each of the Credit Documents,  and all
         other  documents  necessary for  performance of the obligations of such
         Credit  Party  under  this  Agreement,  and  identifying  by title  all
         officers  or other  authorized  representatives  of such  Credit  Party
         authorized to execute requests for Loans under Section 5.2;

                  (j)      favorable opinions of counsel (including Canadian
         counsel as to perfection of the
         Canadian Collateral) for the Credit Parties;

                  (k) financial  statements of the Borrower and its consolidated
         subsidiaries,  as follows:  (i) a balance sheet and  statements of cash
         flow, net worth, and income,  all prepared on a consolidated  basis and
         in  accordance  with  GAAP and all  certified  as to fair and  complete
         presentation by an Authorized  Financial Officer as of the close of and
         for the third quarter of the current fiscal year of the Borrower,  (ii)
         financial  statements  prepared on a consolidated  basis, in accordance
         with GAAP and  certified  as to fair and  complete  presentation  by an
         Authorized   Financial  Officer  and  by  independent   accountants  of
         recognized  standing acceptable to the Agent and containing no material
         qualifications,  as of the close of and for the  fiscal  years 1996 and
         1997 of the Borrower;  and (iii) a statement of projected net worth and
         income for the Borrower's 1998 fiscal year,  prepared on a consolidated
         basis  and  certified  as  to  fair  and  complete  presentation  by an
         Authorized Financial Officer;

                  (l)  certificates  of  each  Credit  Party,  executed  by  the
         Secretary or other authorized  representative  of such Credit Party, as
         to the  incumbency  and  authenticity  of signatures of the officers or
         other  authorized  representatives  of such Credit Party executing this
         Agreement  and any other  documents  required as  conditions  precedent
         under this Section and containing  specimen  signatures of all officers
         or other  authorized  representatives  identified  by such Credit Party
         under subsection 5.1(g) above;

                  (m)      a solvency certificate of each of the Credit
         Parties, executed by its chief financial officer or other authorized
         representative, substantially in the form of Exhibit K;

                  (n) evidence of insurance in  compliance  with Section  6.2(b)
         hereof and  insurance  certificates  naming the Agent as loss payee and
         additional  insured  on  all  insurance  policies  (excluding  workers'
         compensation policies); and

                  (o)      such other documents as the Agent may reasonably
         request.

         Section 5.2.      Conditions Precedent to Loans and Issuance of
         Letters of Credit.

                  (a) All Loans and Letters of Credit. As a condition  precedent
         to the  funding  of a Loan  or  the  issuance  of a  Letter  of  Credit
         hereunder (a "Credit Event"), (i) there shall exist no Event of Default
         or event (an "Incipient  Default") which, with notice or lapse of time,
         or both, would constitute an Event of Default, either immediately prior
         to, or after giving effect to such Credit Event (ii) the Borrower shall
         have complied with all of the conditions stated in Section 5.1, (iii) a
         Margin  Stock  Event  shall  not  have  occurred,  (iv)  all  necessary
         deliveries and filings to perfect the Agent's security interests in the
         Collateral shall have been  accomplished,  and (v) the  representations
         and  warranties of the Borrower set forth in Article IV hereof shall be
         true and  correct as if made and  restated  on the date of such  Credit
         Event.

                  (b) Revolving Credit Loans. As a further  condition  precedent
         to the funding of a Revolving Credit Loan, the Borrower shall request a
         Revolving  Credit Loan borrowing by written notice (or telephone notice
         promptly  confirmed  in writing) to the Agent not later than 12:00 noon
         (Charlotte,  North  Carolina time) on the Business Day of the requested
         borrowing in the case of Base Rate Loans, and on the third Business Day
         prior to the date of the requested  borrowing in the case of Eurodollar
         Loans.  Each such  request  for a borrowing  (a "Notice of  Borrowing")
         shall be irrevocable and shall specify (A) that a Revolving Credit Loan
         is requested, (B) the date of the requested borrowing (which shall be a
         Business Day), (C) the aggregate  principal amount to be borrowed,  and
         (D)  whether  the  borrowing  shall be  comprised  of Base Rate  Loans,
         Eurodollar Loans or a combination  thereof, and if Eurodollar Loans are
         requested,  the Interest Period(s) therefor. If the Borrower shall fail
         to specify in any such Notice of Borrowing (I) an  applicable  Interest
         Period in the case of a  Eurodollar  Loan,  then such  notice  shall be
         deemed to be a request for an Interest Period of one month, or (II) the
         type of  Revolving  Credit Loan  requested,  then such notice  shall be
         deemed to be a request for a Base Rate Loan hereunder.

                  (c) Employee  Loans. As a further  condition  precedent to the
         funding of any Employee Loan, the Borrower shall deliver to NationsBank
         not later than  12:00  noon  (Charlotte,  North  Carolina  time) on the
         requested funding date, an appropriate  Notice of Borrowing  specifying
         that  the  funding  of  Employee  Loans is  requested,  the date of the
         requested  borrowing  (which shall be a Business Day) and the amount to
         be borrowed.

                  As an  additional  condition  precedent  to the funding of any
         Employee  Loan,  the  Borrower  and/or its  transfer  agent  shall have
         received from the Qualified  Employee (or personal  holding company) to
         whom  the  Employee  Loan  is  to  be  made,  such  additional   pledge
         instruction,  if any, as the  Borrower  and/or its  transfer  agent may
         require in order to register on its books the pledge to  NationsBank of
         the Employee Pledged Shares.

                  (d)  Funding  Obligations.  In no  event  shall  the  Agent or
         NationsBank  be  required  to fund any  portion of the Loans  requested
         hereunder in an amount in excess of the actual funds  received from the
         Banks  (including  NationsBank in its capacity as a Bank) pursuant to a
         Notice of Borrowing.


                        ARTICLE VI. AFFIRMATIVE COVENANTS

         Each of the Credit Parties  covenants and agrees that, until all of its
obligations  under the Credit  Documents have been satisfied in full (or waived)
and until the Total Commitments have been terminated:

         Section 6.1.      Payments Hereunder.

         Each Credit Party shall make all payments of principal, interest, fees,
and all other payments  required  hereunder,  under the Revolving  Credit Notes,
under the Borrower Guaranty and under any other agreements with any of the Banks
to which such Credit Party is party, as and when due.

         Section 6.2.      Existence and Good Standing; Insurance; Conduct.

         The Borrower  shall do or cause to be done all things  necessary,  with
respect to itself and each of its subsidiaries, (a) to preserve and keep in full
force and effect its existence, employee stock plans, rights, licenses, permits,
and franchises and comply with all  applicable  laws and all rules,  regulations
and orders of federal,  state and local  regulatory  bodies having  jurisdiction
applicable  to it except for any  noncompliance  with which would  reasonably be
expected to have a Material  Adverse  Effect;  (b) to  maintain  and protect its
material assets or properties used or useful in the conduct of its operations in
a prudent manner including,  without limitation, the maintenance at all times of
such  insurance  upon its  insurable  properties,  operations  and  professional
services with  reputable  insurers as would be prudent for companies in the same
or similar  business  as the  Borrower  or such  Guarantor;  (c) to conduct  its
operations  and  continue the conduct of its  business  without any  substantial
change in the general nature of such  operations or business from that in effect
on the Closing  Date;  and (d) to keep proper  books of records and  accounts in
which full, true and correct entries in conformity with GAAP and Requirements of
Law shall be made of all dealings and  transactions  in relation to its business
and activities.

         Section 6.3.      Taxes and Charges.

         The Borrower shall, and shall cause each of its Subsidiaries to, timely
file  returns  and  pay  and  discharge  all  material  taxes,  assessments  and
governmental fees, charges or levies imposed upon it or its income or profits or
upon its properties or any part thereof, before the same shall be in default, as
well as all lawful claims which,  if unpaid,  might become a lien or charge upon
such properties or any part thereof; provided,  however, that the Borrower shall
not be required to pay and discharge or cause to be paid and discharged any such
tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested  in good faith by  appropriate  proceedings  and the Borrower
shall have set aside on its books adequate reserves therefor.

         Section 6.4.      Financial Statements.

         The Borrower shall deliver or cause to be delivered to the Agent and
         the Banks,

                  (a) within 120 days after the end of each  fiscal  year of the
         Borrower,  (i) the annual financial  statements of the Borrower and its
         consolidated  subsidiaries,  on  a  consolidated  basis,  containing  a
         balance  sheet  as at the end of such  fiscal  year and  statements  of
         income, cash flows, and changes in stockholders' equity for such fiscal
         year,  prepared  in  accordance  with  GAAP,  certified  as to fair and
         complete  presentation by an Authorized Financial Officer and certified
         by  independent  accountants of recognized  standing  acceptable to the
         Agent,  which  accountants  shall also include an opinion  stating that
         their  examination  of  the  financial   statements  was  conducted  in
         accordance with generally accepted auditing standards and, if they have
         prepared a management letter as part of their  responsibilities  to the
         Borrower,  a copy of such management letter promptly upon completion of
         such  letter;  and (ii)  calculations,  reviewed  and  certified  by an
         Authorized  Financial Officer,  showing the Borrower's  compliance with
         the applicable financial standards contained in Section 7.6;

                  (b)  within 50 days  after the end of each of the first  three
         quarters of each fiscal year of the  Borrower  (except  with respect to
         item (b)(ii) below,  which shall be required to be delivered  within 50
         days  after the end of each of the second  and third  quarters  of each
         fiscal year of the Borrower  only) (i) a balance  sheet of the Borrower
         and its  consolidated  subsidiaries  and related  statements of income,
         cash flow, and net worth,  all prepared on a consolidated  basis and in
         accordance  with  GAAP,  and  all  certified  as to fair  and  complete
         presentation by an Authorized  Financial Officer as of the close of and
         for such period;  (ii) a statement  of projected  net worth and income,
         prepared on a consolidated  basis and certified as to fair and complete
         presentation by an Authorized Financial Officer of the Borrower for the
         Borrower's  then-current fiscal year; and (iii) calculations,  reviewed
         and  certified  by  an  Authorized   Financial  Officer,   showing  the
         Borrower's compliance with the applicable financial standards contained
         in Section 7.6 hereof;

                  (c) no later  than 120 days  after  the  commencement  of each
         fiscal  year of the  Borrower,  a  projected  balance  sheet and income
         statement for such fiscal year, on a consolidated basis;

                  (d) concurrently with the delivery of the financial statements
         referred to in  Sections  6.4(a) and 6.4(b),  a  certificate  as to the
         Borrower's   compliance   with  clause  (viii)  of  the  definition  of
         "Permitted  Investments"  and  specifying  the  aggregate  balance  (i)
         credited to all  Separation  Allowance  Accounts and (ii) the aggregate
         balance  of  Permitted  CSAP  Loans,   reviewed  and  certified  by  an
         Authorized Financial Officer;

                  (e) upon the written  request of the Agent and with reasonable
notice, such other financial  statements and reports as the Agent may reasonably
deem necessary to provide current financial information; and

                  (f) concurrently with the delivery of the financial statements
and  calculations   required  under  subsections  (a)-(f)  of  this  Section,  a
certificate of an Authorized  Financial Officer certifying the fair and complete
presentation of the data and  information  used in making the  calculations  and
stating that such annual  financial  statements have been prepared in accordance
with  GAAP and that  there  exists  no Event of  Default  or  Incipient  Default
hereunder.

         Section 6.5       Reports.

         Each Credit Party shall deliver to the Agent and the Banks:

                  (a) as soon as reasonably possible,  and, in any event, within
         five Business Days after the Credit Party receives  notice or knowledge
         thereof  or  learns  facts  which  would  lead a  reasonable  Person to
         undertake  diligent inquiry, a report or statement executed by a senior
         officer of the Credit Party with respect to (i) the  occurrence  of any
         Reportable  Event as defined by ERISA and  regulations  thereunder that
         requires  notification to the PBGC, (ii) the occurrence of any Event of
         Default  or  Incipient  Default or the  material  failure to observe or
         perform any covenant set forth  herein or in any other  agreement  with
         any of the Banks to which the  Borrower or any  Subsidiary  is a party,
         and any action taken or contemplated  with respect  thereto,  and (iii)
         (A) any pending or threatened litigation or administrative  proceedings
         or  investigations  against or  affecting  the  Borrower  or any of its
         Subsidiaries  which,  if  determined  adversely  to the Borrower or any
         Subsidiary  would  reasonably  be expected  to have a Material  Adverse
         Effect, and (B) any reserves set aside or to be set aside in connection
         with such proceedings, in accordance with GAAP; and

                  (b) such other  reports  as the Agent may,  from time to time,
         reasonably request in writing from the Borrower.

         Section 6.6.      Loan Balances.

                  (a)  Revolving   Credit  Notes.   The  aggregate   outstanding
         principal   balance  under  the  Revolving   Credit  Notes,   plus  LOC
         Obligations  will,  at no time,  exceed an amount equal to  $95,000,000
         (except  only  as  such  amount  may  be  increased  to  a  maximum  of
         $107,500,000,  with  a  corresponding  decrease  in the  Employee  Loan
         Commitment, pursuant to Section 2.8(d) or decreased pursuant to Section
         2.8(e));

                  (b)  Employee  Notes.  The  aggregate   outstanding  principal
         balance  under the Employee  Notes will,  at no time,  exceed an amount
         equal to $25,000,000  (except only as such amount may be increased to a
         maximum of $37,500,000,  with a corresponding decrease in the Aggregate
         Revolving  Credit  Commitment,  pursuant to Section 2.8(d) or decreased
         pursuant to Section 2.8(e)); and

                  (c) Aggregate  Total  Commitments.  The aggregate  outstanding
         balance under the Revolving  Credit Notes and the Employee Notes,  plus
         the LOC Obligations will, at no time, exceed $120,000,000  (except only
         as such amount may be decreased pursuant to Section 2.8(e)).

         Section 6.7.      Uncertificated Securities.

         With   respect  to  all  Employee   Pledged   Shares  that  consist  of
uncertificated securities, the Borrower shall, or shall cause its transfer agent
to, at all times and without  limitation  of any other  requirements  imposed by
applicable  laws  comply  with an  issuer's  obligations  and  duties  regarding
uncertificated  securities  and pledges  thereof or security  interests  therein
under  Articles  8 and 9 of the  Uniform  Commercial  Code as in effect in North
Carolina (the "U.C.C."),  including without  limitation  Article 8, Sections 207
(Rights and Duties of Issuer with Respect to  Registered  Owners and  Registered
Pledgees),  401 (Duty of Issuer to Register Transfer,  Pledge, or Release),  and
408 (Statements of Uncertificated Securities).  All statements of uncertificated
securities as required by Sections 8-408(1),  (2) and (7) of the U.C.C. shall be
substantially  in the  forms of  Exhibits  G and H, as  applicable.  Such  other
statements of uncertificated  securities as are required by Section 8-408 of the
U.C.C.  or may from time to time be properly  issued by the Borrower  and/or its
transfer  agent  shall  conform  generally  to the forms of  Exhibits G and H as
appropriate.

         Section 6.8.      Positive Net Worth.

         Each of the Borrower and the  Subsidiary  Guarantors  shall maintain at
all times a positive net worth of at least one dollar.

         Section 6.9.      Bylaws.

         The Borrower shall use all reasonable best efforts to cause Section 9.4
of its  Bylaws to be  amended to  clarify  that the liens  granted by  Qualified
Employees in favor of the Agent on their  Employee  Stock do not  constitute the
type of liens referenced in such Section 9.4 for the purposes thereof.

         Section 6.10.     Year 2000 Compliance.

         The Borrower will  promptly  notify the Agent in the event the Borrower
discovers or determines that any computer  application  (including  those of its
principal  suppliers  or  vendors)  that  is  material  to  it  or  any  of  its
Subsidiaries' business or operations will not be Year 2000 Compliant,  except to
the extent that such failure could not reasonably be expected to have a Material
Adverse Effect.

         Section 6.11.     Borrower Guaranty.

         All Employee Loans shall be unconditionally  guaranteed by the Borrower
under a  guaranty  in the form of Exhibit C in the full  amount of the  Employee
Loans (the "Borrower Guaranty").

         Section 6.12.     Employee Pledge Agreements; Employee Pledged Shares.

                  (a)  Employee  Pledge  Agreements.  All  common  stock  of the
         Borrower  purchased  or  refinanced  with the  proceeds of the Employee
         Loans (the "Employee  Pledged  Shares") shall be pledged to NationsBank
         and the Banks, to the extent of their participations, by the purchasers
         of  the  Employee  Pledged  Shares  pursuant  to  stock  pledge  letter
         agreements ("Employee Pledge Agreements")  substantially in the form of
         Exhibit D-1 (for  individual  purchasers) or D-2 (for personal  holding
         companies).

                  (b) Delivery of Certificates;  Book Entries.  (i) The Borrower
         shall cause all  certificates  and any other  instruments  or documents
         evidencing  ownership  of  Employee  Pledged  Shares,  if  any,  to  be
         delivered  to  NationsBank  at the address  specified  in Section  10.8
         hereof promptly upon the funding of the related  Employee Loans,  shall
         cause all such  certificates to be accompanied by executed  assignments
         separate from the certificates in blank in the form of Exhibit E hereto
         ("Employee  Stock Powers"),  and shall cause the following legend to be
         placed on all such certificates:

                  "In the event the shares  represented by this  certificate are
                  sold,  the  purchaser  may be required  to remit the  purchase
                  price  directly  to the  Company  to be  applied in payment of
                  certain  Indebtedness of the registered holder to NationsBank,
                  N.A., as agent for itself and certain other banks."

                  (ii) With respect to all Employee  Pledged Shares that consist
         of  uncertificated  securities,  the Borrower shall, or shall cause its
         transfer agent to, (A) register on its books the pledges to NationsBank
         of such  Employee  Pledged  Shares  promptly  upon the  funding  of the
         related  Employee  Loans,  (B)  identify on all  initial  and  periodic
         statements and all other statements or notices  respecting the Employee
         Pledged  Shares the  pledges to  NationsBank  of the  Employee  Pledged
         Shares and the restriction  that any purchaser of the Employee  Pledged
         Shares may be  required  to remit the  purchase  price  directly to the
         Borrower to be applied in payment of the related Employee Loan, and (C)
         have all pledgee notices and statements respecting the Employee Pledged
         Shares  delivered to  NationsBank  at the address  specified in Section
         10.8 hereof.

                  (c) Sales. Upon the occurrence of any event giving NationsBank
         the option to  accelerate  the maturity date under any Employee Note or
         the  termination  of  employment  of the maker of any Employee  Note as
         provided in Section 9.4 of the  Borrower's  Bylaws,  the  Borrower  may
         treat such event or  termination as an offer to sell to the Borrower or
         to one or more Qualified Employees the Employee Pledged Shares affected
         thereby or pledged pursuant to the Employee Note affected thereby under
         the terms and  conditions of Section 9.4 of the Borrower's  Bylaws.  In
         the event that any or all  Employee  Pledged  Shares are sold to one or
         more Qualified  Employees prior to repayment of the associated Employee
         Loan, the Borrower  shall direct such Qualified  Employees to remit the
         purchase price  directly to the Borrower.  The Borrower shall apply the
         proceeds of any sale of Employee  Pledged Shares (i) first,  to pay any
         remaining  balance  under the  Employee  Note  secured by the  Employee
         Pledged  Shares sold  (including  principal,  interest,  and collection
         expenses), (ii) second, to pay any other amounts required by applicable
         law, and (iii) third, to the maker of the related  Employee Note to the
         extent, if any, of any surplus  proceeds.  Upon payment by the Borrower
         of the  remaining  amounts owed under the Employee  Note secured by the
         Employee  Pledged Shares sold,  NationsBank  shall return such Employee
         Pledged Shares to the Borrower.

         Section 6.13.     Additional Guaranties, Stock Pledges and Further
         Assurances.

                  (a)  Domestic  Subsidiaries,  Etc..  At any  time  any  Person
         becomes a Material  Domestic  Subsidiary of the Borrower,  the Borrower
         shall promptly  notify the Agent thereof,  and shall (i) promptly cause
         such Domestic Subsidiary to become a Subsidiary  Guarantor by execution
         of a  Joinder  Agreement,  (ii)  deliver  with the  Joinder  Agreement,
         supporting resolutions,  incumbency  certificates,  corporate formation
         and  organizational  documentation and opinions of counsel as the Agent
         may  reasonably  request,  and (iii)  deliver  stock  certificates  and
         related pledge agreements or pledge joinder  agreements  evidencing the
         pledge of 100% of the Voting Stock of such Domestic  Subsidiary and all
         Material  Domestic  Subsidiaries of such Domestic  Subsidiary and, upon
         the request of the Agent or the Majority Banks, 65% of the Voting Stock
         of all Foreign  Subsidiaries of such Domestic Subsidiary and such other
         ownership  interests of such Domestic  Subsidiary  in foreign  Persons,
         together,  in each case,  with undated stock or other  transfer  powers
         executed in blank.

                  (b) Foreign Subsidiaries, Etc.. At any time any Person becomes
         a Foreign Subsidiary or the Borrower or any Subsidiary  Guarantor shall
         acquire an ownership interest in any foreign Person, the Borrower shall
         promptly notify the Agent thereof, and shall, upon request of the Agent
         or the Majority Banks, (i) deliver supporting  resolutions,  incumbency
         certificates,  corporation  formation and organizational  documentation
         and opinions of counsel,  and (ii) deliver stock  certificates or other
         evidence of ownership  (where required for perfection  under local law)
         and a related  pledge  agreement  evidencing  the  pledge of 65% of the
         Voting  Stock  of such  Foreign  Subsidiary  or,  if  less,  all of the
         ownership  interests in such other  Person  acquired by the Borrower or
         any such  Subsidiary  Guarantor,  together  with undated stock or other
         transfer powers executed in blank.

                  (c) Further  Assurances.  Each Credit Party  shall,  and shall
         cause each of its  Subsidiaries to, take such action at its own expense
         as  requested  by the  Agent,  to  ensure  that the  Agent  has a first
         priority  perfected  lien to secure  the  Obligations  in all  personal
         property of the Credit Parties  located in the United States and Canada
         and, to the extent deemed  material by the Agent or the Majority Banks,
         in its or their sole reasonable discretion, all other personal property
         of the Credit Parties now or hereafter  owned or acquired by the Credit
         Parties.  Each  Credit  Party  shall,  and  shall  cause  each  of  its
         Subsidiaries  to,  adhere to the  covenants  regarding  the location of
         personal property as set forth in the Security Agreement.

         Section 6.14.     Post-Closing Matters.

         Within  45  days  from  the  Closing  Date,  the  following  conditions
subsequent shall have been satisfied:

                  (a)  Receipt  by  the  Agent  of  Schedule  7 to  this  Credit
         Agreement   setting   forth   Investments   of  the  Borrower  and  its
         Subsidiaries  existing as of the Closing  Date, as referenced in clause
         (iv) of the definition of "Permitted Investments";

                  (b) Receipt by the Agent of revised  Schedule 6 to this Credit
         Agreement  updating  such  Schedule  to  include  Indebtedness  of  the
         Borrower and its  Subsidiaries as of June 30, 1998;  such  Indebtedness
         shall  not  differ  materially  in type and kind  from  that  listed on
         Schedule 6 delivered on the Closing Date; and

                  (c)  Receipt by the Agent of  favorable  opinions  of Canadian
         counsel (as to  perfection of the Canadian  Collateral)  for the Credit
         Parties  and  evidence  of filing  of  financing  statements  (or their
         equivalent) under Canadian law to perfect the security interests in the
         Canadian Collateral.


                         ARTICLE VII. NEGATIVE COVENANTS

         Each of the Credit Parties  covenants and agrees that,  until such time
as all  obligations  under the Credit  Documents have been satisfied in full (or
waived) and until the Total Commitments have been terminated:

         Section 7.1.      Indebtedness.

         Neither  the  Borrower  nor  any if its  Subsidiaries  shall  contract,
create, incur, assume or permit to exist any Indebtedness, except:

                  (a)      Indebtedness arising or existing under this Credit
         Agreement and the other Credit Documents;

                  (b) Indebtedness  outstanding on the date hereof and set forth
         in Schedule 6, and renewals,  refinancings  and  extensions  thereof on
         terms  and   conditions  no  less  favorable  than  for  such  existing
         Indebtedness;

                  (c)      Indebtedness to any Interest Swap Provider relating
         to the obligations hereunder;

                  (d) purchase  money  Indebtedness  (including  obligations  in
         respect of Capital Leases)  hereafter  incurred to finance the purchase
         of fixed assets,  provided that (i) the total of all such  Indebtedness
         (including  any such  Indebtedness  referred  to in Section  (b) above)
         shall not exceed an aggregate principal amount of $1,000,000 at any one
         time outstanding, (ii) such Indebtedness when incurred shall not exceed
         the  purchase  price  of the  asset(s)  financed,  and  (iii)  no  such
         Indebtedness  shall be refinanced  for a principal  amount in excess of
         the  principal  balance   outstanding  thereon  at  the  time  of  such
         refinancing;

                  (e)      unsecured Indebtedness incurred in connection with
         any acquisition or Investment permitted under Section 7.3(c) hereof;

                  (f) guaranty and other contingent  obligations of the Borrower
         in favor of its Subsidiaries in connection with Indebtedness  permitted
         under this Section 7.1.

         Section 7.2.      Liens.

         Neither  the  Borrower  nor  any of its  Subsidiaries  shall  contract,
create,  incur,  assume or permit to exist any Lien with respect to any of their
respective property or assets of any kind (whether real or personal, tangible or
intangible),  whether  now owned or  hereafter  acquired,  except for  Permitted
Liens.

         Section 7.3.      Consolidation, Merger, Sale or Purchase of Assets,
         etc.

         Neither the Borrower nor any of its Subsidiaries shall:

                  (a) Enter  into a  transaction  of  merger  or  consolidation,
except (i) a member of the Consolidated Group may be a party to a transaction of
merger or consolidation  with another member of the Consolidated  Group and (ii)
any  acquisition  permitted  pursuant  to clause  (c)  immediately  below may be
effected  by a merger  with and into a Credit  Party or  Subsidiary  of a Credit
Party so long as, in either case,  (A) if the Borrower is a party  thereto,  (x)
the Borrower shall be the surviving  corporation  and (y) the Borrower shall not
alter or amend its existing capital structure in a manner changing its status as
an employee-owned corporation,  (B) if a Subsidiary Guarantor is a party thereto
and the Borrower is not a party thereto,  the Subsidiary  Guarantor shall be the
surviving corporation, and (C) no Default or Event of Default shall exist either
immediately prior to or immediately after giving effect thereto;

                  (b) Sell,  lease,  transfer  or  otherwise  dispose of assets,
property  and/or  operations  (including  any  sale-leaseback  transaction,  but
excluding (x) the sale of inventory in the ordinary course of business;  (y) the
sale or disposition of plant,  property and equipment  which is no longer useful
in the business or as to which the proceeds  therefrom are  reinvested in plant,
property  and  equipment  within six months  thereof;  and (z) the sale,  lease,
transfer or other  disposition  of the Wystar record keeping  software  system),
unless

                           (i)      the book value of such assets, property
         and/or operations do not in the
         aggregate exceed $5,000,000 in any fiscal year, and

                           (ii)     no Default of Event of Default exists or
         would exist after giving effect
         thereto on a Pro Forma Basis,

without the prior written consent of the Majority Banks;

                  (c) Acquire  all or any portion of the capital  stock or other
ownership  interest  in any  Person  or all or any  substantial  portion  of the
assets,  property and/or  operations of any Person or make any Investment in any
Subsidiary, without the prior written consent of the Majority Banks, unless

                           (i) the amount of any such acquisition or Investment,
         together with any other  acquisitions  or Investments  made pursuant to
         this  subsection (c) shall not exceed the sum of (A) $10,000,000 in the
         aggregate  in any fiscal year plus (B) the amount of any payment due in
         such fiscal year in connection with the KPMG Acquisition (of which sum,
         not more than  $10,000,000  may be paid in cash in such  fiscal  year);
         provided,  however,  that the total amount of any such  acquisition  or
         Investment  in any one  Person or any one  Subsidiary  shall not exceed
         $20,000,000  in the aggregate at any one time;  and provided,  further,
         that,   notwithstanding  the  foregoing,   the  total  amount  paid  in
         connection with the KPMG Acquisition shall not exceed $16,000,000;

                           (ii)     the Board of Directors of the Person which
         is the subject of the acquisition
         shall have approved the acquisition; and

                           (iii)    no Default or Event of Default would exist
         after giving effect thereto on a Pro Forma Basis; or

                  (d) In the case of the Borrower  and any  Material  Subsidiary
which is not wholly-owned,  liquidate,  wind-up or dissolve, whether voluntarily
or involuntarily (or suffer to permit any such liquidation or dissolution).

         Section 7.4.      Fiscal Year; Governing Documents.

         None of the Credit Parties shall (a) change its fiscal year, unless (i)
required to do so by law, (ii) 60 days' advance  written notice thereof is given
to the Agent,  and (iii)  covenants and agreements in this Agreement are amended
as  appropriate to accommodate  such change,  (b) materially  amend or alter its
certificate of  incorporation  or (c) materially amend or alter any provision of
its Bylaws (including,  without limitation, Section 9 of its Bylaws) relating in
any way to such Credit Party's  representations  and warranties or ability fully
and timely to comply with all of its obligations under this Agreement.

         Section 7.5.      Investments.

         Neither the  Borrower nor any of its  subsidiaries  shall lend money or
extend credit or make advances to any Person,  or purchase or acquire any stock,
obligations  or  securities  of, or any other  interest  in, or make any capital
contribution  to, or  otherwise  make an  Investment  in, any Person  except for
Permitted Investments.

         Section 7.6.      Financial Covenants.

         The  Borrower,   on  a   consolidated   basis  with  its   consolidated
subsidiaries, shall not:

         (a) As of the end of each fiscal quarter, cause or suffer its Net Worth
to be less than the following  amounts during the applicable  periods  indicated
below:

Period                                      Amount

Closing Date to June 29, 1999      $2,500,000

June 30, 1999 to June 29, 2000     $2,500,000 plus 50% net income
                                   for the fiscal year ended June 30, 1999

June 30, 2000 to June 29, 2001     $2,500,000 plus 50% cumulative net income
                                   for the fiscal years ended June 30, 1999 and
                                   2000

June 30, 2001 to June 29, 2002     $2,500,000 plus 50% cumulative net income
                                   for the fiscal years ended June 30, 1999,
                                   2000 and 2001

June 30, 2002 to June 29, 2003     $2,500,000 plus 50% cumulative net income
                                   for the fiscal years ended June 30, 1999,
                                   2000, 2001, and 2002

June 30, 2003 to June 29, 2004     $2,500,000 plus 50% cumulative net income
                                   for the fiscal years ended June 30, 1999,
                                   2000, 2001, 2002 and 2003

         (b) As of the end of each  fiscal  quarter,  cause or suffer  the Fixed
Charge  Coverage  Ratio to be less than 1.5 to 1 for the  immediately  preceding
four fiscal quarters as of each Calculation Date.

         (c) As of the end of each fiscal quarter,  cause or suffer the Leverage
Ratio to be greater than 2.5 to 1.0 for the  immediately  preceding  four fiscal
quarters as of each Calculation Date.

         Section 7.7.      Franchises.

         Neither the Borrower nor any of its subsidiaries shall suffer the final
revocation,  suspension,  material  amendment or  termination  of any franchise,
agreement,  permit,  or license as a result of which it is reasonably  likely to
suffer a Material Adverse Effect.

         Section 7.8.      Certificated Securities.

         The Borrower  shall not issue  certificates  for any  Employee  Pledged
Shares except upon 30 days' prior written notice to the Agent.

         Section 7.9.      Capital Expenditures.

         The Borrower and its Subsidiaries shall not incur Capital  Expenditures
in excess of  $25,000,000  in the aggregate in any fiscal year plus,  for fiscal
years  occurring  after the current  fiscal  year,  the unused  portion from the
immediately  preceding fiscal year beginning with the first fiscal year to occur
after the Closing Date.

         Section 7.10.     Transaction with Affiliates.

         Neither the  Borrower nor any of its  subsidiaries  shall enter into or
permit to exist any  transaction  or series of  transactions  with any  officer,
director,  shareholder,  subsidiary  or  Affiliate of such Person other than (a)
transactions  permitted by Section 7.1, Section 7.2, Section 7.3 or Section 7.5,
(b) normal compensation and reimbursement of expenses of officers and directors,
(c)  provision  of  financial  and other  services  and the sharing of know-how,
technology and office space in the ordinary  course of business,  and (d) except
as otherwise  specifically  limited in this Agreement,  other transactions which
are entered into in the ordinary  course of such Person's  business on terms and
conditions  substantially  as favorable to such Person as would be obtainable by
it in a comparable arms-length transactions with a Person other than an officer,
director, shareholder, subsidiary or Affiliate.

         Section 7.11.     Limitation on Restrictions on Subsidiary Dividends
                           and Other Distributions, etc.

         Neither the Borrower  nor any of its  Subsidiaries  shall,  directly or
indirectly,  create or otherwise cause, incur, assume, suffer or permit to exist
or become effective any consensual encumbrance or restriction of any kind on the
ability of any Person to (a) pay dividends or make any other distribution on any
of such Person's capital stock, (b) subject to subordination provisions, pay any
Indebtedness owed to the Borrower, (c) make loans or advances to the Borrower or
(d) transfer any of its property to the  Borrower,  except for  encumbrances  or
restrictions  existing  under  or by  reason  of  (i)  customary  non-assignment
provisions in any lease  governing a leasehold  interest,  (ii) any agreement or
other instrument of a Person existing at the time it becomes a Subsidiary of the
Borrower in  accordance  with Section 7.5,  provided  that such  encumbrance  or
restriction is not applicable to any other Person,  or any property of any other
Person, other than such Person becoming a Subsidiary of the Borrower and was not
entered  into in  contemplation  of such  Person  becoming a  Subsidiary  of the
Borrower and (iii) this Agreement and the other Credit Documents.

         Section 7.12      Issuance and Sale of Subsidiary Stock.

         The Borrower will not, except to qualified  directors or other nominees
(of nominal amounts of stock) where required by applicable  law, sell,  transfer
or otherwise  dispose of, any shares of capital stock of any of its Subsidiaries
or permit any of its  Subsidiaries to issue,  sell or otherwise  dispose of, any
shares of capital stock of any of its  Subsidiaries to any Person other than the
Borrower or its Subsidiaries.


                              ARTICLE VIII. DEFAULT

         Section 8.1.      Events of Default.

         Each of the  following  events shall  constitute  an "Event of Default"
hereunder  if such event shall not be remedied  within the time period set forth
below:

                  (a) The Borrower shall fail to pay (i) any amount of principal
         (except required  prepayments)  hereunder or under the Revolving Credit
         Notes when due and payable,  or (ii) any amount of interest or required
         prepayment  of principal or fee required to be paid  hereunder,  within
         five days after the date when due and payable;

                  (b) The Borrower or any of the Borrower's  Subsidiaries  shall
         fail to pay any Indebtedness in excess of $3,000,000  (other than under
         this  Agreement) when due (whether by scheduled  maturity,  by required
         prepayment,  by  acceleration,  by demand or otherwise),  shall fail to
         meet its  obligations  under the terms of the Borrower  Guaranty or any
         other  material  guaranty  when  called upon to do so, or shall fail to
         perform any  material  term,  covenant or  agreement  on its part to be
         performed  under any agreement or instrument  evidencing or securing or
         relating  to any such  Indebtedness  or  guaranty  when  required to be
         performed,  if the effect of any such failure is to  accelerate,  or to
         permit the holder or holders of such  Indebtedness or the trustee under
         any such  agreement or instrument to  accelerate,  the maturity of such
         Indebtedness or of any obligation  guaranteed by the Borrower,  and the
         Borrower has not cured such failure within the grace period provided by
         the applicable agreement or instrument,  whether or not such holders or
         trustees elect to exercise such remedy or to waive such failure;

                  (c) Any representation or warranty made by the Borrower or any
         of  its  Subsidiaries   herein  or  in  any   certificate,   agreement,
         instrument,  report or statement  contemplated  by or made or delivered
         pursuant to or in connection  herewith or any other  agreement with any
         of the Banks to which the Borrower or such Subsidiary is a party, shall
         be, at the time of the making or deemed  making of such  representation
         or warranty, incorrect in any material respect;

                  (d) The  Borrower  or any of its  Subsidiaries  shall  fail to
         observe or perform any covenant or  agreement  contained in (i) Section
         2.6  (as  it  pertains  to  Employee   Notes),   Section  2.8(b),   the
         organizational existence clause of Section 6.2(a), Section 6.4, Section
         6.5(a) or Sections 7.1, 7.2, 7.3, 7.5, 7.6, 7.9, 7.11 and 7.12, or (ii)
         any other Section of this Agreement and such failure shall continue for
         more than 20 days after the Borrower  shall have  notice,  knowledge or
         reason to know of any cause giving rise to such failure;

                  (e)  The   Borrower   or  any  of  the   Borrower's   Material
         Subsidiaries  shall  generally  not pay its debts as they become due or
         admit in writing its  inability  generally so to pay its debts,  make a
         material  assignment  for the benefit of  creditors,  seek an order for
         relief in  bankruptcy,  become  insolvent  within  the  meaning  of the
         Federal  Bankruptcy  Code,  petition or apply to any  tribunal  for the
         appointment of any receiver, custodian, liquidator, trustee, or similar
         official (hereinafter "Official") for it or any substantial part of its
         property,  commence any proceeding relating to it under any bankruptcy,
         reorganization,  arrangement,  readjustment  of  debt,  dissolution  or
         liquidation  law or statute  of any  jurisdiction  (including,  without
         limitation,  the Federal  Bankruptcy  Code) or there shall be commenced
         against the  Borrower any such  proceeding  which  remains  unstayed or
         undismissed  for a period of 60 days, or the Borrower shall consent to,
         approve of or acquiesce in any such  proceeding or the  appointment  of
         any such Official;

                  (f) The Borrower or any of the Borrower's  Subsidiaries  shall
         suffer the entry of judgment  against it by any court of record  having
         jurisdiction over it or any of its properties for the payment of money,
         if  the  aggregate  of  all  such  judgments  outstanding  against  the
         Borrower, on a consolidated basis, is in excess of $3,000,000, or shall
         suffer the issuance of a writ of attachment of any material  portion of
         its assets,  and the Borrower shall not discharge the same,  fully bond
         or  insure  against  its  discharge,   provide  for  its  discharge  in
         accordance  with its  terms,  or  procure a stay of  execution  thereon
         within 45 days from the date of entry thereof, unless execution thereon
         is effectively stayed pending further proceedings;

                  (g) Any security interest or lien granted or reaffirmed in the
         Security Agreement or the Credit Party Pledge Agreement in any material
         portion of the  Collateral  shall,  in any  material  respect,  for any
         reason cease to be a valid and perfected security interest, encumbrance
         or lien having first priority as provided therein;

                  (h) Any Reportable Event (as defined in Section 4043 of ERISA)
         that requires  notification to the PBGC and which the Agent  determines
         in good faith might constitute  grounds for the termination of any Plan
         covered by Title IV of ERISA or for the  appointment by the appropriate
         United States  District  Court of a trustee to administer any such Plan
         shall have occurred and be  continuing 45 days after written  notice to
         such effect shall have been given to the Borrower by the Agent,  or any
         such Plan shall be  terminated,  or a trustee  shall be appointed by an
         appropriate  United States  District Court to administer any such Plan,
         or the PBGC shall  institute  proceedings to terminate any such Plan or
         to appoint a trustee to administer  any such Plan, and in any such case
         the aggregate  amount of vested  unfunded  liabilities  under such Plan
         shall exceed $3,000,000;

                  (i)      Defaults under all or substantially all of the
         Employee Notes have occurred and are continuing;

                  (j)      The Borrower Guaranty shall be held invalid or
         unenforceable against the Borrower, or
         the Borrower shall deny or disaffirm its obligations thereunder;

                  (k)  Except  to  the  extent   permitted   under  this  Credit
         Agreement,  the guaranty given by any Subsidiary Guarantor hereunder or
         any  material  provision  thereof  shall  cease to be in full force and
         effect, or any Subsidiary  Guarantor  hereunder or any Person acting by
         or on behalf of such Subsidiary  Guarantor shall deny or disaffirm such
         Subsidiary   Guarantor's   obligations  under  such  guaranty,  or  any
         Subsidiary Guarantor shall default in the due performance or observance
         of any term,  covenant  or  agreement  on its part to be  performed  or
         observed pursuant to such guaranty; or

                  (l)      A Change of Control shall occur.

         Section 8.2.      Acceleration.

         Upon the  occurrence of any Event of Default,  the Majority  Banks,  by
written  notice  to  the  Agent  and  the  Borrower,  may  terminate  the  Total
Commitments  and  instruct the Agent to declare the entire  Indebtedness  of the
Credit Parties then outstanding hereunder or under the Notes immediately due and
payable (including the payment of cash collateral as additional security for the
LOC Obligations) without presentment,  demand, protest, notice of protest or any
other  notice  of  any  kind,  all  of  which  are  hereby   expressly   waived.
Notwithstanding   the  foregoing   provisions   of  this  section,   the  entire
Indebtedness of the Credit Parties then outstanding hereunder or under the Notes
shall become immediately due and payable (and the Borrower shall pay one hundred
percent cash collateral as additional  security for the LOC Obligations) and the
Total  Commitments  shall terminate,  without notice or election of any kind and
without  need for any action by the Banks or the  Agent,  if an Event of Default
specified  in  Section  8.1(e)  hereof  shall  occur.  The Banks  shall  have no
obligation to make any Loans or disburse any loan proceeds  during the existence
of any Event of Default or Incipient Default.

         Section 8.3.      Right of Setoff.

         Upon the occurrence and during the  continuance of any Event of Default
not  cured in  accordance  with  this  Agreement,  each of the  Banks is  hereby
authorized  at any time and from  time to time,  without  notice  to the  Credit
Parties (any such notice being hereby  expressly  waived by the Credit Parties),
to set off and apply any and all deposits  (general or special,  time or demand,
provisional or final) at any time held, and any other  Indebtedness  at any time
owing,  by such Bank to or for the credit or the  account  of any  Credit  Party
against all of the obligations of such Credit Party,  irrespective of whether or
not the Agent shall have made any demand under this Agreement or the Notes,  and
although  such  obligations  may be  unmatured.  All  amounts  set off by a Bank
pursuant  to  this  Section  shall  be  applied  to all of  the  Credit  Party's
obligations  to such Bank,  including  those  under or in  connection  with this
Agreement, and to such Bank's Employee Loan Participation pro rata in accordance
with the amount then  outstanding  under each such  obligation.  For purposes of
this Section, each of the Banks shall be considered to be a "creditor" under the
Federal  Bankruptcy  Code with respect to this Agreement,  the Revolving  Credit
Notes, the Employee Notes and the Borrower  Guaranty.  The Banks agree to act in
good faith and  promptly  to notify the  affected  Credit  Party  after any such
setoff and application,  provided that the failure to give such notice shall not
affect the  validity  of such  setoff and  application.  The rights of the Banks
under this  Section  are in addition to other  rights and  remedies  (including,
without limitation, other rights of setoff) which the Banks may have.


                          ARTICLE IX. AGENCY PROVISIONS

         Section 9.1       Appointment.

         Each  Bank  hereby  designates  and  appoints   NationsBank,   N.A.  as
administrative  agent (in such  capacity,  the " Agent")  of such Bank to act as
specified  herein  and the other  Credit  Documents,  and each such Bank  hereby
authorizes the Agent,  as Agent for such Bank, to take such action on its behalf
under the provisions of this Credit Agreement and the other Credit Documents and
to exercise  such powers and perform such duties as are  expressly  delegated by
the terms hereof and of the other  Credit  Documents,  together  with such other
powers as are  reasonably  incidental  thereto.  Each Bank  further  directs and
authorizes the Agent to execute releases (or similar  agreements) to give effect
to the  provisions  of this Credit  Agreement  and the other  Credit  Documents,
including  specifically without limitation the provisions of Section 7.3 hereof.
Notwithstanding  any provision to the contrary elsewhere herein and in the other
Credit  Documents,  the  Agent  shall not have any  duties or  responsibilities,
except  those  expressly  set  forth  herein  and  therein,   or  any  fiduciary
relationship   with   any   Bank,   and   no   implied   covenants,   functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Credit Agreement or any of the other Credit Documents,  or shall otherwise exist
against the Agent.  The provisions of this Section are solely for the benefit of
the Agent and the Banks and none of the Credit  Parties shall have any rights as
a third party beneficiary of the provisions  hereof. In performing its functions
and duties under this Credit Agreement and the other Credit Documents, the Agent
shall act  solely as Agent of the  Banks  and does not  assume  and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for any Credit Party or any of their respective Affiliates.

         Section 9.2       Delegation of Duties.

         The Agent may  execute any of its duties  hereunder  or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be  responsible  for the  negligence  or  misconduct  of any agents or
attorneys-in-fact selected by it with reasonable care.

         Section 9.3       Exculpatory Provisions.

         The   Agent   and   its   officers,   directors,   employees,   agents,
attorneys-in-fact  or affiliates shall not be (i) liable for any action lawfully
taken  or  omitted  to be  taken by it or such  Person  under  or in  connection
herewith or in connection with any of the other Credit Documents (except for its
or  such  Person's  own  gross  negligence  or  willful  misconduct),   or  (ii)
responsible  in any  manner to any of the Banks  for any  recitals,  statements,
representations or warranties made by any of the Credit Parties contained herein
or in any of the other Credit Documents or in any certificate, report, document,
financial  statement or other written or oral statement  referred to or provided
for  in,  or  received  by the  Agent  under  or in  connection  herewith  or in
connection with the other Credit  Documents,  or  enforceability  or sufficiency
therefor of any of the other Credit Documents,  or for any failure of any Credit
Party to perform its obligations hereunder or thereunder. The Agent shall not be
responsible  to  any  Bank  for  the   effectiveness,   genuineness,   validity,
enforceability,  collectability or sufficiency of this Agreement,  or any of the
other  Credit  Documents  or for any  representations,  warranties,  recitals or
statements made herein or therein or made by the Borrower or any Credit Party in
any  written  or  oral  statement  or in  any  financial  or  other  statements,
instruments, reports, certificates or any other documents in connection herewith
or  therewith  furnished  or made by the Agent to the Bank or by or on behalf of
the  Credit  Parties to the Agent or any Bank or be  required  to  ascertain  or
inquire as to the  performance  or observance  of any of the terms,  conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the  proceeds  of the  Loans or the use of the  Letters  of  Credit or of the
existence or possible  existence of any Incipient Default or Event of Default or
to inspect  the  properties,  books or  records of the Credit  Parties or any of
their respective Affiliates.

         Section 9.4       Reliance on Communications.

         The Agent shall be entitled to rely,  and shall be fully  protected  in
relying,  upon any note,  writing,  resolution,  notice,  consent,  certificate,
affidavit,  letter,  cablegram,  telegram,  telecopy, telex or teletype message,
statement,  order or other document or conversation believed by it to be genuine
and  correct  and to have  been  signed,  sent or made by the  proper  Person or
Persons and upon advice and  statements  of legal  counsel  (including,  without
limitation,  counsel to any of the Credit Parties,  independent  accountants and
other experts  selected by the Agent with reasonable  care).  The Agent may deem
and treat the Banks as the owners of their  respective  interests  hereunder for
all purposes  unless a written  notice of  assignment,  negotiation  or transfer
thereof shall have been filed with the Agent in accordance  with Section 10.2(b)
hereof.  The Agent shall be fully  justified  in failing or refusing to take any
action under this Agreement or under any of the other Credit Documents unless it
shall first receive such advice or concurrence of the Majority Banks as it deems
appropriate or it shall first be indemnified  to its  satisfaction  by the Banks
against any and all  liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting,  hereunder or under any
of the other Credit Documents in accordance with a request of the Majority Banks
(or to the extent  specifically  provided in Section  10.10,  all the Banks) and
such request and any action taken or failure to act  pursuant  thereto  shall be
binding upon all the Banks (including their successors and assigns).

         Section 9.5       Notice of Default.

         The  Agent  shall  not be  deemed  to have  knowledge  or notice of the
occurrence of any  Incipient  Default or Event of Default  hereunder  unless the
Agent has received  notice from a Bank or a Credit Party referring to the Credit
Document, describing such Incipient Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent  receives such
a notice,  the Agent shall give prompt  notice  thereof to the Banks.  The Agent
shall  take such  action  with  respect  to such  Incipient  Default or Event of
Default as shall be reasonably directed by the Majority Banks.

         Section 9.6       Non-Reliance on Agent and Other Banks.

         Each  Bank  expressly  acknowledges  that  each  of the  Agent  and its
officers, directors, employees, agents,  attorneys-in-fact or affiliates has not
made any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken,  including any review of the affairs of any
Credit  Party  or any  of  their  respective  Affiliates,  shall  be  deemed  to
constitute any  representation  or warranty by the Agent to any Bank.  Each Bank
represents to the Agent that it has, independently and without reliance upon the
Agent or any other Bank, and based on such  documents and  information as it has
deemed  appropriate,  made  its own  appraisal  of and  investigation  into  the
business,  assets,  operations,   property,   financial  and  other  conditions,
prospects  and  creditworthiness  of the Borrower,  the other Credit  Parties or
their  respective  Affiliates  and  made  its own  decision  to make  its  Loans
hereunder and enter into this Agreement. Each Bank also represents that it will,
independently  and without  reliance upon the Agent or any other Bank, and based
on such  documents and  information  as it shall deem  appropriate  at the time,
continue to make its own credit analysis,  appraisals and decisions in taking or
not taking action under this  Agreement,  and to make such  investigation  as it
deems  necessary  to  inform  itself  as to the  business,  assets,  operations,
property, financial and other conditions, prospects and credit-worthiness of the
Borrower, the other Credit Parties and their respective  Affiliates.  Except for
notices,  reports and other documents  expressly required to be furnished to the
Banks  by  the  Agent   hereunder,   the  Agent  shall  not  have  any  duty  or
responsibility  to  provide  any Bank  with  any  credit  or  other  information
concerning  the  business,  operations,  assets,  property,  financial  or other
conditions,  prospects or  creditworthiness  of the  Borrower,  the other Credit
Parties or any of their respective Affiliates which may come into the possession
of  the  Agent  or  any  of  its   officers,   directors,   employees,   agents,
attorneys-in-fact or affiliates.

         Section 9.7       Indemnification.

         The Banks agree to indemnify  the Agent in its capacity as such (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably  according to their respective Total Commitments (or
if the Total Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interests of
the  Banks),  from and  against any and all  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever  which may at any time (including  without  limitation at
any time  following the final payment of all of the  obligations of the Borrower
hereunder and under the other Credit  Documents)  be imposed on,  incurred by or
asserted  against the Agent in its  capacity  as such in any way  relating to or
arising out of this  Agreement  or the other Credit  Documents or any  documents
contemplated   by  or  referred  to  herein  or  therein  or  the   transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in  connection  with any of the  foregoing;  provided  that no Bank  shall be
liable for the payment of any portion of such liabilities,  obligations, losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting from the gross  negligence or willful  misconduct of the Agent. If any
indemnity  furnished to the Agent for any purpose  shall,  in the opinion of the
Agent,  be insufficient  or become  impaired,  the Agent may call for additional
indemnity and cease, or not commence,  to do the acts indemnified  against until
such  additional  indemnity is furnished.  The  agreements in this Section shall
survive the repayment of the Loans, LOC Obligations and other  obligations under
the Credit Documents and the termination of the Total Commitments hereunder.

         Section 9.8       Agent in its Individual Capacity.

         The Agent and its  affiliates  may make loans to, accept  deposits from
and generally engage in any kind of business with the Borrower, its Subsidiaries
or their respective Affiliates as though the Agent were not the Agent hereunder.
With respect to the Loans made by and all obligations of the Borrower  hereunder
and under the other Credit  Documents,  the Agent shall have the same rights and
powers  under this  Agreement as any Bank and may exercise the same as though it
were not the Agent,  and the terms "Bank" and "Banks" shall include the Agent in
its individual capacity.

         Section 9.9       Successor Agent.

         The Agent may, at any time,  resign upon 20 days' written notice to the
Banks,  and may be removed,  upon show of cause,  by the Majority  Banks upon 30
days' written notice to the Agent.  Upon any such  resignation  or removal,  the
Majority  Banks  shall  have the  right to  appoint  a  successor  Agent.  If no
successor  Agent shall have been so appointed by the Majority  Banks,  and shall
have accepted such  appointment,  within 30 days after the notice of resignation
or notice of removal,  as  appropriate,  then the retiring  Agent shall select a
successor Agent provided such successor is a Bank hereunder or a commercial bank
organized under the laws of the United States of America or of any State thereof
and has a  combined  capital  and  surplus  of at least  $400,000,000.  Upon the
acceptance of any appointment as Agent hereunder by a successor,  such successor
Agent shall thereupon succeed to and become vested with all the rights,  powers,
privileges  and duties of the retiring  Agent,  and the retiring  Agent shall be
discharged from its duties and obligations as Agent, as appropriate,  under this
Agreement and the other Credit  Documents and the provisions of this Section 9.9
shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was Agent under this Agreement.


                            ARTICLE X. MISCELLANEOUS

         Section 10.1.     Rights and Waivers.

         All  rights,  remedies  and  powers  granted  to the Agent or the Banks
herein or in any other Credit  Document,  whether  express or implied,  shall be
cumulative and may be exercised singly or concurrently with such other rights as
the Agent or the Banks may have,  and shall  include,  without  limitation,  the
right to apply to a court of equity for any  injunction  to restrain a breach or
threatened  breach of this  Agreement  and all rights as stated in Article  VIII
hereof.  No failure or delay on the part of the Agent or the Banks in exercising
any right, power or privilege  hereunder or under any other Credit Document,  or
under applicable law, shall operate as a waiver thereof; nor shall any single or
partial  exercise  of any right,  power or  privilege  hereunder  or  thereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power, or privilege.  No waiver or  modification of any right,  power or
privilege of the Agent or the Banks or of any  obligation of the Borrower or any
other Credit Party shall be effective  unless such waiver or  modification is in
writing,  signed by the Agent or the Banks, as required herein, and then only to
the extent set forth  therein.  A waiver by the Agent or the Banks of any right,
power or  privilege  hereunder  or under any other  Credit  Document  on any one
occasion  shall not be  construed  as a bar to, or a waiver of, any such  right,
power or  privilege  which the Agent or the Banks  otherwise  would  have on any
subsequent occasion. Neither the Agent nor the Banks shall have any liability to
the  Borrower or any other Credit Party for failure to fund any loan on the date
set for such  funding if such failure is due to forces or  circumstances  beyond
the control of the Banks, including,  without limitation, Acts of God, concerted
work stoppages, or delays in wire transfer systems.

         Section 10.2.     Binding Effect; Assignment.

                  (a) This Agreement  shall bind and inure to the benefit of the
         parties,  their legal representatives,  successors and assigns,  except
         that neither the Borrower nor any  Guarantor may assign or transfer its
         rights  hereunder or any  interests  herein  without the prior  written
         consent of all the Banks.

                  (b) Each Bank may  assign  all or a portion  of its rights and
         obligations hereunder (including,  without limitation, all or a portion
         of its Total Commitments or its Loans) to (i) a Bank, (ii) an affiliate
         of a Bank or (iii) any other  commercial bank or financial  institution
         reasonably  acceptable to the Agent and, so long as no Default or Event
         of Default has occurred and is continuing, the Borrower (the consent of
         the  Borrower  shall not be  unreasonably  withheld or delayed and such
         consent  shall be deemed  given if the  Borrower  does not  notify  the
         assigning Bank and the Agent of any objection  within two Business Days
         after the Borrower has been provided notice of the proposed  assignment
         by the  assigning  Bank or the  Agent);  provided  that  (i)  any  such
         assignment shall be in a minimum aggregate amount of $5,000,000 (or, if
         less,  the  remaining  amount of the Total  Commitment of the assigning
         Bank) of the Total Commitments and in integral  multiples of $1,000,000
         above such amount and (ii) any such assignment  shall be of a constant,
         not  varying,  percentage  of  all  the  assigning  Bank's  rights  and
         obligations under this Agreement. Upon receipt by the assigning Bank of
         the Agent's and Borrower's (provided no Default or Event of Default has
         occurred and is continuing) written consent, the execution and delivery
         to the Agent of an assignment  agreement between the assigning Bank and
         the  assignee,  the  delivery to the Agent of a transfer  fee of $3,500
         payable to the Agent for its own account, and the making of any payment
         by the assignee required by the assigning Bank, this Agreement shall be
         deemed to be amended to the extent,  and only to the extent,  necessary
         to reflect the addition of such  assignee,  and the assignee  shall for
         all  purposes be a Bank party  hereto and shall have,  to the extent of
         such  assignment,  the same rights and obligations as a Bank hereunder.
         Upon the  consummation of any  assignment,  the assigning Bank shall be
         relieved  from  its   obligations   hereunder  to  the  extent  of  the
         obligations  so  assigned.   Notwithstanding  anything  herein  to  the
         contrary,  nothing  herein shall prevent an assignment by any Bank to a
         Federal  Reserve Bank in support of  borrowings  made by such Bank from
         such Federal Reseve Bank.

                  (c) Each Bank may grant  participations  in all or any part of
         its Revolving  Credit Loans and may grant  subparticipations  in all or
         any part of its Employee Loan  Participations to any commercial bank or
         other financial  institution.  Each participation shall be in an amount
         equal to or in excess of $5,000,000.  A participant  shall not have any
         rights  under  this  Agreement  or  any  other  document  delivered  in
         connection  herewith  (the  participant's  rights  against  the Bank in
         respect of such  participation  to be those set forth in the  agreement
         executed  by the  Bank in favor of the  participant  relating  thereto,
         which agreement with respect to such  participation  shall not restrict
         the Bank's  ability to make any  modification,  amendment  or waiver to
         this Agreement without the consent of the participant,  except that the
         Bank may agree  with any  participant  that the Bank will not,  without
         such  participant's  consent,  (i) extend or increase the amount of the
         Revolving Credit Commitments or the Employee Loan Participations,  (ii)
         agree to extend the final maturity of the Notes,  (iii) agree to reduce
         the principal amount of, or rate of interest on, the Notes,  (iv) agree
         to release any material  portion of the collateral or Employee  Pledged
         Shares and (v) except as permitted  under Section  7.3(a) or (b), agree
         to release the Borrower or all or  substantially  all of the Guarantors
         from its or their respective  obligations under the Credit  Documents).
         All  amounts  payable by the  Borrower  under this  Agreement  shall be
         determined as if a Bank had not sold such  participation.  The Borrower
         acknowledges and agrees that any participant  described in this Section
         10.2 will,  for  purposes of Sections  2.12,  2.14,  2.16 and 2.17,  be
         deemed to be a Bank hereunder, provided that such participant shall not
         be entitled to receive any more than the Bank would have  received  had
         such  participation  not been made.  In the event of any such sale by a
         Bank  of  participating   interests  to  a  participant,   such  Bank's
         obligations  under this  Agreement  shall remain  unchanged,  such Bank
         shall remain solely responsible for the performance thereof,  such Bank
         shall remain the holder of any  obligation  for all purposes under this
         Agreement,  and the Borrower shall continue to deal solely and directly
         with such Bank in  connection  with the Bank's  rights and  obligations
         under this Agreement.

         Section 10.3.     Severability.

         Any  provision  of  this  Agreement  prohibited  by  the  laws  of  any
jurisdiction  shall,  as to such  jurisdiction,  be ineffective to the extent of
such prohibition,  or modified to conform with such laws,  without  invalidating
the remaining  provisions of this  Agreement,  and any such  prohibition  in any
jurisdiction shall not invalidate such provisions in any other jurisdiction.

         Section 10.4.     Interpretation.

         All parties have  participated in the drafting of this  Agreement,  and
this  Agreement  shall  be  interpreted   without   reference  to  any  rule  of
construction  providing  for  interpretation  of  documents  against the Persons
drafting them.

         Section 10.5.     Governing Law; Jury Trial.

         This  Agreement  and the other Credit  Documents  shall be construed in
accordance  with  and  governed  by the  internal  laws of the  State  of  North
Carolina, excluding its choice of law rules. The parties hereto (a) individually
with respect to each instance and each issue as to which the right to a trial by
jury would otherwise accrue,  waive and elect not to assert their right to trial
by jury on any issue triable of right by a jury to the full extent that any such
right shall now or hereafter exist, and certify that no  representative or agent
of the Agent or the Banks (including without limitation the Agent's counsel) has
represented,  expressly or otherwise,  to any Credit Party that the Agent or the
Banks will not seek to enforce this waiver of right to jury trial provision, (b)
consent  to the  jurisdiction  of the  courts  of the  State of North  Carolina,
including its federal district courts,  and (c) consent to service of process by
registered mail, return receipt requested.

         Section 10.6.     Payment of Expenses and Taxes; Indemnification.

                  (a) The  Borrower  agrees to pay all out of  pocket  costs and
         expenses of the Agent,  including the reasonable fees and disbursements
         of special counsel for the Agent,  in connection with the  negotiation,
         preparation,  execution and delivery of this Agreement,  the Notes, the
         Borrower Guaranty, the Employee Pledge Agreements, and any other Credit
         Document, to pay all reasonable out of pocket costs and expenses of the
         Banks in connection with the enforcement of this Agreement,  the Notes,
         and any other Credit Document, including reasonable attorneys' fees and
         disbursements  arising in connection  therewith (whether or not suit is
         instituted),  and also to pay all reasonable actual out-of-pocket costs
         of the Banks in connection  with any  inspections,  investigations,  or
         examinations performed under the Security Agreement.

                  (b) The Borrower  agrees to indemnify  the Agent and the Banks
         from and against any and all liabilities,  losses, damages,  penalties,
         actions,  judgments,  costs,  expenses (including,  without limitation,
         reasonable  attorneys' fees and  disbursements) or disbursements of any
         kind or nature  whatsoever  which may be imposed  on,  incurred  by, or
         asserted against the Agent and the Banks in any litigation,  proceeding
         or  investigation  instituted or conducted by any Person other than the
         Borrower with respect to any aspect of, or any transaction contemplated
         by, or  referred  to in,  or any  matter  related  to,  any Loans  made
         hereunder,  including,  without  limitation,  in  connection  with  the
         Borrower's  servicing  role  hereunder  and  any  consumer  lending  or
         securities  law  violations  arising  from or related  to the  Employee
         Loans.  The Borrower also agrees to pay, and to save the Banks harmless
         from any delay in paying,  all stamp and other taxes, if any, which may
         be payable or determined to be payable in connection with the execution
         and delivery of this Agreement,  the Notes, the Borrower Guaranty,  the
         Employee  Pledge  Agreements,  and any other  Credit  Document,  or any
         modification  hereof or thereof,  and all filing and recording  fees in
         connection therewith.

         Section 10.7.     Survival of Representations and Warranties.

         All  representations  and warranties  made in this Agreement and in any
certificates  or other  documents  delivered  pursuant  hereto shall survive the
execution and delivery of this Agreement and the making of the Loans  hereunder,
and the provisions of Section 10.6 shall survive payment of the Notes.

         Section 10.8.     Notices.

         All notices,  requests and demands to or upon any party hereto shall be
deemed  to have  been  given  or made  when  delivered  by  hand,  when  sent by
telecopier or telegram or when mailed,  first-class,  postage prepaid, addressed
to such party as follows or to such other address as may be hereafter designated
in writing by such party to the other parties hereto:

                  (a)      if to the Agent, to:

                           NationsBank, N.A.
                           Corporate Bank
                           6th Floor
                           6610 Rockledge Drive
                           Bethesda, Maryland 20817
                           Attention: Michael R. Heredia
                                          Senior Vice President

                  with a copy to:

                           Ret Taylor
                           Agency Services
                           NationsBank, N.A.
                           101 North Tryon Street
                           15th Floor
                           Charlotte, NC 28255

                  (b)      if to the Borrower or the Subsidiary Guarantors, to:

                           Watson Wyatt & Company
                           6707 Democracy Blvd., Suite 800
                           Bethesda, Maryland  20817
                           Attention: Eric B. Schweizer
                                         Treasurer

                  with copies to:

                           Walter W. Bardenwerper, Esq.
                           General Counsel
                           Watson Wyatt & Company
                           6707 Democracy Blvd., Suite 800
                           Bethesda, Maryland  20817

                  (c)      if to any Bank, to its address set forth below its
         name on the signature pages hereof, with a copy to the Agent.

         Section 10.9.     Execution.

         This Agreement may be executed by the parties hereto individually or in
any combination of the parties hereto in several separate counterparts,  each of
which shall be an original and all of which taken together shall  constitute one
and the same Agreement.

         Section 10.10.             Amendments.

         Neither this  Agreement  nor any other  Credit  Document nor any of the
terms  hereof  or  thereof  may  be  amended,  changed,  waived,  discharged  or
terminated unless such amendment, change, waiver, discharge or termination is in
writing  entered into by, or approved in writing by, the Majority  Banks and the
Borrower, provided, however, that:

         (a)      without the consent of each Bank affected thereby, neither
         this Agreement nor any of the other Credit Documents may be amended to

                        (i) extend the final maturity of any Loan or the time of
                  payment  of  any  reimbursement  obligation,  or  any  portion
                  thereof,  arising from drawings  under  Letters of Credit,  or
                  extend  or waive any  principal  amortization  payment  of any
                  Loan, or any portion thereof,

                       (ii)  reduce  the rate or extend  the time of  payment of
                  interest (other than as a result of waiving the  applicability
                  of any increase in interest  rates after the  occurrence of an
                  Event  of  Default  or on  account  of a  failure  to  deliver
                  financial  statements  on a  timely  basis)  thereon  or  fees
                  hereunder,

                      (iii)  reduce or waive the principal amount of any Loan
                  or of any reimbursement obligation, or any portion thereof,
                  arising from drawings under Letters of Credit,

                       (iv) increase the Revolving Credit Commitment or Employee
                  Loan  Participation  of a Bank  over  the  amount  thereof  in
                  effect,  except  as  provided  in  Section  2.8(d)  (it  being
                  understood and agreed that a waiver of any Default or Event of
                  Default shall not constitute a change in the Revolving  Credit
                  Commitment or Employee Loan Participation of any Bank),

                        (v) except as  permitted  under  Section  7.3(a) or (b),
                  release  the  Borrower  or  all  or  substantially  all of the
                  Subsidiary Guarantors from its or their respective obligations
                  under the Credit Documents,

                       (vi)         except as the result of or in connection
                  with a disposition permitted under Section 7.3(b), release
                  all or substantially all of the Collateral,

                      (vii) amend, modify or waive any provision of this Section
                  10.10 or Section 2.8(d),  2.12,  2.13, 2.14, 2.15, 2.16, 2.17,
                  8.1(a), 10.6 or 10.7,

                     (viii)         reduce any percentage specified in, or
                  otherwise modify, the definition of Majority Banks, or

                       (ix)         consent to the assignment or transfer by
                  the Borrower of any of its rights and  obligations under
           (or in respect of) the Credit Documents except as permitted thereby;

                  (b)      without the consent of the Agent, no provision of
             Section 9 may be amended;

                  (c)      without the consent of the Issuing Bank, no
             provision of Section 2.5 may be amended.

         Notwithstanding  the fact that the consent of all the Banks is required
in certain  circumstances  as set forth above, (x) each Bank is entitled to vote
as such Bank sees fit on any  bankruptcy  reorganization  plan that  affects the
Loans, and each Bank  acknowledges that the provisions of Section 1126(c) of the
Federal  Bankruptcy Code supersedes the unanimous  consent  provisions set forth
herein and (y) the Majority  Banks may consent to allow the Borrower to use cash
collateral in the context of a bankruptcy or insolvency proceeding.

         Section 10.11.             Relationship of the Parties.

         This Agreement  provides for the making of loans by the Banks, in their
capacity  as  Banks,  to the  Borrower,  and for the  payment  of  interest  and
repayment of principal by the Borrower to the Banks.  The  relationship  between
the Banks  (including,  throughout this Section,  the Agent) and the Borrower is
limited to that of  creditors/secured  parties,  on the one hand, and debtor, on
the other hand. The provisions  herein for compliance with financial  covenants,
delivery of financial  statements,  and financial  inspections,  investigations,
audits,  or  examinations  are  intended  solely for the benefit of the Banks to
protect  their  interests  as lenders  in  assuring  payments  of  interest  and
repayment  of  principal,  and  nothing  contained  in this  Agreement  shall be
construed as permitting or obligating  the Banks to act as financial or business
advisors or consultants to the Borrower, as permitting or obligating any Bank to
control the Borrower or to conduct the  Borrower's  operations,  as creating any
fiduciary  obligation on the part of the Banks to the  Borrower,  or as creating
any joint venture,  agency, or other relationship between the parties other than
as  explicitly  and  specifically   stated  in  this  Agreement.   The  Borrower
acknowledges that it has had the opportunity to obtain the advice of experienced
counsel of its own choosing in connection  with the negotiation and execution of
this  Agreement  and to obtain the advice of such  counsel  with  respect to all
matters  contained  herein,  including,  without  limitation,  the  provision in
Section 10.5 for waiver of trial by jury. The Borrower further acknowledges that
it is experienced  with respect to financial and credit matters and has made its
own  independent  decision  to apply to the Banks for credit and to execute  and
deliver this Agreement.


<PAGE>



         IN WITNESS WHEREOF, the parties have caused this Credit Agreement to be
duly executed and delivered as of the date stated on the first page hereof.

BORROWER
                                              WATSON WYATT & COMPANY
                                              (d/b/a Watson Wyatt Worldwide),
                                              a Delaware corporation

ATTEST: /s/ Walter W. Bardenwerper            By:    /s/ Barbara L. Landes
Name: Walter W. Bardenwerper                  Name:  Barbara L. Landes
Title:    Secretary                           Title:    Vice President and
                                                        Chief Financial Officer


SUBSIDIARY GUARANTOR                          WATSON WYATT INVESTMENT
                                              CONSULTING, INC.,
                                              a Delaware corporation


ATTEST:    /s/ Walter W. Bardenwerper         By:    /s/ Barbara L. Landes
           Name: Walter W. Bardenwerper       Name:  Barbara L. Landes
           Title:    Secretary                Title:   Chief Financial Officer


SUBSIDIARY GUARANTOR                          WYATT DATA SERVICES, INC.,
                                              a Delaware corporation

ATTEST:    /s/ Walter W. Bardenwerper         By:    /s/ Eric B. Schweizer
           Name: Walter W. Bardenwerper       Name:  Eric B. Schweizer
           Title:    Secretary                Title:    Treasurer


SUBSIDIARY GUARANTOR                          WATSON WYATT INTERNATIONAL, INC.,
                                              a Nevada corporation


ATTEST:    /s/ Walter W. Bardenwerper         By:  /s/ Eric B. Schweizer
           Name: Walter W. Bardenwerper       Name:  Eric B. Schweizer
           Title:    Secretary                Title:    Treasurer



<PAGE>



BANKS                                NATIONSBANK, N.A., as a Bank and as Agent


                                       By:  /s/ Michael R. Heredia
                                            Name:    Michael R. Heredia
                                            Title:   Senior Vice President

                                            All Administrative Notices:

                                            Address: NationsBank, N.A.
                                                     101 North Tryon Street
                                                     15th Floor
                                                     Charlotte, NC 28255
                                               Telephone:        (704) 388-1108
                                               Telecopy:         (704) 388-9436
                                               Attention:       Ret Taylor
                                                                Agency Services

                                            All Other Notices:

                                            Address: 6610 Rockledge Drive
                                                     MD2-600-06-13
                                                     Bethesda, MD 20817
                                              Telephone:        (301) 571-0724
                                              Telecopy:         (301) 571-0719
                                         Attention:      Michael R. Heredia,
                                                         Senior Vice President



                           Revolving Credit Commitment: $19,395,833.34
                           Employee Loan Participation:    $  5,104,166.66
                           Total Commitment:              $24,500,000.00



<PAGE>



                                     PNC BANK, NATIONAL ASSOCIATION,
                                     as a Bank and as Co-Agent


                                       By: /s/Robert J. Giannone
                                      Name: Robert J. Giannone
                                     Title: Assistant Vice President

                                     Administrative Notices:
                                     Address: 1600 Market Street
                                              21st Floor
                                              Philadelphia, PA  19103
                                              Telephone:        (215) 585-5286
                                              Telecopy:         (215) 585-6037
                                              Attention:        Barbara Walsh,
                                                             Loan Administrator

                                             All Other Notices:
                                             Address: 1600 Market Street
                                                      21st Floor
                                                     Philadelphia, PA  19103
                                             Telephone:        (215) 585-7630
                                             Telecopy:         (215) 585-5972
                                          Attention:        Robert J. Giannone
                                                       Assistant Vice President



                              Revolving Credit Commitment:    $17,812,500.00
                              Employee Loan Participation:    $ 4,687,500.00
                              Total Commitment:               $22,500,000.00



<PAGE>



                                      COMERICA BANK,
                                      as a Bank and as Co-Agent


                                       By:          /s/ Dan M. Roman
                                       Name:        Dan M. Roman
                                       Title:       Vice President

                                      Administrative Notices:

                                      Address: U.S. Banking East
                                               500 Woodward Avenue
                                               9th Floor, MC 3280
                                               Detroit, MI  48275-3280
                                      Telephone:        (313) 222-3678
                                      Telecopy:         (313) 222-3330
                                      Attention:        Diana Pascoe,
                                                        Customer Assistant

                                      All Other Notices:
                                      Address: U.S. Banking East
                                               500 Woodward Avenue
                                               9th Floor, MC 3280
                                               Detroit, MI  48275-3280
                                              Telephone:        (313) 222-3803
                                              Telecopy:         (313) 222-3330
                                              Attention:        Dan M. Roman,
                                                           Vice President

                              Revolving Credit Commitment:    $17,812,500.00
                              Employee Loan Participation:    $ 4,687,500.00
                              Total Commitment:               $22,500,000.00



<PAGE>



                                FIRST UNION NATIONAL BANK,
                                as a Bank and as Co-Agent


                                       By:  /s/Barbara K. Angel
                                      Name: Barbara K. Angel
                                     Title: Vice President

                                     All Notices:

                                     Address: 1970 Chain Bridge Road
                                              3rd Floor
                                              McLean, VA  22102
                                    Telephone:        (703) 760-5369
                                    Telecopy:         (703) 760-5457
                                    Attention:        Barbara Angel
                                                      Vice President



                                Revolving Credit Commitment:    $17,812,500.00
                                Employee Loan Participation:    $ 4,687,500.00
                                Total Commitment:               $22,500,000.00



<PAGE>



                                    CRESTAR BANK


                                       By: /s/Nancy R. Petrash
                                      Name:  Nancy R. Petrash
                                     Title:  Senior Vice President

                                    Administrative Notices:

                                    Address: 1445 New York Avenue, NW
                                             Washington, DC  20005
                                    Telephone:        (202) 879-6395
                                    Telecopy:         (202) 879-6137
                                    Attention:        Linda Jameson

                                    All Other Notices:

                                    Address: 1445 New York Avenue, NW
                                             5th Floor
                                             Washington, DC  20005
                                    Telephone:        (202) 879-6432
                                    Telecopy:         (202) 879-6137
                                    Attention:        Nancy R. Petrash



                                Revolving Credit Commitment:     $11,083,333.33
                                Employee Loan Participation:     $ 2,916,666.67
                                Total Commitment:                $14,000,000.00



<PAGE>


                               THE BANK OF NOVA SCOTIA


                               By:   /s/J.W. Campbell
                               Name:  J.W. Campbell
                               Title:  Unite Head

                               Administrative Notices:
                               Address: One Liberty Plaza
                                        24th Floor
                                        New York, NY  10006
                               Telephone:        (212) 225-5064
                               Telecopy:         (212) 225-5145
                               Attention:        Karen Arthur
                               All Other Notices:
                               Address: One Liberty Plaza
                                        26th Floor
                                        New York, NY  10006
                               Telephone:        (212) 225-5159
                               Telecopy:         (212) 225-5090
                               Attention:        Tim Finneran


                               Revolving Credit Commitment:     $11,083,333.33
                               Employee Loan Participation:     $ 2,916,666.67
                               Total Commitment:                $14,000,000.00


<PAGE>
 
                                    EXHIBIT A

                          FORM OF REVOLVING CREDIT NOTE


$__________.00                                             Bethesda, MD
                                                           June 30, 1998

     FOR VALUE RECEIVED,  the undersigned Borrower hereby promises to pay to the
     order of  ______________________,  and its  successors  and assigns,  on or
     before  June 30, 2003 to the office of the Agent in  immediately  available
     funds  as  provided  in the  Credit  Agreement,  the  principal  amount  of
     __________  DOLLARS  ($__________.00)  or the  aggregate  unpaid  principal
     amount of all  Revolving  Credit  Loans owing to such Bank,  together  with
     interest thereon at the rates and as provided in the Credit Agreement. This
     Revolving  Credit Note is one of the Revolving  Credit Notes referred to in
     the Credit  Agreement  dated as of June 30, 1998 (as amended and  modified,
     the  "Credit   Agreement")  among  Watson  Wyatt  &  Company,   a  Delaware
     corporation,  the Subsidiary  Guarantors and Lenders identified therein and
     NationsBank,  N.A., as Agent.  Terms used but not otherwise  defined herein
     shall have the meanings  provided in the Credit  Agreement.  The holder may
     endorse  and attach a  schedule  to reflect  borrowings  evidenced  by this
     Revolving  Credit Note and all payments and prepayments  thereon;  provided
     that  any  failure  to  endorse  such  information  shall  not  affect  the
     obligation of the  undersigned  Borrower to pay amounts  evidenced  hereby.
     Upon the occurrence of an Event of Default,  all amounts  evidenced by this
     Revolving  Note may,  or  shall,  become  immediately  due and  payable  as
     provided in the Credit Agreement without  presentment,  demand,  protest or
     notice of any kind, all of which are waived by the undersigned Borrower. In
     the event payment of amounts evidenced by this Revolving Credit Note is not
     made at any stated or accelerated maturity, the undersigned Borrower agrees
     to pay, in addition to principal  and  interest,  all costs of  collection,
     including  reasonable  attorneys'  fees. This Revolving Credit Note and the
     Loans and amounts  evidenced  hereby may be transferred only as provided in
     the Credit Agreement.

<PAGE>


     This  Revolving  Credit  Note  shall be  governed  by,  and  construed  and
     interpreted in accordance with, the law of the State of North Carolina.  In
     WITNESS WHEREOF,  the undersigned Borrower has caused this Revolving Credit
     Note to be duly executed as of the date first above written.

                                                     WATSON WYATT & COMPANY,
                                                     a Delaware corporation


ATTEST:                                     By:
Name:        Walter W. Bardenwerper         Name:    Barbara L. Landes
Title:       Secretary                               Title: Vice President and
                                                      Chief Financial Officer




<PAGE>


                                    EXHIBIT B

                             FORM OF PROMISSORY NOTE

Name: __________________                                  Bethesda, MD
Office:_________________                                  June 30, 1998
$-----------------------

     FOR  VALUE  RECEIVED,  the  undersigned  promises  to pay to the  order  of
     NATIONSBANK,      N.A.     (the      "Agent"),      at      ______________,
     __________________________  or at such  other  address  as the Agent  shall
     subsequently  state to the  undersigned  in writing,  the  principal sum of
     _______________________________/100  U.S. DOLLARS (U.S.  $_________),  plus
     interest  on the unpaid  balance  thereof at a  fluctuating  rate per annum
     equal to the  Applicable  Rate.  Interest shall be computed on the basis of
     the actual  number of days elapsed  over a year of 365 or 366 days,  as the
     case may be [or if the Federal Funds Rate (defined below) shall then apply,
     360 days], for the period commencing with the date hereof and ending on the
     date on which  this Note has been paid in full.  Interest  shall be payable
     quarterly  in arrears,  commencing  on  ____________________  for the first
     calendar  quarter  ending after the date hereof and  continuing  on the 3rd
     business  day of the month  immediately  following  each  calendar  quarter
     occurring  thereafter,  and on the Maturity Date. For purposes hereof,  the
     "Applicable  Rate" means (i) for all periods prior to and including January
     5, 2001, the Adjusted Base Rate and (ii) for all periods  thereafter (a) if
     no Cash Flow Deficiency exists as of the immediately  preceding Calculation
     Date, the Adjusted Base Rate and (b) if a Cash Flow Deficiency exists as of
     the immediately  preceding Calculation Date, the Prime Rate. "Adjusted Base
     Rate"  means,  for any  day,  the  rate  per  annum  (rounded  upwards,  if
     necessary,  to the  nearest  whole  multiple  of 1/100 of 1%)  equal to the
     greater  of (a) the  Federal  Funds  Rate in effect on such day plus 1/2 of
     1.0% or (b) the Prime Rate in effect on such day,  minus  1.0%.  If for any
     reason  the Agent  shall  have  determined  (which  determination  shall be
     conclusive  absent  manifest  error) that it is unable after due inquiry to
     ascertain the Federal Funds Rate for any reason, including the inability or
     failure of the Agent to obtain sufficient quotations in accordance with the
     terms hereof,  the Adjusted Base Rate shall be determined without regard to
     clause (a) of the first sentence of this definition until the circumstances
     giving rise to such  inability no longer exist.  Any change in the Adjusted
     Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall
     be effective on the effective  date of such change in the Prime Rate or the
     Federal Funds Rate, respectively.  "Federal Funds Rate" means, for any day,
     the rate of interest  per annum  (rounded  upwards,  if  necessary,  to the
     nearest whole multiple of 1/100 of 1%) equal to the weighted average of the
     rates on overnight  Federal funds  transactions with members of the Federal
     Reserve System  arranged by Federal funds brokers on such day, as published
     by the Federal Reserve Bank of New York on the business day next succeeding
     such day,  provided that (A) if such day is not a business day, the Federal
     Funds Rate for such day shall be such rate on such transactions on the next
     preceding business day and (B) if no such rate is so published on such next
     succeeding  business  day, the Federal Funds Rate for such day shall be the
     average  rate  quoted  to the  Agent  on such day on such  transactions  as
     determined by the Agent.  "Prime Rate" means the per annum rate of interest
     established  from  time to time by the  Agent at its  principal  office  in
     Charlotte,  North  Carolina as its Prime Rate.  Any change in the  interest
     rate resulting from a change in the Prime Rate shall become effective as of
     12:01 a.m.  of the  business  day on which each change in the Prime Rate is
     announced  by the  Agent.  The Prime Rate is a  reference  rate used by the
     Agent in determining interest rates on certain loans and is not intended to
     be the lowest rate of interest  charged on any  extension  of credit to any
     debtor.  "Calculation  Date" means the last day of each  fiscal  quarter of
     Watson Wyatt & Company.  A "Cash Flow  Deficiency"  shall exist at any time
     when the Leverage  Ratio of the Watson Wyatt & Company,  on a  consolidated
     basis,  is 2.5 or greater,  as more fully  described in the Loan  Documents
     referenced below. Principal hereunder shall be payable in seven consecutive
     annual installments of (U.S.  $_____________)  each on the 30th day of each
     September  hereafter  beginning September 30, 199__. This Note shall mature
     on September 30, ________ (the "Maturity  Date");  provided  however,  that
     this Note  shall  mature on the  earlier  of (a) one  calendar  year  after
     termination  (whether  voluntary or involuntary)  of the  undersigned  from
     Watson  Wyatt & Company  or any of its  subsidiaries  or  affiliates  (such
     termination is, hereinafter, a "Termination"),  or (b) immediately upon the
     sale of the common  stock  securing  payment of this  Promissory  Note,  if
     either such date is earlier than the Maturity Date.  Whenever any principal
     of or  interest  on this Note  shall not be paid when due,  whether  at the
     stated maturity or by  acceleration  or otherwise,  interest on such unpaid
     amounts shall  thereafter [and in the case of late principal  payments,  50
     days  thereafter  if no other  default  shall then exist under this Note or
     under any other Loan  Document  (as such term is defined  hereinafter)]  be
     payable at a rate per annum equal to two (2)  percentage  points  above the
     stated rate of interest  under this Note until such amounts  shall be paid,
     but in no event  shall  the rate of  interest  payable  hereon  exceed  the
     highest rate allowed by law.  Payments shall be made in lawful money of the
     United States and in immediately available funds and shall be applied first
     to interest,  then to principal.  The  undersigned may prepay the principal
     hereof,  in whole  or in  part,  at any  time  without  penalty,  provided,
     however,  that any  prepayments of principal  shall be applied  against the
     installments  of principal  hereunder in their  inverse  order of maturity.
     Whenever this Note, or any other liability of any of the undersigned to the
     Agent  matures,  whether  at the  stated  maturity  or by  acceleration  or
     otherwise,  the Agent may set-off  against  the balance  hereof any and all
     credits,  money,  stocks, bonds or other security or property of any nature
     whatsoever on deposit with or held by, or in the  possession of, the Agent,
     to the credit of or for the account of the  undersigned,  without notice to
     or consent by the undersigned.  The undersigned promptly shall provide such
     financial, operational or business information in each instance and in such
     form as the  Agent in its  sole  discretion  shall  require.  This  Note is
     secured by,  among other  things,  common  stock of Watson  Wyatt & Company
     purchased or  refinanced  with the  proceeds of the loan  evidenced by this
     Note  and  as  provided  by a  certain  stock  pledge  agreement  from  the
     undersigned  to the Agent dated this date, and this Note is entitled to the
     benefits of said stock pledge  agreement,  including,  without  limitation,
     waiver  by the  undersigned  of  demand,  presentment,  protest,  and other
     notices, all as provided in the stock pledge agreement. Upon failure of the
     undersigned  to pay any payment  hereon in full when due, or the failure of
     the  undersigned  to perform or comply  with any of the  provisions  hereof
     and/or any of the  provisions  of any pledge  agreement,  guaranty,  or any
     other  document  previously,   simultaneously  or  hereafter  executed  and
     delivered  by the  undersigned  to the Agent in  connection  with this Note
     (collectively,   and  including  without  limitation  that  certain  Credit
     Agreement  dated June 30, 1998,  as amended,  among Watson Wyatt & Company,
     the Subsidiary  Guarantors  identified therein, the banks party thereto and
     NationsBank,  N.A., as Agent, the "Loan Documents"), or the occurrence of a
     default on the part of the  undersigned or Watson Wyatt & Company under any
     of the Loan  Documents;  or if any  information  contained in any financial
     statement, application, schedule, report or any other document delivered by
     the  undersigned or any other party in connection  with the  obligations of
     the  undersigned  or such other party omitted to state any material fact or
     any fact  necessary  to make such  information  not  misleading;  or if any
     judgment  shall be entered  against the  undersigned;  or if an  attachment
     shall be levied against any assets of the  undersigned in the possession of
     the Agent; or if the undersigned shall become the subject of any bankruptcy
     or  insolvency  proceeding;  or if any event other than  Termination  shall
     occur that Watson  Wyatt & Company  may,  under  Section 9.4 of its Bylaws,
     treat as an offer to sell the shares of common stock securing this Note; or
     if the Agent shall in good faith deem itself insecure or unsafe as a result
     of  acts  or  events  which  bear  upon  the  financial  condition  of  the
     undersigned or the repayment of this Note, then the entire unpaid principal
     balance  hereof plus  accrued and unpaid  interest  thereon  shall,  at the
     option of the Agent,  mature and become immediately due and payable without
     presentment,  demand, protest, notice of protest or any other notice of any
     kind, all of which are hereby  expressly  waived.  The  undersigned  hereby
     agrees to pay,  in  addition  to all other sums or money due,  all costs of
     collection and reasonable  attorneys' fees, whether suit be brought or not,
     if this Note is not paid in full when due,  whether at the stated  maturity
     or by  acceleration.  The  undersigned  hereby  certifies to Agent that the
     proceeds hereof are not to be used in whole or in part for personal, family
     or  household  purposes,  but  only for the  purpose  of  financing  and/or
     refinancing the purchase of common stock of Watson Wyatt & Company. 

<PAGE>



     This  instrument is an  instrument  under seal and shall be governed in all
     respects by the laws of the State of North  Carolina,  excluding its choice
     of law rules.  The undersigned  hereby consents to the  jurisdiction of the
     courts  of North  Carolina,  including  the  federal  district  court,  and
     consents  to  service  of  process  by  registered  mail,   return  receipt
     requested.  The  undersigned  further  specifically  consents  to  venue in
     Mecklenburg County, North Carolina.

Witness:__________________ Signed:__________________ (Seal)
           (Signature)

Name:____________________  Name:___________________
         (Print or Type)                    (Print or Type)



<PAGE>



                                    EXHIBIT C

                           FORM OF GUARANTY AGREEMENT
     IS GUARANTY AGREEMENT, dated as of June 30, 1998 (the "Guaranty"), is given
     by WATSON WYATT & COMPANY,  a Delaware  corporation (the  "Guarantor"),  to
     NATIONSBANK,  N.A., a national banking association,  as Agent for the Banks
     party  to the  Credit  Agreement  referred  to  below  (the  "Agent").  All
     capitalized  terms used and not defined herein have the meanings  stated in
     the Credit Agreement.


                              W I T N E S S E T H :

     WHEREAS,  the  Guarantor,  as borrower  and  otherwise,  is a party to that
     Credit  Agreement,  dated as of the date hereof,  among the Guarantor,  the
     Agent and the Banks named therein (as the same may be amended,  modified or
     extended, the "Credit Agreement");  and WHEREAS, in consideration of and to
     induce advances made or to be made, or other financial  accommodations from
     time  to time  afforded  or to be  afforded,  to or at the  request  of the
     individuals  listed on Exhibit A attached  hereto,  as such  Exhibit may be
     amended from time to time upon the making of additional  advances to or for
     the  benefit of persons  employed by the  Guarantor  or its  affiliates  or
     subsidiaries (each such person  individually an "Employee Borrower" and all
     collectively the "Employee  Borrowers";  in addition,  such term shall mean
     and include all entities eligible to purchase shares of common stock of the
     Guarantor and to or for the benefit of whom  Employee  Loans are made under
     the Credit  Agreement),  such  advances or other  financial  accommodations
     being for the purpose of financing the purchase from the Guarantor of stock
     of the Guarantor,  the Guarantor has agreed to guarantee the performance of
     the  obligations of the Employee  Borrowers under the Employee Notes issued
     pursuant to the Credit Agreement;  NOW, THEREFORE,  in consideration of the
     premises  and  other  good and  valuable  consideration,  the  receipt  and
     sufficiency of which is hereby acknowledged, the Guarantor hereby agrees as
     follows:

     1. Guaranty of Liabilities. The Guarantor hereby unconditionally guarantees
     and  becomes  surety for the full and  prompt  payment to the Agent and the
     Banks at maturity,  whether by acceleration or otherwise,  and at all times
     thereafter,  and upon a Default  hereunder,  of the Employee  Loans and all
     indebtedness,  obligations and liabilities of the Employee Borrowers to the
     Agent and the Banks,  whether now existing or hereafter created or arising,
     matured or unmatured,  and whether absolute or contingent,  joint, several,
     or joint and  several,  arising out of the  financing  by the Agent and the
     Banks of the  acquisition by the Employee  Borrowers of any shares of stock
     issued  or to be  issued by the  Guarantor  (all of which  are  hereinafter
     called the "Guaranteed Debt").

     In the event any Employee  Borrower shall at any time fail to pay the Agent
     or any Bank any principal of or interest on or other sums  constituting any
     Guaranteed Debt at its maturity,  whether by acceleration or otherwise,  or
     in the event of any Default  hereunder  as defined  herein,  the  Guarantor
     promises to pay such amount to the Agent and such Bank forthwith on demand,
     in the same manner as if the  Guaranteed  Debt  constituted  the direct and
     primary liability of the Guarantor, this being a guaranty of payment rather
     than of collection.

     2. In the Event of a Default.  In case of the occurrence of a default under
     the terms of any Employee  Borrower's note evidencing  Guaranteed Debt, any
     Employee  Borrower's  pledge  agreement  providing  security for Guaranteed
     Debt, or any other document or instrument pertaining thereto, or in case of
     the  death  or  incompetence  of any  Employee  Borrower,  or in  case  any
     dissolution,   liquidation,   bankruptcy,   reorganization,   receivership,
     assignment,  debt  arrangement or other  proceeding under any bankruptcy or
     insolvency  law or  procedure  is  instituted  by or  against  an  Employee
     Borrower,  each of such  events or  occurrences  constituting  a  "Default"
     hereunder,  all  Guaranteed  Debt of such  Employee  Borrower  shall at the
     option of the Agent and the Banks  immediately  become due and payable from
     the Guarantor;  and in any such event the Guarantor  hereby  authorizes the
     Agent and the  Banks,  without  notice or demand,  to  advance a  Revolving
     Credit  Loan,  as defined in the Credit  Agreement,  for the account of the
     Guarantor or to  appropriate  and apply any  property,  balances,  credits,
     deposits, accounts or moneys of the Guarantor then in the possession of the
     Agent,  or standing to the credit of the Guarantor,  to the payment of such
     Guaranteed  Debt. In the event of the  occurrence  and  continuance  of any
     Event  of  Default  under  and as  defined  in the  Credit  Agreement,  all
     Guaranteed Debt of all Employee  Borrowers shall at the option of the Agent
     and the Banks become  immediately due and payable,  irrespective of whether
     there exists a default under any note issued by a Employee Borrower.

     3.  Agreements  and  Waivers.  The  Guarantor  hereby (a) agrees (i) to any
     modifications  of any terms or conditions of any Guaranteed  Debt and/or to
     any  extensions  or  renewals  of time of  payment  or  performance  by any
     Employee Borrower or the Guarantor; and (ii) that it shall not be necessary
     for the Agent to resort to legal remedies against any Employee Borrower, or
     against any collateral, before proceeding against the Guarantor; (b) waives
     notice of any election,  acceptance, demand, protest, notice of protest and
     notice of default,  presentment for payment,  diligence in collection,  and
     waives,  to  the  extent  permitted  by  law,  all  benefit  of  valuation,
     appraisement,  and all  exemptions  under the laws of the  North  Carolina,
     and/or any other state or territory of the United  States;  (c) agrees,  if
     any  Guaranteed  Debt is not paid in accordance  with the terms hereof,  to
     pay, in addition  to all other sums of money due,  all costs of  collection
     including  costs of suit and  (whether or not suit is brought)  the Agent's
     and the Banks'  reasonable  attorneys' fees and  disbursements;  (d) agrees
     that the  Agent and the  Banks  shall  have no  obligation  to  verify  the
     signature of the Employee  Borrower on any note,  pledge agreement or other
     document  delivered in connection with any Guaranteed  Debt; and (e) agrees
     that the  Guarantor's  liability  hereunder  shall in no way be affected or
     impaired by the failure of such note, pledge agreement or other document to
     be valid, binding or enforceable as against such Employee Borrower.

     4. Certain  Rights of the Agent and the Banks.  The  Guarantor's  liability
     hereunder  shall in no way be affected or impaired by any of the  following
     (any or all of which  may be done or  omitted  by the  Agent  or the  Banks
     without notice to anyone and  irrespective  of whether the Guaranteed  Debt
     shall be increased or decreased thereby), namely: (a) any acceptance by the
     Agent or the Banks of any security or collateral  for, or other  guarantors
     or obligors  upon, any Guaranteed  Debt;  (b) any  compromise,  settlement,
     surrender,  release, discharge, renewal, extension,  alteration,  exchange,
     sale,  pledge or other  disposition of, or substitution  for, or indulgence
     with  respect to, or failure,  neglect or omission to realize  upon,  or to
     enforce,  exercise or perfect any liens or right of  appropriation or other
     rights with respect to any  Guaranteed  Debt or any security or  collateral
     therefor,  or any  claims  against  any  person  or  persons  primarily  or
     secondarily liable thereon; (c) the granting of credit from time to time by
     the Agent or any Bank to any Employee  Borrower in excess of the amount, if
     any, to which the right of recovery under this Guaranty may be limited;  or
     (d) any act of  commission  or omission of any kind or at any time upon the
     part of the Agent or any Bank with respect to any matter  whatsoever  other
     than the  execution  and delivery by the Agent or any Bank to the Guarantor
     of an express written  release or cancellation of this Guaranty.  The Agent
     shall  have the  right to  determine  how,  when  and what  application  of
     payments and credits,  if any, whether derived from a Employee  Borrower or
     any other source,  shall be made on the Guaranteed  Debt, and this Guaranty
     shall apply to and secure any  ultimate  balance that shall remain owing to
     the Agent or any Bank.  This  Guaranty  is  secured  by the  Collateral  as
     defined in the Credit Agreement.

     5. No Waiver, Etc. No postponement or delay on the part of the Agent or any
     Bank in the enforcement of any right hereunder shall constitute a waiver of
     such right,  and all rights of the Agent and the Banks  hereunder  shall be
     cumulative and not alternative and shall be in addition to any other rights
     granted to the Agent or any Bank in any other agreement,  or by Law. If any
     provision   hereof  shall  be  or  shall  be  declared  to  be  illegal  or
     unenforceable in any respect, such illegal or unenforceable provision shall
     be and become absolutely null and void and of no force and effect as though
     such provision were not in fact set forth herein,  but all other covenants,
     terms,  conditions and provisions hereof shall nevertheless  continue to be
     valid and enforceable and this Guaranty shall be so construed.

     6. Continuing Guaranty.  This Guaranty shall continue in force in any event
     for so long as any Employee Borrower shall be indebted to the Agent and the
     Banks,  and  thereafter  until the Agent and the Banks shall have  actually
     received  written notice of the  termination  hereof from the Guarantor and
     until all  Guaranteed  Debt incurred or contracted  before  receipt of such
     notice shall have been fully and finally  paid plus  interest,  costs,  and
     attorneys' fees as above described, it being contemplated that the Employee
     Borrowers may borrow,  repay and subsequently  borrow money from, or become
     indebted to, the Agent and the Banks from time to time,  and the Guarantor,
     not having given notice of the  termination  hereof as herein provided for,
     shall be deemed to have permitted this Guaranty to remain in full force and
     effect with respect to such additional or subsequent Guaranteed Debt.

     7. Agent Has No Duty to Advise;  Waiver. The Guarantor assumes the risk for
     its  failure to be and keep  informed  of the  financial  condition  of the
     Employee Borrowers and of all other circumstances  bearing upon the risk of
     non-payment and  non-performance  of the Guaranteed Debt; and the Agent and
     the Banks shall have no duty to advise the Guarantor of  information  known
     to  the  Agent  or  any  Bank   regarding   such   condition  or  any  such
     circumstances.  Furthermore,  the Guarantor hereby waives any defense based
     on the  failure  of the  Agent to  conduct a credit  review of an  Employee
     Borrower prior to making or during the existence of any Employee Loan.

     8. Subordination;  Rescission.  The Guarantor agrees that all claims of the
     Guarantor  against  any  and all of the  Employee  Borrowers,  whether  now
     existing or hereafter  arising,  are and shall be at all times  subject and
     subordinate to the Guaranteed  Debt, for so long as any Guaranteed  Debt or
     such  claim or claims  shall  exist.  The  Guarantor  waives  all rights of
     subrogation that it might have arising out of this Guaranty.  The Guarantor
     agrees that it shall not,  without the prior written  consent of the Agent:
     (a) receive any  payment of or collect,  in whole or in part,  or sue upon,
     any claim or claims now or hereafter  existing which the Guarantor may hold
     against the Employee Borrower;  or (b) enforce any lien which the Guarantor
     may now or in the future have on any of the Employee Borrowers' properties,
     real or personal, as security for the payment of any debt or claim owing by
     any Employee  Borrower to the  Guarantor.  The  liability of the  Guarantor
     hereunder  shall be reinstated  and revived and the rights of the Agent and
     the Banks  shall  continue  if and to the  extent  that for any  reason any
     payment  by or on behalf  of any  Employee  Borrower  or the  Guarantor  is
     rescinded or must be otherwise  restored by the Agent or any Bank,  whether
     as  a  result  of  any  proceedings  in  bankruptcy  or  reorganization  or
     otherwise,  provided,  however,  that if the Agent or any Bank  chooses  to
     contest  any such  matter at the request of the  Guarantor,  the  Guarantor
     agrees to  indemnify  and hold the Agent  and any such Bank  harmless  with
     respect to all costs (including,  without  limitation,  attorneys' fees) of
     such litigation.  If any Employee Borrower becomes a debtor in a case under
     the Federal Bankruptcy Code and the Guarantor is an "insider" as defined in
     such Code, the Guarantor agrees, upon request by a debtor-in-possession  or
     trustee (collectively "Official") for such Employee Borrower, to pay to the
     estate  of  such  Employee  Borrower  an  amount  equal  to any  amount  of
     Guaranteed  Debt  previously paid to the Agent or any Bank by such Employee
     Borrower and  reasonably  contended by such official to be avoidable  under
     Section 547 of such Code.

     9.  Miscellaneous.  This Guaranty  shall be governed in all respects by the
     internal  laws of the State of North  Carolina but  excluding its choice of
     law rules and shall be binding  upon and shall  inure to the benefit of the
     parties  hereto  and their  respective  heirs,  executors,  administrators,
     personal representatives,  successors and assigns. This Guaranty,  together
     with the  Credit  Agreement  and the other  documents  executed  thereunder
     (collectively,  as the  same  may  be  modified  or  amended,  the  "Credit
     Documents"),  constitute  the  entire  agreement  of the Agent on behalf of
     itself and the Banks and the Guarantor with respect to its subject  matter,
     superseding  and  replacing  any previous  guaranty and  applicable  to all
     obligations guaranteed by the Guarantor under any previous guaranty as well
     as to all  subsequently  incurred  Guaranteed Debt, and no provision hereof
     may be modified, altered, amended or waived except by a writing executed by
     the person against whom it is sought to be applied or enforced. All parties
     have participated in the drafting of this Guaranty, and this Guaranty shall
     be interpreted without reference to any rule of construction  providing for
     interpretation  of  documents  against  the  Persons  drafting  them.  This
     Guaranty  may be  executed  by the parties  hereto  individually  or in any
     combination of the parties hereto in several separate counterparts, each of
     which shall be an original and all of which taken together shall constitute
     one and the same Guaranty.

     10.  Venue,  Etc. The  Guarantor and the Agent agree that, at the option of
     the Agent,  all  litigation  arising out of this  Guaranty  shall be in the
     local or federal  courts  located in the State of North  Carolina,  and the
     Guarantor  hereby waives any defense of inconvenient  forum.  The Guarantor
     and the Agent  further  agree  that  process  may be served  upon any party
     hereto by certified or registered mail, return receipt requested,  directed
     to such party at its address stated in the Credit Agreement, and each party
     waives any defense of  insufficiency  of service with respect to process so
     served.  The Guarantor  and the Agent  further  agree that,  because of the
     complexities  of  commercial  transactions  and the  need  for  expeditious
     resolution of disputes,  any litigation  arising out of this Guaranty shall
     be before a court  sitting  without a jury,  and both parties  hereby waive
     trial by jury in all such  litigation,  after having received the advice of
     their respective independent counsel.

     11.  Limitation  on  Obligations.  Notwithstanding  any  provision  to  the
     contrary  contained herein or in any other of the Credit Documents,  to the
     extent the  obligations of the Guarantor shall be adjudicated to be invalid
     or unenforceable for any reason (including,  without limitation, because of
     any applicable  state or federal law relating to fraudulent  conveyances or
     transfers) then the obligations of the Guarantor hereunder shall be limited
     to the maximum  amount that is  permissible  under  applicable law (whether
     federal or state and including, without limitation, the Bankruptcy Code).



<PAGE>


     WITNESS the due execution  hereof with the intent of being legally bound as
     of the date stated on the first page hereof.


                                              WATSON WYATT & COMPANY,
                                              a Delaware corporation,


ATTEST:__________________________             By:_________________________
Name:      Walter W. Bardenwerper                Name:    Barbara L. Landes
Title:     Secretary                             Title:   Vice President and
                                                    Chief Financial Officer




<PAGE>



                                    EXHIBIT A
                                       TO
                               GUARANTY AGREEMENT

                          [To be supplied by Guarantor)


<PAGE>



                                   EXHIBIT D-1

                                    Name: ______________________
                                    Home Address: _______________
 
                                    Date: ______________________


Watson Wyatt & Company
6707 Democracy Blvd.
Bethesda, MD  20817

Attn:  Mr. Walter W. Bardenwerper, General Counsel & Secretary

Gentlemen:

     I have issued a promissory  note in the  principal  amount of $_________ to
     NationsBank,  N.A.  (the  "Agent"),  as agent for itself and certain  other
     banks.  That note  evidences a loan made to me by the Agent to enable me to
     purchase,  or to  refinance  the purchase  of,  ____________  shares of the
     common stock of Watson Wyatt & Company (the "Company").

     As security for the timely satisfaction of my obligations under the note, I
     hereby  pledge to the Agent all shares  purchased  or  refinanced  with the
     proceeds of the loan as stated above (the "Employee Pledged  Shares"),  and
     grant to the Agent a lien on and security  interest in those shares and all
     proceeds thereof. I have not, and I agree that until the note has been paid
     in  full I will  not,  sell or  otherwise  dispose  of any of the  Employee
     Pledged Shares or create,  incur or permit to exist any other pledge, lien,
     encumbrance,  or security  interest in the Employee Pledged Shares or their
     proceeds except as provided in this letter.

     The Agent is  authorized  to remit the proceeds of my loan  directly to the
     Company.  The Company  and/or its transfer  agent is hereby  authorized and
     directed,  upon  disbursement  by the Agent of the proceeds of my loan,  to
     register  on its  books my  pledge  to the  Agent of the  Employee  Pledged
     Shares,  to identify  said  pledge of the  Employee  Pledged  Shares on all
     initial  and  periodic  statements  and all  other  statements  or  notices
     respecting the Employee Pledged Shares, and to have all pledgee notices and
     statements  respecting  the Employee  Pledged Shares as well as any and all
     certificates or any other instruments or documents  evidencing my ownership
     of the Employee  Pledged Shares sent directly to the Agent at the following
     address:


                           NationsBank, N.A.
                           101 North Tryon Street
                           Independence Center, 15th Floor
                           NC1-001-15-04
                           Charlotte, North Carolina  28255
                           Attn:    Ret Taylor
                                    Agency Services

     I agree  that the Agent  shall  take and  maintain  possession  of all such
     statements,  notices,  certificates,   instruments  and  documents  in  its
     capacity as pledgee.

     In the event of (i) a default under my note, or (ii) my death,  termination
     of  employment,  or bankruptcy or the imposition of a lien or attachment on
     the Employee  Pledged  Shares as described in Section 9.4 of the  Company's
     Bylaws  before all  principal  and interest  payments have been made on the
     note, I agree and direct that such event may be  considered  by the Company
     as an offer to sell the Employee Pledged Shares to the Company or to one or
     more  Eligible  Purchasers as of the date of such event under the terms and
     conditions of Section 9.4 of the Company's Bylaws. ("Eligible Purchaser" as
     used in this letter has the meaning given to that term in Section 9.9(a) of
     the  Company's  Bylaws).  I agree to execute all  necessary or  appropriate
     instruments   and  documents,   including   stock  powers  and  notices  or
     instructions to register stock transfers, to permit the Company to sell the
     Employee Pledged Shares in accordance with this letter, and I authorize the
     Agent to give notices or  instructions  to register  stock  transfers or to
     return all  certificates  for the Employee  Pledged Shares,  if any, to the
     Company as necessary  to effect such sale. I further  agree and direct that
     the Company shall apply the proceeds of any such sale (a) first, to pay any
     remaining  balance on the note  (including  principal  and  interest),  (b)
     second, to pay any other amounts required by applicable law, and (c) third,
     to me to the extent, if any, of any surplus  proceeds.  In the event of the
     sale of the Employee  Pledged Shares upon termination of my employment with
     the  Company,  the Company may deduct from any sums then due to me from the
     Company  (including  without limitation accrued salary and vacation pay, if
     any) the difference,  if any, between the remaining  balance on my note and
     the proceeds of the sale of the Employee  Pledged  Shares,  and the Company
     may apply the amount so deducted as provided in (a) and (b) above.  I agree
     that I will have no right, either against the Company or against the Agent,
     to any amounts applied under (a) or (b) above.

     In the event that any or all of the Employee Pledged Shares are sold to one
     or more Eligible Purchasers prior to repayment of my loan from the Agent, I
     agree and direct that such Eligible Purchaser(s) shall be directed to remit
     the  purchase  price to the Company  and that the  Company  shall apply the
     proceeds  of such sale in the manner  provided  above.  To  facilitate  the
     foregoing,  I agree and direct that the Company  and/or its transfer  agent
     register  on its  books  and  identify  on  all  transaction  and  periodic
     statements  respecting the Employee Pledged Shares the restriction that any
     purchaser  of the  Employee  Pledged  Shares may be  required  to remit the
     purchase  price  directly  to the  Company  to be  applied in payment of my
     indebtedness  to the  Agent,  and I  further  agree  and  direct  that  the
     following  legend  shall be placed  on all  certificates,  if any,  for the
     Employee Pledged Shares:

     "In the event the shares  represented  by this  certificate  are sold,  the
     purchaser  may be  required  to remit the  purchase  price  directly to the
     Company to be applied in payment of certain  indebtedness of the registered
     holder to NationsBank,  N.A., as agent for itself and certain other banks."
     You agree to have such legend removed from any  certificate if and when you
     are  advised in writing  by the Agent that my  indebtedness  to it has been
     repaid in full.

     Upon the  payment in full of all  amounts  due under my note  issued to the
     Agent, I understand that with respect to all of the Employee Pledged Shares
     that have not been sold or  otherwise  disposed  of under the terms of this
     letter,  the Agent will direct the  Company  and/or its  transfer  agent to
     register on its books the release of the Agent's lien on and the  foregoing
     restrictions  respecting  such  Employee  Pledged  Shares,  and  will  have
     delivered  to me,  at its  expense,  free of liens  and  encumbrances,  and
     without  recourse or  representation,  all  certificates,  if any, for such
     Employee  Pledged  Shares.  I agree that beyond the exercise of  reasonable
     care,  the  Agent  shall  have no  duty or  liability  to  preserve  rights
     pertaining  to the Employee  Pledged  Shares,  and shall be relieved of all
     responsibility  for the Employee Pledged Shares upon issuing a direction to
     the Company  and/or its transfer  agent to register the release of its lien
     on and the foregoing restriction respecting the Employee Pledged Shares and
     upon surrendering or tendering surrender to me of all certificates, if any,
     respecting the Employee Pledged Shares.

     I agree that all rights,  remedies and powers  granted to the Agent in this
     letter,  in my note, in your guaranty of my note, or in any other  document
     previously,  simultaneously or hereafter executed and delivered by me or by
     any other  party to the  Agent in  connection  with this  letter or my note
     (collectively,  the "Loan Documents"), whether express or implied, shall be
     cumulative  and may be  exercised  singly or  concurrently  with such other
     rights as the Agent may have.  I also agree that no failure or delay on the
     part of the Agent in exercising  any right,  power or privilege  hereunder,
     under any of the Loan Documents,  or under applicable law, shall operate as
     a waiver  thereof;  nor shall any single or partial  exercise of any right,
     power or privilege  hereunder or  thereunder  preclude any other or further
     exercise thereof or the exercise of any other right, power, or privilege. I
     further  agree  that no  waiver  or  modification  of any  right,  power or
     privilege  of the Agent or of any  obligation  of mine  shall be  effective
     unless such waiver or modification is in writing,  signed by the Agent, and
     then only to the extent set forth therein, and I agree that a waiver by the
     Agent of any right, power or privilege  hereunder on any one occasion shall
     not be  construed  as a bar to, or a waiver  of, any such  right,  power or
     privilege which the Agent otherwise would have on any subsequent occasion.

     This letter  constitutes a security  agreement in favor of the Agent, and I
     understand  that the Agent is entitled to rights and  remedies as a secured
     party under this agreement and  applicable  law. I authorize and direct you
     to provide a copy of this letter to the Agent,  and I  understand  that the
     Agent is relying on this letter,  in addition to your  guaranty of my note,
     in making its loan to me.



Witness:_____________________               Signed:_____________________
           (Signature)

Name:    ________________________           Name:_______________________
           (Print or Type)                       (Print or Type)

                                            Tax ID No.:_________________



<PAGE>




                                   EXHIBIT D-2


                                      Name:

                                    Address:





                                      Date:



Watson Wyatt & Company
6707 Democracy Blvd.
Bethesda, MD  20817

Attn:  Mr. Walter W. Bardenwerper, General Counsel & Secretary

Gentlemen:

     The  undersigned  employee  [Employee  Name] (the  "Employee") has issued a
     promissory  note in the  principal  amount of  $________  (the  "Note")  to
     NationsBank,  N.A.  (the  "Agent"),  as agent for itself and certain  other
     banks.  The Note  evidences  a loan made to the  Employee by the Agent (the
     "Loan") for the purpose of  financing  or  refinancing  the purchase by the
     undersigned  personal holding company  [Personal Holding Company Name] (the
     "Holding  Company")  of  ___________  shares of the common  stock of Watson
     Wyatt & Company (the "Company").

     As security for the timely  satisfaction of all obligations under the Note,
     the  undersigned  hereby  pledge  to the  Agent  all  shares  purchased  or
     refinanced  with the  proceeds of the Loan as stated  above (the  "Employee
     Pledged Shares"), and grant to the Agent a lien on and security interest in
     the Employee Pledged Shares and all proceeds thereof.  The undersigned have
     not,  and  agree  that  until the Note has been paid in full they will not,
     sell or otherwise  dispose of any of the Employee Pledged Shares or create,
     incur or permit to exist any other pledge, lien,  encumbrance,  or security
     interest  in the  Employee  Pledged  Shares  or their  proceeds  except  as
     provided in this letter.

     The Agent is  authorized  to remit the proceeds of the Loan directly to the
     Company.  The Company  and/or its transfer  agent is hereby  authorized and
     directed,  upon  disbursement  by the Agent of the proceeds of the Loan, to
     register on its books the undersigned's pledge to the Agent of the Employee
     Pledged Shares,  to identify said pledge of the Employee  Pledged Shares on
     all initial and periodic  statements  and all other  statements  or notices
     respecting the Employee Pledged Shares, and to have all pledgee notices and
     statements  respecting  the Employee  Pledged Shares as well as any and all
     certificates or any other instruments or documents  evidencing ownership of
     the Employee  Pledged  Shares sent  directly to the Agent at the  following
     address:

                           NationsBank, N.A.
                           101 North Tryon Street
                           Independence Center, 15th Floor
                           NC1-001-15-04
                           Charlotte, North Carolina  28255
                           Attn:    Ret Taylor
                                    Agency Services

     The undersigned agree that the Agent shall take and maintain  possession of
     any  and  all  such  statements,  notices,  certificates,  instruments  and
     documents in its capacity as pledgee.

     In the event of (i) a default under the Note or (ii) the death, termination
     of employment, or bankruptcy of the Employee or the imposition of a lien or
     attachment  on the Employee  Pledged  Shares as described in Section 9.4 of
     the Company's  Bylaws before all principal and interest  payments have been
     made on the Note,  such event may be  considered by the Company as an offer
     to sell  the  Employee  Pledged  Shares  to the  Company  or to one or more
     Eligible  Purchasers  as of the date of such  event  under  the  terms  and
     conditions of Section 9.4 of the Company's Bylaws ("Eligible  Purchaser" as
     used in this letter has the meaning given to that term in Section 9.9(a) of
     the Company's  Bylaws).  The undersigned  agree to execute all necessary or
     appropriate  instruments and documents,  including stock powers and notices
     or instructions to register stock transfers,  to permit the Company to sell
     the Employee  Pledged Shares in accordance with this letter,  and the Agent
     is hereby  authorized  to give notices or  instructions  to register  stock
     transfers or to return all certificates for the Employee Pledged Shares, if
     any,  to the Company as  necessary  to effect  such sale.  The  undersigned
     further  agree and direct that the Company  shall apply the proceeds of any
     such sale (a) first,  to pay any remaining  balance on the Note  (including
     principal and interest),  (b) second,  to pay any other amounts required by
     applicable  law, and (c) third,  to the Employee to the extent,  if any, of
     any  surplus  proceeds.  In the event of the sale of the  Employee  Pledged
     Shares upon the Employee's  termination  of employment as described  above,
     the  Company  may deduct  from any sums then due to the  Employee  from the
     Company  (including  without limitation accrued salary and vacation pay, if
     any) the difference,  if any, between the remaining balance on the Note and
     the proceeds of the sale of the Employee  Pledged  Shares,  and the Company
     may apply the amount so  deducted  as  provided  in (a) and (b) above.  The
     undersigned agree that they will have no right,  either against the Company
     or against the Agent, to any amounts applied under (a) or (b) above.

     In the event that any or all of the Employee Pledged Shares are sold to one
     or more Eligible  Purchasers prior to repayment of the Loan from the Agent,
     such Eligible Purchaser(s) shall be directed to remit the purchase price to
     the Company and that the Company  shall apply the  proceeds of such sale in
     the manner  provided  above.  To facilitate the foregoing,  the undersigned
     agree and direct that the Company and/or its transfer agent register on its
     books and identify on all transaction and period statements  respecting the
     Employee  Pledged Shares the restriction that any purchaser of the Employee
     Pledged  Shares may be required to remit the purchase price directly to the
     Company to be applied in  payment  of the  Employee's  indebtedness  to the
     Agent,  and the  undersigned  further  agree and direct that the  following
     legend  shall be  placed  on all  certificates,  if any,  for the  Employee
     Pledged Shares:

     "In the event the shares  represented  by this  certificate  are sold,  the
     purchaser  may be  required  to remit the  purchase  price  directly to the
     Company to be applied in payment of certain  indebtedness of the registered
     holder to NationsBank, N.A., as agent for itself and certain other banks."

     Such legend shall be removed from any  certificate  if and when the Company
     is advised in writing by the Agent that all indebtedness to the Agent under
     the Note has been repaid in full.

     Upon the  payment in full of all  amounts  due under the Note issued to the
     Agent and with respect to all of the Employee  Pledged Shares that have not
     been sold or  otherwise  disposed  of under the terms of this  letter,  the
     Agent will direct the Company  and/or its transfer agent to register on its
     books the release of the Agent's lien on and  restriction  respecting  such
     Employee Pledged Shares, and will have delivered to the Holding Company, at
     its  expense,  free of liens and  encumbrances,  and  without  recourse  or
     representation, all certificates, if any, for such Employee Pledged Shares.
     The  undersigned  agree that beyond the exercise of  reasonable  care,  the
     Agent shall have no duty or liability to preserve rights  pertaining to the
     Employee Pledged Shares,  and shall be relieved of all  responsibility  for
     the Employee  Pledged Shares upon issuing a direction to the Company and/or
     its transfer agent to register the release of its lien on and the foregoing
     restriction respecting the Employee Pledged Shares and upon surrendering or
     tendering  surrender to the Holding  Company of all  certificates,  if any,
     respecting the Employee Pledged Shares.

     All rights, remedies and powers granted to the Agent in this letter, in the
     Note, in your guaranty of the Note,  or in any other  document  previously,
     simultaneously or hereafter executed and delivered by either or both of the
     undersigned  or by any  other  party to the Agent in  connection  with this
     letter or the Note (collectively, the "Loan Documents"), whether express or
     implied,  shall be cumulative and may be exercised  singly or  concurrently
     with such  other  rights as the Agent may have.  No failure or delay on the
     part of the Agent in exercising  any right,  power or privilege  hereunder,
     under any of the Loan Documents,  or under applicable law, shall operate as
     a waiver  thereof;  nor shall any single or partial  exercise of any right,
     power or privilege  hereunder or  thereunder  preclude any other or further
     exercise  thereof or the exercise of any other right,  power, or privilege.
     No waiver or modification of any right,  power or privilege of the Agent or
     of any obligation of either or both of the  undersigned  shall be effective
     unless such waiver or modification is in writing,  signed by the Agent, and
     then only to the extent set forth therein, and a waiver by the Agent of any
     right,  power or  privilege  hereunder  on any one  occasion  shall  not be
     construed  as a bar to, or a waiver of, any such right,  power or privilege
     which the Agent otherwise would have on any subsequent occasion.

     This letter constitutes a security agreement in favor of the Agent, and the
     undersigned understand that the Agent is entitled to rights and remedies as
     a secured party under this  agreement and applicable  law. The  undersigned
     authorize  and direct the  Company to provide a copy of this  letter to the
     Agent and understand that the Agent is relying on this letter,  in addition
     to the Company's guaranty of the Note, in making the Loan.

                                                          Employee:

Witness:                                                  Signed:
                  (Signature)                             (Employee Signature)


Name:                                                     Name:
                  (Print or Type)                        (Print or Type)


                                                      Personal Holding
Company:

Witness:                                                 Signed:
                  (Signature)                         (Name of Personal
                                                       Holding Co.)

Name:                                                 Tax ID No.:
           (Type or Print Name)                       (Print or Type)

                                                       By:
                                                        (Employee Signature)

                                                       Name:
                                                       (Type or Print
                                                        Employee Name)


<PAGE>






 
                                    EXHIBIT E


                              EMPLOYEE STOCK POWER


    FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to



     the  following  shares  of  the  common  stock  of   _________________,   a
     ___________ corporation:

                  No. of Shares                               Certificate No.



     and irrevocably appoints  __________________________________  its agent and
     attorney-in-fact  to transfer  all or any part of such common  stock and to
     take all necessary and appropriate action to effect any such transfer.  The
     agent and  attorney-in-fact  may substitute and appoint one or more persons
     to act for him.  The  effectiveness  of a transfer  pursuant  to this stock
     power shall be subject to any and all transfer  restrictions  referenced on
     the face of the certificates evidencing such interest or in the certificate
     of incorporation or bylaws of the subject  corporation,  to the extent they
     may from time to time exist.

Date:    _____________

                                      By:_____________________________
                                      Name:
                                     Title:




<PAGE>



                                    EXHIBIT F

                      TRUTH IN LENDING DISCLOSURE STATEMENT


Creditor:         NationsBank,  N.A., as Agent (the  "Agent")  under that
Credit
                  Agreement  dated  as of June 30,  1998  among  Watson
Wyatt &
                  Company (the "Borrower"), the Subsidiary Guarantors
identified
                  therein,   the  banks  party   thereto   (the   "Banks")
and
                  NationsBank,  N.A.  (the "Agent") (as the same may be
amended,
                  modified,  extended or restated from time to time, the
"Credit
                  Agreement").


ANNUAL
PERCENTAGE RATE      FINANCE CHARGE       Amount Financed    Total of Payments

The cost of your   The dollar amount the  The amount of credit
credit as a yearly credit will cost you.  provided to you or on  The amount you
rate                                      your behalf.           will have paid
                                                                 after you have
                                                                 made all
                                                                 payments as
                                                                 scheduled
    %                  $                        $                      $
------------------------------------------------------------------------------


Your payment schedule will be:

     Except as provided  below,  27 interest  payments  with the first  interest
     payment due April __, 19__ and subsequent  interest payments due on the 3rd
     business day of each July,  October,  January and April  thereafter,  until
     this  debt is paid in full,  and,  except  as  provided  below,  seven  (7)
     principal  payments  of  $__________  each,  with  the  first  payment  due
     September 30, 19__ and subsequent payments due on September 30 of each year
     thereafter,  with the final payment due September 30, 200__. The amounts of
     interest  payments will vary. Based on the current ANNUAL  PERCENTAGE RATE,
     the largest  interest payment will be  $_________________  and the smallest
     interest  payment  will  be  $_________________,  assuming  that  principal
     payments are made in accordance with the foregoing schedule.

     All  principal on this loan shall be due on the earlier of (i) one calendar
     year  after  termination   (whether   voluntary  or  involuntary)  of  your
     employment  with  Watson  Wyatt &  Company  or any of its  subsidiaries  or
     affiliates,  or (ii) immediately upon the sale of the common stock securing
     payment of this loan,  if either such date is earlier  than  September  30,
     200__.

     The annual percentage rate may increase during the term of this transaction
     if the Applicable Rate increases.  For purposes hereof,  "Applicable  Rate"
     means (i) for all  periods  prior to and  including  January 5,  2001,  the
     Adjusted Base Rate and (ii) for all periods  thereafter (a) if no Cash Flow
     Deficiency  exists as of the immediately  preceding  Calculation  Date, the
     Adjusted  Base  Rate and (b) if a Cash  Flow  Deficiency  exists  as of the
     immediately  preceding  Calculation  Date,  the Prime Rate.  "Adjusted Base
     Rate"  means,  for any  day,  the  rate  per  annum  (rounded  upwards,  if
     necessary,  to the  nearest  whole  multiple  of 1/100 of 1%)  equal to the
     greater  of (a) the  Federal  Funds  Rate in effect on such day plus 1/2 of
     1.0% or (b) the Prime Rate in effect on such day,  minus  1.0%.  If for any
     reason  the Agent  shall  have  determined  (which  determination  shall be
     conclusive  absent  manifest  error) that it is unable after due inquiry to
     ascertain the Federal Funds Rate for any reason, including the inability or
     failure of the Agent to obtain sufficient quotations in accordance with the
     terms hereof,  the Adjusted Base Rate shall be determined without regard to
     clause (a) of the first sentence of this definition until the circumstances
     giving rise to such  inability no longer exist.  Any change in the Adjusted
     Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall
     be effective on the effective  date of such change in the Prime Rate or the
     Federal Funds Rate, respectively.  "Federal Funds Rate" means, for any day,
     the rate of interest  per annum  (rounded  upwards,  if  necessary,  to the
     nearest whole multiple of 1/100 of 1%) equal to the weighted average of the
     rates on overnight  Federal funds  transactions with members of the Federal
     Reserve System  arranged by Federal funds brokers on such day, as published
     by the Federal Reserve Bank of New York on the business day next succeeding
     such day,  provided that (A) if such day is not a business day, the Federal
     Funds Rate for such day shall be such rate on such transactions on the next
     preceding business day and (B) if no such rate is so published on such next
     succeeding  business  day, the Federal Funds Rate for such day shall be the
     average  rate  quoted  to the  Agent  on such day on such  transactions  as
     determined by the Agent.  "Prime Rate" means the per annum rate of interest
     established  from  time to time by the  Agent at its  principal  office  in
     Charlotte,  North  Carolina as its Prime Rate.  Any change in the  interest
     rate resulting from a change in the Prime Rate shall become effective as of
     12:01 a.m.  of the  business  day on which each change in the Prime Rate is
     announced  by the  Agent.  The Prime Rate is a  reference  rate used by the
     Agent in determining interest rates on certain loans and is not intended to
     be the lowest rate of interest  charged on any  extension  of credit to any
     debtor.  "Calculation Date" means the last day of the fiscal quarter of the
     Borrower.  A "Cash  Flow  Deficiency"  shall  exist  at any  time  when the
     Leverage Ratio of the Borrower, on a consolidated basis, is 2.5 or greater.
     "Leverage  Ratio" means the ratio of (i)  Consolidated  Funded Debt to (ii)
     Consolidated  EBITDA.  "Consolidated  Funded Debt" means Funded Debt of the
     Consolidated  Group  determined on a consolidated  basis in accordance with
     GAAP  and  "Funded  Debt"  means,  with  respect  to  any  person,  without
     duplication,  (i) all obligations of such person for borrowed  money,  (ii)
     all  obligations  of such  person  under  conditional  sale or other  title
     retention  agreements  relating to property purchased by such person (other
     than customary  reservations  or retentions of title under  agreements with
     suppliers  entered  into in the  ordinary  course of  business),  (iii) all
     obligations of such person issued or assumed as the deferred purchase price
     of  property or services  purchased  by such person  (other than trade debt
     incurred in the  ordinary  course of business  and due within six months of
     the  incurrence  thereof)  which would appear as  liabilities  on a balance
     sheet of such person, (iv) the principal portion of all obligations of such
     person under capital leases,  (v) the maximum amount of all standby letters
     of credit issued or bankers' acceptances facilities created for the account
     of such person and, without duplication, all draft drawn thereunder (to the
     extent unreimbursed), (vi) all Funded Debt of another person secured by (or
     for which the holder of such Funded Debt has an existing right,  contingent
     or otherwise, to be secured by) any lien on, or payable out of the proceeds
     of production from,  property owned or acquired by such person,  whether or
     not the obligations  secured thereby have been assumed,  (vii) all guaranty
     obligations  of such person with  respect to Funded Debt of another  person
     and (viii) Funded Debt of any partnership or  unincorporated  joint venture
     in which such person is a general  partner or a joint venturer (but only to
     the  extent  to  which  such  person's  assets  are at risk  in such  joint
     venture).  "Consolidated EBITDA" means, for any period for the Consolidated
     Group, the sum of (i) Consolidated Net Income for such period, plus (ii) to
     the extent deducted in the calculation of Consolidated Net Income,  the sum
     of interest  expense,  income taxes,  depreciation and  amortization,  plus
     (iii)  nonrecurring  cash and non-cash  charges incurred in connection with
     the Well Spring Joint  Venture  write-down,  determined  on a  consolidated
     basis in  accordance  with GAAP.  "Consolidated  Net Income"  means for any
     period  for the  Consolidated  Group,  net income on a  consolidated  basis
     determined in accordance with GAAP. "Consolidated Group" means the Borrower
     and its consolidated  subsidiaries,  as determined in accordance with GAAP.
     "GAAP" means generally accepted accounting  principles in the United States
     applied on a consistent basis.

     Any  increase  in the annual  percentage  rate will take the form of higher
     quarterly interest payments.

     If your loan were for  $3,000.00 at 8% per year for seven (7) years and the
     rate increased to 9% per year after the first interest payment but prior to
     the first principal  payment,  then your quarterly  interest payments would
     increase by $7.50 until the first  principal  payment had been made, and by
     something less than $7.50 during  subsequent  years as the principal amount
     is paid down and the amount of interest payments decrease.

Security:                  You are giving a security  interest in common stock
                           of Watson Wyatt & Company  purchased
                           or refinanced with the proceeds of this loan.

Late                       Charge:  If an  interest  payment is late you will be
                           charged  interest on such  payment at the
Applicable
                           Rate plus 2%,  and if a  principal  payment  is fifty
                           (50) days or more late, you will be charged
interest
                           on such payment at the Applicable Rate plus 2%.

Prepayment:                If you pay off early, you will not have to pay a
                           penalty.

     See  your  contract   documents  for  any  additional   information   about
     nonpayment,  default,  any required  repayment in full before the scheduled
     date, and prepayment refunds and penalties.

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

                         Itemization of Amount Financed


         Itemization of Amount Financed of $_________________.


         This  entire  amount  will be paid to Watson  Wyatt &  Company  on
your
behalf.

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



<PAGE>


         I acknowledge receipt of the foregoing Truth in Lending Disclosures.


                                           -----------------------------------
                                          Printed Name:_______________________
                                          Date:______________________________



<PAGE>



                                    EXHIBIT G


                          INITIAL TRANSACTION STATEMENT


                            Shares of Common Stock of
                             WATSON WYATT & COMPANY
                            Par Value $1.00 per Share

1.       Registered Owner: [Name, address, and Tax ID No. of owner (Qualified
           Employee, pension plan or personal holding company, as applicable)]

2.       Registered Pledgee:        NationsBank, N.A.
                                    101 North Tryon Street
                                    15th Floor
                                    Charlotte, North Carolina  28255
                                    Attn:   Agency Services

                                    Tax ID No.:  54-0314875

3.       Date of Registration of Transfer and Pledge:

4.       Number of Shares Transferred to Registered Owner:

5.       Number of Shares Pledged to Registered Pledgee:

6.       Liens,  Restrictions and Adverse Claims:  Any purchaser of the
         subject  shares may be  required to remit the  purchase price
         directly to Watson Wyatt & Company to be applied in payment of
         certain indebtedness of the Registered Owner to the Registered
         Pledgee, as agent for itself and certain other banks.


     THIS  STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE
     TIME OF ITS ISSUANCE.  DELIVERY OF THIS  STATEMENT,  OF ITSELF,  CONFERS NO
     RIGHTS ON THE RECIPIENT.  THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT
     NOR A SECURITY.

                                                 WATSON WYATT & COMPANY

                                             By:______________________________
                                             Name:____________________________
                                           Title:_____________________________



<PAGE>




                                    EXHIBIT H


                         PERIODIC TRANSACTION STATEMENT

                              Dated: ______________

                            Shares of Common Stock of
                             WATSON WYATT & COMPANY
                            Par Value $1.00 per Share


1.       Registered Owner: [Name,  address, and Tax ID No. of owner (Qualified
         Employee,  pension plan or personal holding company, as applicable)]

2.       Registered Pledgee:        NationsBank, N.A.
                                    101 North Tryon Street
                                    15th Floor
                                    Charlotte, North Carolina  28255
                                    Attn:   Agency Services

                                    Tax ID No.:  54-0314875

3.       Number of Shares Registered to Registered Owner:

4.       Number of Shares Pledged to Registered Pledges:

5.       Liens,  Restrictions and Adverse Claims:  Any purchaser of the
         subject  shares may be  required to remit the  purchase price
         directly to Watson Wyatt & Company to be applied in payment of
         certain indebtedness of the Registered Owner to the Registered
         Pledgee, as agent for itself and certain other banks.

     THIS  STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE
     TIME OF ITS ISSUANCE.  DELIVERY OF THIS  STATEMENT,  OF ITSELF,  CONFERS NO
     RIGHTS ON THE RECIPIENT.  THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT
     NOR A SECURITY.

                                              WATSON WYATT & COMPANY

                                                By:___________________________
                                                Name:_________________________
                                                Title:________________________



<PAGE>


                                    EXHIBIT I


                 FORM OF AGREEMENT TO EMPLOYEE PLEDGE AGREEMENTS

     In consideration of financial accommodations made by NationsBank,  N.A., as
     Agent  for the  Banks  party  to the  Credit  Agreement  referred  to below
     ("Agent"), to or at the request of Watson Wyatt & Company (the "Borrower"),
     and the mutual covenants contained in that certain Credit Agreement,  dated
     as of  June  30,  1998,  among  the  Borrower,  the  Subsidiary  Guarantors
     identified therein, the Agent and the Banks party thereto (the "Banks"), as
     said  agreement  may have  been or may be  amended  from  time to time (the
     "Credit  Agreement"),  and having reviewed the Employee  Pledge  Agreements
     executed and delivered in connection  with Employee  Loans as identified on
     the attached  schedule  (which  schedule  identifies  all  Employee  Pledge
     Agreements executed and delivered after ___________________),  the Borrower
     hereby  reaffirms its prior  acknowledgment  of and agreement to certain of
     the Employee Pledge Agreements,  and hereby further acknowledges and agrees
     to the terms and  conditions  of each and every one of the Employee  Pledge
     Agreements.

     This Agreement to Employee Pledge Agreements is executed and delivered with
     the intent that the Borrower shall be bound by each of the Employee  Pledge
     Agreements  and that the Agent and the Banks  shall rely hereon and thereon
     in making or participating in Employee Loans.

     Capitalized  terms used but not  defined  herein  shall  have the  meanings
     stated  in  the  Credit  Agreement.   As  used  herein,   "Employee  Pledge
     Agreements"  shall include any and all  amendments  to the Employee  Pledge
     Agreements.

                                                     WATSON WYATT & COMPANY

                                                     By:   ___________________
                                                     Name: ___________________
                                                     Title:___________________


<PAGE>




                                Exhibit I, Page 2

                           Schedule of Employee Loans
                         and Employee Pledge Agreements


                                                          Number of
            Name            Initial Loan Amount       Shares Pledged     Date











<PAGE>



                                    EXHIBIT J

                           FORM OF NOTICE OF BORROWING

TO:      NATIONSBANK, N.A., as Agent
         101 North Tryon Street
         Independence Center, 15th Floor
         NC1-001-15-04
         Charlotte, North Carolina  28255
         Attn:    Ret Taylor
                  Agency Services

RE:      Credit Agreement dated as of June 30, 1998 among Watson Wyatt & Company
         (the "Borrower"),  the Subsidiary  Guarantors  identified therein, the
         banks party thereto (the "Banks") and  NationsBank,  N.A., as Agent (as
         the same may be amended,  modified,  extended or restated  from time to
         time, the "Credit Agreement")

DATE:    _____________, 199__


1.       This Notice of  Borrowing  is made  pursuant to the terms of the Credit
         Agreement.  All capitalized  terms used herein unless otherwise defined
         shall have the meanings set forth in the Credit Agreement.

2.       Please be advised that:

         ______                     (a) the  Borrower  is  requesting Revolving
                                    Credit Loans in the amount of $__________ to
                                    be  funded  on  ____________,  199__  at the
                                    interest  rate option set forth in paragraph
                                    3 below.

                                    Subsequent  to the funding of the requested
                                    Revolving Credit Loans, the aggregate amount
                                    of  outstanding   Revolving   Credit Loans,
                                    together with  outstanding LOC Obligations,
                                    will be  $_________  which  is less  than or
                                    equal  to  the  Aggregate  Revolving Credit
                                    Commitment.  
         ______                     (b)  the  Borrower  is  requesting that  a
                                    portion of the current outstanding Revolving
                                    Credit Loans in the amount of $__________ be
                                    extended or converted  at the interest rate
                                    option set forth in paragraph 3 below. 

         ______                     (c) on  behalf of the  Qualified Employees,
                                    the Borrower is requesting Employee Loans in
                                    the  amount of  $__________  to be funded on
                                    ____________, 199__. 
                           Subsequent to the funding of the  requested Employee
                           Loans, the aggregate  amount of outstanding Employee
                           Loans will be $_________  which is less than or equal
                           to the Employee Loan Commitment.

                           Subsequent to the funding of each individual Employee
                           Loan,  the  amount  funded  in  connection  with such
                           Employee  Loan will not  exceed the book value of the
                           shares of stock to be  purchased or  refinanced with
                           the proceeds of such  Employee  Loan,  as computed in
                           accordance   with   Section   2.1(d)  of  the Credit
                           Agreement.

3.       The interest rate option  applicable to the requested  Revolving Credit
         Loans (or the  extension or  conversion  of all or part of the existing
         Revolving Credit Loans), as set forth above, shall be:

         a.       ________ the Base Rate

         b.       ________ the Eurodollar Rate plus the Applicable Percentage
                 for an Interest Period of:

                                    ________ one month
                                    ________ two months
                                    ________ three months
                                    ________ six months

4.       The  representations  and warranties set forth in the Credit Documents
         are true and  correct in all  material  respects as if made on the date
         hereof and shall be true and  correct  as of the date of the borrowing
         (or continuation or conversion thereof).

5.       As of the date  hereof,  no  Incipient  Default or Event of Default has
         occurred  and is  continuing  or  would be  caused  by this  Notice of
         Borrowing  or the making of Loans  requested  hereby  and no Incipient
         Default or Event of Default shall exist as of the date of the borrowing
         (or continuation or conversion thereof).

7.       No material  adverse  effect has occurred in the  financial  conditio
         of the Borrower  since the Closing Date.

8.       No Margin Stock Event has occurred.

                                                        WATSON WYATT & COMPANY

                                                        By:___________________
 
Name:__________________
                                                       Title:_________________


<PAGE>



                                    EXHIBIT K

                          FORM OF SOLVENCY CERTIFICATE

     The undersigned treasurer of Watson Wyatt & Company, a Delaware corporation
     ("Watson Wyatt"), is familiar with the properties,  businesses,  assets and
     liabilities  of  Watson  Wyatt  and is  duly  authorized  to  execute  this
     certificate on behalf of Watson Wyatt

     Reference is made to that Credit  Agreement dated as of June 30, 1998 among
     Watson Wyatt, the Subsidiary Guarantors identified therein, the banks party
     thereto (the "Banks") and NationsBank, N.A., as Agent (the "Agent") (as the
     same may be amended, modified,  extended or restated from time to time, the
     "Credit Agreement"). All capitalized terms used and not defined herein have
     the meanings stated in the Credit Agreement.

     1. The  undersigned  certifies  that he has  made  such  investigation  and
     inquiries  as to the  financial  condition  of  Watson  Wyatt  as he  deems
     necessary and prudent for the purpose of providing  this  Certificate.  The
     undersigned  acknowledges  that the Agent and the Banks are  relying on the
     truth and accuracy of this  Certificate  in  connection  with making of the
     Loans under the Credit Agreement.

     2. The undersigned  certifies that the financial  information,  projections
     and assumptions  which underlie and form the basis for the  representations
     made in this  Certificate  were  reasonable when made and were made in good
     faith and continue to be reasonable as of the date hereof.

     BASED ON THE FOREGOING,  the  undersigned  certifies  that, both before and
     after giving effect to the Loans:

     A. Watson Wyatt has assets having a fair  saleable  value which exceeds its
     liabilities.

     B. Watson Wyatt is able to and anticipates that it will be able to meet its
     debts as they mature.

     C. Watson Wyatt has adequate capital to conduct the business in which it is
     and proposes to be engaged.

     D. The  representations  and  warranties  of Watson  Wyatt set forth in the
     Credit Agreement are true and correct.

     E. No  Incipient  Default  or Event of Default  under the Credit  Agreement
     exists or would exist.


<PAGE>



     F. The  Financial  Statements  delivered  to the Banks  pursuant to Section
     5.1(k) of the Credit Agreement fairly and completely  present the financial
     condition of Watson Wyatt.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate this 30th
     day of June, 1998, in his capacity as the treasurer of Watson Wyatt.

                                                 -----------------------------
                                                 Eric B. Schweizer
                                                 Title: Treasurer of Watson
                                                 Wyatt & Company




<PAGE>



                                    EXHIBIT L


                            FORM OF JOINDER AGREEMENT


     THIS JOINDER AGREEMENT (the "Agreement"),  dated as of ___________________,
     1998, is by and between  _______________________,  a ________________  (the
     "Applicant  Guarantor"),  and  NATIONSBANK,  N.A., in its capacity as Agent
     under that certain Credit  Agreement  dated as of June 30, 1998 (as amended
     and modified,  the "Credit Agreement") by and among Watson Wyatt & Company,
     a Delaware  corporation,  the Subsidiary  Guarantors  and Banks  identified
     therein and  NationsBank,  N.A., as Agent.  All of the defined terms in the
     Credit Agreement are incorporated herein by reference.

     The  Applicant  Guarantor  has  indicated its desire to become a Subsidiary
     Guarantor  or is  required  by the  terms  of  Section  6.13 of the  Credit
     Agreement to become a Subsidiary Guarantor under the Credit Agreement.

     Accordingly,  the  Applicant  Guarantor  hereby  agrees as follows with the
     Agent for the benefit of the Banks:

     1. The Applicant Guarantor hereby  acknowledges,  agrees and confirms that,
     by its execution of this Agreement,  the Applicant Guarantor will be deemed
     to be a party to the Credit Agreement and a "Subsidiary  Guarantor" for all
     purposes of the Credit Agreement and the other Credit Documents,  and shall
     have all of the obligations of a Subsidiary  Guarantor  thereunder as if it
     had  executed the Credit  Agreement  and the other  Credit  Documents.  The
     Applicant Guarantor agrees to be bound by all of the terms,  provisions and
     conditions contained in the Credit Documents,  including without limitation
     (i) all of the affirmative and negative  covenants set forth in Articles VI
     and VII of the  Credit  Agreement  and  (ii)  all of the  undertakings  and
     waivers set forth in Article IV of the Credit  Agreement.  Without limiting
     the  generality of the foregoing  terms of this  paragraph 1, the Applicant
     Guarantor  hereby  (A)  jointly  and  severally  together  with  the  other
     Subsidiary  Guarantors,  guarantees to each Bank, the Agent and the Issuing
     Bank as provided in Article III of the Credit Agreement, the prompt payment
     and performance of the Subsidiary  Guaranteed  Obligations in full when due
     (whether at stated maturity, as a mandatory prepayment, by acceleration, as
     a mandatory  cash  collateralization  or otherwise)  strictly in accordance
     with the terms thereof, (B) agrees that if any of the Subsidiary Guaranteed
     Obligations  are not paid or  performed in full when due (whether at stated
     maturity, as a mandatory prepayment,  by acceleration,  as a mandatory cash
     collateralization or otherwise),  the Applicant Guarantor will, jointly and
     severally together with the other Subsidiary  Guarantors,  promptly pay and
     perform the same, without any demand or notice whatsoever,  and that in the
     case  of  any  extension  of  time  of  payment  or  renewal  of any of the
     Subsidiary Guaranteed  Obligations,  the same will be promptly paid in full
     when due  (whether at extended  maturity,  as a  mandatory  prepayment,  by
     acceleration,  as a  mandatory  cash  collateralization  or  otherwise)  in
     accordance  with the terms of such extension or renewal,  (C) grants to the
     Agent a security interest in its Collateral as referred in, and pursuant to
     the terms of, the Security Agreement, and

<PAGE>


     (D)  pledges  and grants a security  interest  to the Agent in the  Pledged
     Stock  identified in Schedule A attached hereto and the other Collateral as
     referred  in,  and  pursuant  to the  terms of,  the  Credit  Party  Pledge
     Agreement.

     2. The Applicant Guarantor acknowledges and confirms that it has received a
     copy of the Credit  Agreement and the Schedules and Exhibits  thereto.  The
     information  on  the  Schedules  to  the  Credit  Agreement,  the  Security
     Agreement and the Credit Party Pledge  Agreement are amended to provide the
     information shown on the attached Schedule A.

     3. The Applicant  Guarantor  hereby waives  acceptance by the Agent and the
     Banks of the guaranty by the Applicant  Guarantor  under Article III of the
     Credit  Agreement  upon the  execution  of this  Joinder  Agreement  by the
     Applicant Guarantor.

     4. This  Agreement  may be  executed in two or more  counterparts,  each of
     which shall  constitute  an original  but all of which when taken  together
     shall constitute one contract.

     5. This  Agreement  shall be governed by and construed and  interpreted  in
     accordance with the laws of the State of North Carolina.

     IN  WITNESS  WHEREOF,  the  Applicant  Guarantor  has caused  this  Joinder
     Agreement to be duly executed by its  authorized  officers,  and the Agent,
     for the  benefit of the Banks,  has caused the same to be  accepted  by its
     authorized officer, as of the day and year first above written.

                                      APPLICANT GUARANTOR

                                      By:  ______________________________
                                      Name:
                                      Title:

                                                     Address for Notices:

                                      Attn:
                                   Telephone:
                                    Telecopy:

                                                Acknowledged and accepted:
                                                NATIONSBANK, N.A., as Agent

                                     By:  ______________________________
                                      Name:
                                     Title:



<PAGE>



                                   Schedule A

                                       to
                                Joinder Agreement


                       Schedule 1(b) to Security Agreement

                              Intellectual Property



                       Schedule 4(a) to Security Agreement

                             Chief Executive Office



                       Schedule 4(b) to Security Agreement

                             Locations of Collateral



                       Schedule 4(c) to Security Agreement
          Mergers, Consolidations, Change in Structure or Use of Tradenames



                        Schedule 2(a) to Pledge Agreement

                          Description of Pledged Shares


Applicant Guarantor
                            No. of           Certificate
Name of Subsidia           Shares                 No.            Percentage



<PAGE>





STATE OF _______________   )
                           )
COUNTY OF _____________    )



         VERIFICATION


     The  undersigned,  being first duly sworn,  deposes and says that he is the
     treasurer of Watson Wyatt & Company,  a Delaware  corporation,  that he has
     read the foregoing and to his personal knowledge the matters and statements
     contained therein are true and accurate.

     This the 30th day of June, 1998.


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


Sworn to and subscribed before me this 30th day of June, 1998.


----------------------------------
         Notary Public


My Commission Expires:

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

<PAGE>

                                  SCHEDULE 1 to
                                Credit Agreement
<TABLE>

                             WATSON WYATT & COMPANY
                           SUBSIDIARIES AND AFFILIATES
<CAPTION>
<S>
LOCATION            NAME                                            OWNERSHIP1
                    <C>                                             <C>
Argentina           Watson Wyatt Argentina S.A. 4                   100%
Australia           Watson Wyatt Australia Pty Ltd                  100%
Australia           WyComp Pty. Limited15                           100%
Belgium             G&H Consulting Actuaries B.V.6                  100%
Belgium             Watson Wyatt S.A.                               50.1%
Brazil              Watson Wyatt Brasil Ltda. 9                     99%
Canada              Watson Wyatt Company Limited                    100%
China: Shanghai     Watson Wyatt China Ltd. 4                       100%
Colombia            Watson Wyatt Colombia S.A. 4                    100%
France              Watson Wyatt S.A.R.L.                           50.1%
Germany             Watson Wyatt GmbH                               50.1%
Germany             Wyatt Bode Grabner GmbH10                       50%
Hong Kong           Watson Wyatt Hong Kong Limited4                 100%
Hong Kong           Watson Wyatt Systems Limited13                  100%
India               Watson Wyatt India Private Limited5             60%
Indonesia           P.T. Watson Wyatt Purbajaga                     60%
Italy               Watson Wyatt S.r.l.                             50.1%
Japan               Watson Wyatt K.K. 4                             100%
Malaysia            Watson Wyatt (Malaysia) Sdn. Bhd. 4             100%
Mauritius           Watson Wyatt Holdings (Mauritius) Limited11     100%
Mexico              Wyatt Internacional, S.A. de C.V. 4             100%
Mexico              Watson Wyatt Mexico, S.A. de C.V. 16            100%
Netherlands         Watson Wyatt B.V.                               50.1%
New Zealand         Retirement Advisory Services (NZ) Limited       100%
New Zealand         Retirement Trustees NZ Limited                  100%
New Zealand         Watson Wyatt New Zealand Limited4               100%
Philippines         Watson Wyatt Philippines, Inc. 2, 4             100%
Puerto Rico         Watson Wyatt Puerto Rico, Inc.                  100%
Singapore           Watson Wyatt Singapore Pte. Ltd. 4              100%
Spain               Watson Wyatt de Espana, S.A.                    50.1%
Sri Lanka           Watson Wyatt Lanka (Private) Limited12          100%
Sweden              Watson Wyatt AB                                 50.1%
Switzerland         Watson Wyatt AG                                 50.1%
Thailand            Watson Wyatt (Thailand) Ltd.                    100%
U.K.                Graham & Company Limited7                       100%
U.K.                PCL (1991) Limited                              100%
U.K.                PCL Limited7                                    100%
U.K.                The Wyatt Company (UK) Limited7                 100%
U.K.                The Wyatt Company Holdings Limited4             100%
U.K.                Watson Wyatt Holdings (Europe) Limited          50.1%
U.K.                Watson Wyatt International Pension Trustees, Ltd 50.1%
U.K.                Watson Wyatt Limited                             50.1%
U.K.                Wyatt Financial Services Limited7                100%
U.K.                Wyatt Pension Plan Trustee Limited7              100%
U.S. Delaware       Watson Wyatt Investment Consulting, Inc.         100%
U.S. Delaware       Wyatt Data Services, Inc.                        100%
U.S. Delaware       Wyatt Preferred Choice, L.P. 3                  100%
U.S. Delaware       Wyatt Preferred Choice, L.L.C.                  100%
U.S. Massachusetts  Wyatt Asset Services, Inc.                      100%
U.S. Nevada         Watson Wyatt & Company II (nameholder)          100%
U.S. Nevada         Watson Wyatt International, Inc.                100%
<FN>
------------------------------------------------------
1   Includes  direct and indirect  ownership by Watson Wyatt & Company 
2   Other 60% held by Philippine nationals; nominee shareholders
3   General Partner: Watson Wyatt & Company, Limited Partner is Wyatt
    Preferred Choice, L.L.C.
4   100% held by Watson Wyatt International, Inc.
5   Joint Venture; Other 40% held by ABC Consultants Private, Limited
6   100% held by Watson Wyatt S.A. (Belgium subsidiary)
7   100% held by The Wyatt Company Holdings Limited
8   Owned beneficially 100% by Watson Wyatt & Company
9   Other 1% held by Wyatt Data Services, Inc.
10  Other 50% held by Drs. Bode and Grabner
11  60% held by Watson Wyatt International, Inc.; 20% held by each of Watson
    Wyatt Hong Kong Limited and Watson Wyatt Company Limited
12  100% held by Watson Wyatt Singapore Pte. Ltd.
13  100% held by Watson Wyatt Hong Kong Limited
14  Intentionally blank
15  100% held by Watson Wyatt Australia Pty. Ltd.
16  100% owned by Wyatt Internacional, S.A. de C.V.(this company formerly
    known as Watson Wyatt Mexico, S.A. de C.V.)
</FN>
</TABLE>

<PAGE>


                                   SCHEDULE 2
                               To Credit Agreement

                             PERMITTED NONCOMPLIANCE

None.





<PAGE>


                                   SCHEDULE 3
                               To Credit Agreement

                                   LITIGATION

None.





<PAGE>


                                   SCHEDULE 4
                               To Credit Agreement

                              BURDENSOME DOCUMENTS

None.



<PAGE>


                                   SCHEDULE 5
                               To Credit Agreement

                                  REAL PROPERTY

Parque Reforma Piso 2
Campos Eliseos 400
Col. Lomas de Chapultepec
Mexico City, Mexico  11000

(Office condominium on 2nd floor of commercial office building.)



<PAGE>


                                   SCHEDULE 6
                               To Credit Agreement

                                  INDEBTEDNESS





Letters of Credit  issued by  NationsBank  totaling  $2.25  million as
indicated
below:

Beneficiary                Amount             Purpose

Royal Indemnity Company    $225,000          1998 Workers Compensation Program

Howard Bank                $1.5 million      Insurance Captive Initial
                                             Capitalization

Sanyo North America        $500,000          Wyatt Data Services Office Lease

     Bank overdrafts incurred in the normal course of business.

     Deed of  Guarantee  issued  to  Midland  Bank  plc in  connection  with the
     overdraft   facility   for   Watson   Wyatt   Limited   in  the  amount  of
     (pound)250,000.

     Performance  payments due to HR Best  Practices  (d/b/a  People  Management
     Resources) for the period ending June 30, 1998 in connection with the Asset
     Purchase  Agreement dated May 12, 1995 by and between HR Best Practices and
     The Wyatt Company.

     Agreement dated June 30, 1998 between Watson Wyatt & Company and PeopleSoft
     USA,  Inc,  for  approximately  $1.2  million.  This is a fully  cancelable
     contract on or before  September 25, 1998 and provides  software  licensing
     and maintenance for four years.

     Potential tax liability  associated with the Brussels,  Belgium office. The
     statute of limitations expire at the end of 1999, and the current liability
     of approximately $200,000 has been fully reserved by the Company.








<PAGE>


                                   SCHEDULE 7
                               To Credit Agreement

                                   INVESTMENTS

To be delivered post-closing.