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                                CREDIT AGREEMENT

                                      among

                          INTEGRATED LIVING COMMUNITIES
                                  HOLDING, INC.

                                   as Borrower

                                       and

                       INTEGRATED LIVING COMMUNITIES, INC.
                                    as Parent

                                       and

                             CERTAIN SUBSIDIARIES OF
                           THE BORROWER AND THE PARENT

                                  as Guarantors

                                       and

                          THE LENDERS IDENTIFIED HEREIN

                                       and

                            NATIONSBANK, N.A. (SOUTH)

                                    as Agent



                            DATED AS OF APRIL 9, 1997




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<PAGE>


                                TABLE OF CONTENTS


SECTION 1  DEFINITIONS AND ACCOUNTING TERMS................................... 1
         1.1 Definitions...................................................... 1

         1.2 Computation  of  Time  Periods
              and      Other      Definition
              Provisions......................................................16
         1.3 Accounting Terms.................................................16

SECTION 2  CREDIT FACILITY....................................................16
         2.1 Revolving Loans..................................................16
         2.2 Letter of Credit Subfacility.....................................18

SECTION 3  GENERAL PROVISIONS APPLICABLE TO
            LOANS     AND     LETTERS     OF
            CREDIT............................................................22
         3.1 Interest.........................................................22
         3.2 Place and Manner of Payments.....................................22
         3.3 Prepayments......................................................23
         3.4 Fees.............................................................23
         3.5 Payment in full at Maturity......................................24
         3.6 Computations of Interest and Fees................................24
         3.7 Pro Rata Treatment...............................................24
         3.8 Sharing of Payments..............................................25
         3.9 Capital Adequacy.................................................27
         3.10 Inability To Determine Interest Rate............................27
         3.11 Illegality......................................................27
         3.12 Requirements of Law.............................................27
         3.13 Taxes...........................................................28
         3.14 Indemnity.......................................................30

SECTION 4  GUARANTY...........................................................30
         4.1 Guaranty of Payment..............................................30
         4.2 Obligations Unconditional........................................30
         4.3 Modifications....................................................31
         4.4 Waiver of Rights.................................................31
         4.5 Reinstatement....................................................31
         4.6 Remedies.........................................................32
         4.7 Limitation of Guaranty...........................................32

SECTION 5  CONDITIONS PRECEDENT...............................................32
         5.1 Closing Conditions...............................................32
         5.2 Conditions to Revolving  Loans
              to Finance  Acquisition of New
              Properties......................................................36
         5.3 Conditions to All Revolving Loans................................39

SECTION 6  REPRESENTATIONS AND WARRANTIES.....................................39
         6.1 Financial Condition..............................................39
         6.2 No Material Change...............................................39
         6.3 Organization and Good Standing...................................40
         6.4 Due Authorization................................................40
         6.5 No Conflicts.....................................................40
         6.6 Consents.........................................................40
         6.7 Enforceable Obligations..........................................40
         6.8 No Default.......................................................40
         6.9 Ownership........................................................40

                                       i
<PAGE>

         6.10 Indebtedness....................................................41
         6.11 Litigation......................................................41
         6.12 Taxes...........................................................41
         6.13 Compliance with Law.............................................41
         6.14 Compliance with ERISA...........................................41
         6.15 Organization Structure..........................................42
         6.16 Use of Proceeds; Margin Stock...................................42
         6.17 Government Regulation...........................................43
         6.18 Environmental Matters...........................................43
         6.19 Solvency........................................................44
         6.20 Investments.....................................................44
         6.21 Location of Collateral..........................................44
         6.22 Disclosure......................................................44
         6.23 Licenses, etc...................................................44
         6.24 No Burdensome Restrictions......................................44
         6.25 Collateral Documents............................................45
         6.26 Intellectual Property...........................................45
         6.27 Management Agreements...........................................45

SECTION 7  AFFIRMATIVE COVENANTS..............................................45
         7.1 Information Covenants............................................45
         7.2 Financial Covenants..............................................48
         7.3 Preservation of Existence and Franchises.........................49
         7.4 Books and Records................................................49
         7.5 Compliance with Law..............................................49
         7.6 Payment of Taxes and Other Indebtedness..........................49
         7.7 Insurance........................................................49
         7.8 Maintenance of Property..........................................50
         7.9 Performance of Obligations.......................................50
         7.10 Use of Proceeds.................................................50
         7.11 Audits/Inspections..............................................50
         7.12 Additional Credit Parties.......................................50
         7.13 Collateral......................................................51
         7.14 Environmental Indemnity.........................................51
         7.15 Abundance of Caution Properties.................................51
         7.16 Environmental Assessment........................................51
         7.17 Expansion of Units..............................................51

SECTION 8  NEGATIVE COVENANTS.................................................52
         8.1 Indebtedness.....................................................52
         8.2 Liens............................................................52
         8.3 Nature of Business...............................................52
         8.4 Consolidation and Merger.........................................53
         8.5 Sale or Lease of Assets..........................................53
         8.6 Advances, Investments and Loans..................................53
         8.7 Restricted Payments..............................................53
         8.8 Subordinated Debt................................................53
         8.9 Transactions with Affiliates.....................................53
         8.10 Fiscal Year; Organizational Documents...........................54
         8.11 Limitations.....................................................54
         8.12 Negative Pledges................................................54
         8.13 Creation of Subsidiaries........................................54
         8.14 Issuance and Sale of Subsidiary Stock...........................54
         8.15 Sale Leasebacks.................................................54

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         8.16 Ownership of Assets.............................................54
         8.17 Serviceable Beds................................................55
         8.18 Management Agreements...........................................55

SECTION 9  EVENTS OF DEFAULT..................................................55
         9.1 Events of Default................................................55
         9.2 Acceleration; Remedies...........................................57
         9.3 Allocation of Payments After Event of Default....................58

SECTION 10  AGENCY PROVISIONS.................................................58
         10.1 Appointment.....................................................58
         10.2 Delegation of Duties............................................59
         10.3 Exculpatory Provisions..........................................59
         10.4 Reliance on Communications......................................59
         10.5 Notice of Default...............................................60
         10.6 Non-Reliance on Agent and Other Lenders.........................60
         10.7 Indemnification.................................................60
         10.8 Agent in Its Individual Capacity................................61
         10.9 Successor Agent.................................................61

SECTION 11  MISCELLANEOUS.....................................................61
         11.1 Notices.........................................................61
         11.2 Right of Set-Off................................................61
         11.3 Benefit of Agreement............................................62
         11.4 No Waiver; Remedies Cumulative..................................63
         11.5 Payment of Expenses; Indemnification............................64
         11.6 Amendments, Waivers and Consents................................64
         11.7 Counterparts....................................................65
         11.8 Headings........................................................65
         11.9 Defaulting Lender...............................................65
         11.10 Survival  of   Indemnification
                and     Representations    and
                Warranties....................................................65
         11.11 Governing Law; Jurisdiction....................................65
         11.12 Waiver of Jury Trial...........................................66
         11.13 Time...........................................................66
         11.14 Severability...................................................66
         11.15 Entirety.......................................................66
         11.16 Binding Effect.................................................66
         11.17 Confidentiality................................................67


SCHEDULES

Schedule 1.1(a)   Collateral Pool Property
Schedule 1.1(b)   Commitment Percentages
Schedule 1.1(c)   Subordination and Intercreditor Agreement
Schedule 6.10              Indebtedness
Schedule 6.11              Litigation
Schedule 6.15              Organization Structure
Schedule 6.18              Environmental Matters
Schedule 6.21(a)  Real Property Locations
Schedule 6.21(b)  Personal Property Locations
Schedule 6.21(c)  Chief Executive Offices
Schedule 6.26              Intellectual Property
Schedule 7.7(a)   Insurance Coverage

                                      iii
<PAGE>

Schedule 8.2               Liens
Schedule 8.6               Investments
Schedule 11.1              Notices


EXHIBITS

Exhibit 2.1(b)             Form of Notice of Borrowing
Exhibit 2.1(e)             Form of Notice of Continuation/Conversion
Exhibit 2.1(g)             Form of Revolving Loan Note
Exhibit 7.1(d)             Form of Officer's Certificate
Exhibit 7.1(g)             Form of Borrowing Base Certificate
Exhibit 7.12               Form of Joinder Agreement
Exhibit 11.3               Form of Assignment Agreement


                                       iv
<PAGE>


                                CREDIT AGREEMENT



         THIS CREDIT  AGREEMENT (this "Credit  Agreement") is entered into as of
April 9, 1997 among  INTEGRATED  LIVING  COMMUNITIES  HOLDING,  INC., a Delaware
corporation  ("Borrower"),  INTEGRATED  LIVING  COMMUNITIES,  INC.,  a  Delaware
corporation  (the "Parent") and the  subsidiaries of the Borrower and the Parent
identified on the signature pages hereto (such  subsidiaries,  together with the
Parent,  individually a "Guarantor"  and  collectively  the  "Guarantors"),  the
Lenders (as defined herein) and NATIONSBANK,  N.A. (SOUTH)  ("NationsBank"),  as
Agent for the Lenders.

                                    RECITALS

         WHEREAS,  the  Borrower  desires to enter into a $50 million  revolving
credit facility; and

         WHEREAS,  the Lenders  party  hereto have agreed to make the  requested
revolving credit facility  available to the Borrower on the terms and conditions
hereinafter set forth.

         NOW,  THEREFORE,  IN  CONSIDERATION  of the premises and other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto agree as follows:

                                   SECTION 1

                        DEFINITIONS AND ACCOUNTING TERMS

         1.1 DEFINITIIONS.

         As used herein,  the  following  terms shall have the  meanings  herein
specified  unless the context  otherwise  requires.  Defined  terms herein shall
include in the singular number the plural and in the plural the singular:

                  "Abundance of Caution  Property"  shall have the meaning given
such term in Section 5.2.

                  "Additional  Credit  Party"  means each Person that  becomes a
Guarantor after the Closing Date, as provided in Section 7.12.

                  "Adjusted  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:

                  Adjusted Eurodollar Rate =  Eurodollar Rate
                                              ----------------------------------
                                               1 - Eurodollar Reserve Percentage

                  "Agent"  means  NationsBank,  N.A.  (South) (or any  successor
thereto) or any successor agent appointed pursuant to Section 10.9.

                  "Affiliate"  means,  with  respect  to any  Person,  any other
Person (i) directly or indirectly  controlling  or controlled by or under direct
or  indirect  common  control  with such Person or (ii)  directly or  indirectly
owning or  holding  five  percent  (5%) or more of the equity  interest  in such
Person. For purposes of this definition, "control" when used with respect to any
Person  means the power to direct the  management  and  policies of such Person,
directly or indirectly,  whether through the ownership of voting securities,  by
contract  or  otherwise;  and the  terms  "controlling"  and  "controlled"  have
meanings correlative to the foregoing.

<PAGE>

                  "Agency   Services   Address"   means    NationsBank,    N.A.,
NC1-001-15-04,  101 North Tryon Street, Charlotte,  North Carolina 28255, Attn.:
Agency  Services,  or such other address as may be identified by written  notice
from the Agent to the Borrower.

                  "Applicable  Percentage" means for any day, the rate per annum
set forth below opposite the applicable  Leverage Ratio then in effect, it being
understood  that the Applicable  Percentage  for  Eurodollar  Loans shall be the
percentage set forth under the column "Eurodollar Margin":

               Pricing             Leverage                        Eurodollar
               Level               Ratio                             Margin


               I          less than 4.0                              2.25%
                                         -
               II         greater than 4.0 but less than 5.0         2.63%
                                         -
               III        greater than 5.0 but less than 6.0         3.00%
                                         -

The Applicable  Percentage shall be determined and adjusted monthly on the first
day of each calendar month (each a "Rate Determination Date"); provided that:

         (i) the initial  Applicable  Percentage shall be based on the financial
statements and  information  provided to the Agent on the Closing Date and shall
remain in effect at such Pricing Level until the first Rate  Determination  Date
to occur after the Closing Date, and

         (ii)  if  the  Borrower  fails  to  provide  the  annual  or  quarterly
compliance   certificates  and  related  financial  statements  and  information
required by Sections  7.1(a),  (b),  (c) and (e),  as  appropriate,  or fails to
deliver copies of such  certificates to the Agency Services  Address as required
by Section 7.1(d), the Applicable Percentage shall be based on Pricing Level III
until such time as an appropriate  compliance  certificate and related financial
statements and information are delivered, whereupon the applicable Pricing Level
shall be adjusted on the first day of the next  calendar  month and based on the
information  contained  in such  compliance  certificate  and related  financial
statements and information.

Each Applicable  Percentage  shall be effective from a Rate  Determination  Date
until the next such Rate  Determination  Date.  The Agent  shall  determine  the
appropriate  Applicable  Percentage in the pricing matrix  promptly on each Rate
Determination Date and shall promptly notify the Borrower and the Lenders of any
change  thereof.  Such  determinations  by the Agent shall be conclusive  absent
manifest error.  Adjustments in the Applicable  Percentage shall be effective as
to existing Loans as well as any new Loans made.

                  "Average  Economic   Occupancy  Rate"  means,  for  each  Real
Property,  for the most recently ending three month period, the ratio (expressed
as a percentage) equal to the sum of the Economic  Occupancy Rate for each month
in such three month period divided by 3.

                  "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United  States Code,  as amended,  modified,  succeeded or replaced from time to
time.

                  "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.


                                       2
<PAGE>

                  "Borrower" means Integrated Living Communities Holding,  Inc.,
a Delaware corporation, together with any successors and permitted assigns.

                  "Borrowing Base" means, at any date of determination,  the sum
of the Borrowing Base Values for each parcel of Collateral Pool Property.

                  "Borrowing  Base Value"  means,  at any date of  determination
with respect to each  Collateral  Pool Property,  an amount for such  Collateral
Pool Property equal to the lesser of:

                  (a)  75%  of the  appraised  value  of  such  Collateral  Pool
         Property (as determined  pursuant to a third party appraisal  delivered
         to and accepted by the Agent in the sole discretion of the Agent); and

                  (b) the NOI for such  Collateral  Pool Property for the fiscal
         quarter most recently ended multiplied by twenty-four (24).

                  "Business Day" means any day other than a Saturday,  a Sunday,
a legal  holiday  or a day on  which  banking  institutions  are  authorized  or
required  by law or other  governmental  action  to close  in  Charlotte,  North
Carolina or Sarasota,  Florida;  provided that in the case of Eurodollar  Loans,
such day is also a day on which  dealings  between  banks are carried on in U.S.
dollar deposits in the London interbank market.

                  "Capital  Expenditures"  means all  expenditures of the Credit
Parties  and  their  Subsidiaries  which,  in  accordance  with  GAAP,  would be
classified  as capital  expenditures,  including,  without  limitation,  Capital
Leases.

                  "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 (a) securities issued or directly and
fully  guaranteed  or insured  by the United  States of America or any agency or
instrumentality  thereof  (provided that the full faith and credit of the United
States of America is pledged in support  thereof) having  maturities of not more
than twelve months from the date of  acquisition,  (b) U.S.  dollar  denominated
time and demand deposits and certificates of deposit of (i) any Lender, (ii) any
domestic commercial bank having capital and surplus in excess of $500,000,000 or
(iii) any bank whose short-term commercial paper rating from S&P is at least A-1
or the  equivalent  thereof or from  Moody's  is at least P-1 or the  equivalent
thereof (any such bank being an "Approved  Bank"),  in each case with maturities
of not more than 270 days from the date of acquisition, (c) commercial paper and
variable  or fixed  rate  notes  issued by any  Approved  Bank (or by the parent
company  thereof) or any variable  rate notes issued by, or  guaranteed  by, any
domestic  corporation rated A-1 (or the equivalent  thereof) or better by S&P or
P-1 (or the  equivalent  thereof) or better by Moody's and  maturing  within six
months of the date of  acquisition,  (d)  repurchase  agreements  with a bank or
trust company (including any of the Lenders) or securities dealer having capital
and surplus in excess of $500,000,000 for direct  obligations issued by or fully
guaranteed  by the United States of America in which a Credit Party shall have a
perfected  first  priority  security  interest  (subject to no other  Liens) and
having, on the date of purchase thereof, a fair market value of at least 100% of
the amount of the  repurchase  obligations  and (e)  Investments,  classified in
accordance  with GAAP as current  assets,  in money market  investment  programs
registered  under the  Investment  Company Act of 1940,  as  amended,  which are
administered by financial  institutions  having capital of at least $500,000,000
and the  portfolios  of  which  are  limited  to  Investments  of the  character
described in the foregoing subdivisions (a) through (d).

                  "Change  of  Control"  means  the  occurrence  of  any  of the
following events:  (i) (other than IHS) 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, control over,  Voting Stock of the Parent (or other  securities
convertible  into such Voting  Stock)  representing  25% or more of the combined
voting power of all Voting  Stock of the Parent,  (ii) IHS shall fail to own and
have the  right  to vote at least  25% of the  outstanding  Voting  Stock of the
Parent,  determined  on a  fully  diluted  basis  after  giving  effect  to  the
conversion  and  exercise  of  all  outstanding  warrants,   options 


                                       3
<PAGE>

and other  securities of the Parent that are convertible into or exercisable for
Voting Stock of the Parent  (whether or not such  securities  are then currently
convertible  or  exercisable),  (iii) during any period of up to 24  consecutive
months,  commencing after the Closing Date,  individuals who at the beginning of
such 24  month  period  were  directors  of the  Parent  (together  with any new
director whose  election by the Parent's Board of Directors or whose  nomination
for  election by the  Parent's  shareholders  was approved by a vote of at least
two-thirds  of the directors  then still in office who either were  directors at
the beginning of such period or whose  election or  nomination  for election was
previously  so  approved)  cease for any reason to  constitute a majority of the
directors  of the Parent then in office or (iv) the Parent shall fail to own and
have the right to vote 100% of the  outstanding  Voting  Stock of the  Borrower,
determined on a fully diluted  basis after giving effect to the  conversion  and
exercise  of all  outstanding  warrants,  options  and other  securities  of the
Borrower  that are  convertible  into or  exercisable  for  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.

                  "Churchland  Facility"  means  that  certain  assisted  living
facility located at 4916 W. Norfolk Road in Portsmouth,  Virginia and identified
on Schedule 1.1(a) attached hereto.

                  "Closing Date" means the date hereof.

                  "Code"  means the Internal  Revenue Code of 1986,  as amended,
and any successor  statute thereto,  as interpreted by the rules and regulations
issued  thereunder,  in each case as in effect from time to time.  References to
sections of the Code shall be construed also to refer to any successor sections.

                  "Collateral"  means all collateral  referred to in and covered
by the Collateral Documents.

                  "Collateral  Documents"  means  the  Security  Agreement,  the
Pledge Agreement,  the Mortgage  Documents and such other documents executed and
delivered  in  connection  with the  attachment  and  perfection  of the Agent's
security  interests,  for the benefit of the Lenders, in the Real Properties and
the  personal  property  owned  by  the  Credit  Parties,   including,   without
limitation, the Mortgage Policies and UCC financing statements.

                  "Collateral  Pool Adjusted  NOI" means for the fiscal  quarter
most  recently  ending,  with  respect  to the  Collateral  Pool  Property,  the
aggregate NOI for all Collateral Pool Property multiplied by 4.

                  "Collateral Pool Eligibility  Conditions"  means the following
conditions:

                  (a) Average  Economic  Occupancy Rate. Each Real Property must
         maintain an Average Economic  Occupancy Rate of ninety percent (90%) at
         all times; provided, however,

                         (i) any Newly Constructed  Facility acquired subsequent
                    to the date  hereof  shall not be  required  to satisfy  the
                    above-described   90%  Average   Economic   Occupancy   Rate
                    requirement  during the first six months of ownership by the
                    Borrower or a Subsidiary of the Borrower;

                         (ii) the Terrace Gardens Facility need only maintain an
                    Average  Economic  Occupancy  Rate of seventy  five  percent
                    (75%) during the first six (6) months  following the Closing
                    Date   and   shall   not  be   required   to   satisfy   the
                    above-referenced   ninety  percent  (90%)  Average  Economic
                    Occupancy  Rate  requirement  until such six (6) month grace
                    period following the Closing Date has expired;

                         (iii) the West Palm Beach  Facility  need only maintain
                    an Average  Economic  Occupancy  Rate of sixty percent (60%)
                    during the first six (6) months  following  the Closing Date
                    and shall not be required  to satisfy  the  above-referenced
                    ninety  percent  (90%)  Average   Economic   Occupancy  Rate
                    requirement  until such six (6) month grace period following
                    the Closing Date has expired;


                                       4
<PAGE>

                         (iv) the Ghent  Arms  Facility  need only  maintain  an
                    Average Economic Occupancy Rate of eighty-five percent (85%)
                    during the first six (6) months  following  the Closing Date
                    and shall not be required  to satisfy  the  above-referenced
                    ninety  percent  (90%)  Average   Economic   Occupancy  Rate
                    requirement  until such six (6) month grace period following
                    the Closing Date has expired;

                         (v) the King's  Grant  Facility  need only  maintain an
                    Average  Economic  Occupancy  Rate of seventy  percent (70%)
                    during the six (6) months  following  the  Closing  Date and
                    shall not be required to satisfy the above-referenced ninety
                    percent (90%) Average  Economic  Occupancy Rate  requirement
                    until such six (6) month grace period  following the Closing
                    Date has expired; and

                         (vi) with  respect to the  Churchland  Facility and the
                    Gloucester  Facility,  those  Units  which  are  part of the
                    current expansion  projects at such Real Properties will not
                    be considered  in the  calculation  of the Average  Economic
                    Occupancy Rate for such Real Properties until the tenth full
                    calendar month  following the completion of  construction of
                    such Units.

                  (b) Debt  Service  Coverage  Ratio.  Each Real  Property  must
         maintain at all times a Debt  Service  Coverage  Ratio  greater than or
         equal to 1.3 to 1.0.

                  (c)  Units/Serviceable  Beds. Each Real Property must maintain
         at all times at least 50 Units and 60 Serviceable Beds.

                  "Collateral  Pool Property" means the Real  Properties  (other
than Abundance of Caution Property) that (i) satisfy each of the Collateral Pool
Eligibility  Conditions as of the date of determination  and (ii) are either (a)
identified on Schedule 1.1(a) or (b) acquired  subsequent to the Closing Date by
a  Subsidiary  of the  Borrower or the  Borrower  with the proceeds of Revolving
Loans and in  satisfaction  of each of the  conditions  contained in Section 5.2
hereof.

                  "Commitments" means the commitment of each Lender with respect
to the Revolving Committed Amount.

                  "Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement,  the Collateral Documents,  the LOC Documents, the Fee Letter
and all other related agreements and documents issued or delivered  hereunder or
thereunder or pursuant hereto or thereto.

                  "Credit  Parties"  means the Borrower and the  Guarantors  and
"Credit Party" means any one of them.

                  "Credit Party Obligations" means, without duplication, (a) all
of the  obligations of the Credit Parties to the Lenders  (including the Issuing
Lender) and the Agent, whenever arising, under this Credit Agreement, the Notes,
the  Collateral  Documents  or any of the other  Credit  Documents  to which the
Borrower  or any  other  Credit  Party is a party  and (b) all  liabilities  and
obligations  owing from such Credit Party to any Lender,  or any  Affiliate of a
Lender,  arising  under  any  interest  rate  protection  agreements,  commodity
purchase or option  agreements  or other  interest or exchange rate or commodity
price   hedging   agreements   related  to  the  Loans  and  Letters  of  Credit
(collectively, "Hedging Agreements").

                  "Daily Economic Occupancy Rate" means, for each Real Property,
for each  calendar day, the ratio  (expressed as a percentage)  equal to (i) the
number of Serviceable  Beds at such Real Property minus the number of unoccupied
Serviceable Beds at such Real Property to (ii) the number of Serviceable Beds at
such Real Property.

                  "Debt  Service  Coverage  Ratio"  means,  as of  any  date  of
determination,  (i) with respect to the applicable Newly  Constructed  Facility,
the ratio of (a) the NOI for such Newly Constructed Facility for the most recent
fiscal  quarter  multiplied by 4 to (b) the  Borrowing  Base Value of such Newly
Constructed  Facility  multiplied by 10.25,  (ii) with respect to the applicable
Real Property (other than a Newly  Constructed  Facility),  the ratio of (a) the
NOI for


                                       5
<PAGE>

such Real  Property for the most recent six month period  multiplied by 2 to (b)
the  Borrowing  Base Value of such Real  Property  multiplied by 10.25 and (iii)
with respect to the applicable  Abundance of Caution Property,  the ratio of (a)
the NOI for such Abundance  Caution  Property for the most recent fiscal quarter
multiplied by 4 to (b)  seventy-five  percent (75%) of the  acquisition  cost of
such Abundance of Caution Property multiplied by 10.25.

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

                  "Defaulting  Lender" means,  at any time, any Lender that, (a)
has failed to make an Extension of Credit required pursuant to the terms of this
Credit Agreement (but only for so long as such Extension of Credit is not made),
(b) has failed to pay to the Agent or any Lender an amount  owed by such  Lender
pursuant  to the  terms of this  Credit  Agreement  or any of the  other  Credit
Documents  (but only for so long as such amount has not been  repaid) or (c) has
been  deemed  insolvent  or has become  subject to a  bankruptcy  or  insolvency
proceeding or to a receiver, trustee or similar official.

                  "Dollars"  and "$" means  dollars  in lawful  currency  of the
United States of America.

                  "EBITDAR"  means,  for any period,  with respect to the Parent
and its Subsidiaries on a consolidated basis, the sum of (a) Net Income for such
period  plus (b) an amount  which in the  determination  of Net  Income for such
period has been  deducted for (i) Interest  Expense for such period,  (ii) total
Federal,  state or other  domestic and foreign  income taxes for such period and
(iii) all depreciation,  amortization and other non-cash charges for such period
plus (c) rent expense for such period,  all as  determined  in  accordance  with
GAAP.

                  "Economic  Occupancy Rate" means, for each Real Property,  for
each month, the ratio (expressed as a percentage)  equal to the sum of the Daily
Economic  Occupancy  Rate for each  calendar  day in such  month  divided by the
number of calendar days in such month.

                  "Effective Date" means the date, as specified by the Agent, on
which the conditions  set forth in Section  ClosCond ~ shall have been fulfilled
(or waived in the sole discretion of the Lenders) and on which the initial Loans
shall  have been made  and/or  the  initial  Letters  of Credit  shall have been
issued.

                  "Eligible Real Estate" means, as of any date of determination,
an assisted living facility property that satisfies the following criteria:  (a)
the  property  must  have at least 50 Units  and 60  Serviceable  Beds,  (b) the
property must be located within the United  States,  (c) (i) with respect to any
Operating Facility, such property must have a minimum Economic Occupancy Rate of
at least 90% for the six-month  period ending  immediately  prior to the date of
acquisition,  or (ii) with  respect  to any  Newly  Constructed  Facility,  such
property  must have a minimum  Economic  Occupancy  Rate of at least 80% for the
month immediately  prior to the date of acquisition,  (d) (i) with respect to an
Operating  Facility,  such  property  must have a Debt  Service  Coverage  Ratio
greater than or equal to 1.3 to 1.0, or (ii) with respect to a Newly Constructed
Facility,  such property must have a Debt Service Coverage Ratio greater than or
equal to 1.1 to 1.0 and (e) such  property  (other  than  Abundance  of  Caution
Properties  which  must  only be  otherwise  satisfactory  to the  Agent)  shall
otherwise be satisfactory to the Lenders.

                  "Environmental Claim" means any investigation, written notice,
violation,  written  demand,  written  allegation,   action,  suit,  injunction,
judgment,  order, consent decree,  penalty, fine, lien,  proceeding,  or written
claim whether administrative,  or judicial in nature arising (a) pursuant to, or
in connection with, an actual or alleged  violation of, any  Environmental  Law,
(b) in  connection  with  any  Hazardous  Material,  (c)  from  any  assessment,
abatement, removal, remedial, corrective, or other response action in connection
with an Environmental Law or other order of a Governmental Authority or (d) from
any actual or alleged damage, injury, threat, or harm to health, safety, natural
resources, or the environment.

                  "Environmental  Laws" means any and all lawful and  applicable
Federal,  state  and  local  statutes,  laws,  regulations,  ordinances,  rules,
judgments,  orders, decrees,  permits or licenses relating to the environment or
to  emissions,  discharges,  releases  or  threatened  releases  of  pollutants,
contaminants,  toxic or  hazardous  substances  or wastes  into the  environment
including,  without  limitation,  ambient air,  surface water,  ground water, or
land, or otherwise


                                       6
<PAGE>

relating to the manufacture,  processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, toxic or hazardous
substances or wastes.

                  "Equity  Issuance"  means any  issuance  by the  Parent to any
Person of (a) shares of its capital  stock (common or preferred) or other equity
interests,  (b) any shares of its capital  stock  (common or preferred) or other
equity interests pursuant to the exercise of options (other than stock issued to
employees and directors  pursuant to employees or directors  stock option plans)
or warrants  or (c) any shares of its capital  stock  (common or  preferred)  or
other equity  interests  pursuant to the  conversion  of any debt  securities to
equity.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by the rules
and regulations thereunder,  all as the same may be in effect from time to time.
References  to  sections  of  ERISA  shall  be  construed  also to  refer to any
successor sections.

                  "ERISA   Affiliate"   means   an   entity,   whether   or  not
incorporated,  which is under  common  control with a Credit Party or any of its
Subsidiaries  within the meaning of Section 4001(a)(14) of ERISA, or is a member
of a group  which  includes  a Credit  Party  and which is  treated  as a single
employer under Sections 414(b) or (c) of the Code.

                  "ERISA  Event"  means  (i)  with  respect  to  any  Plan,  the
occurrence  of a Reportable  Event or the  substantial  cessation of  operations
(within  the  meaning of Section  4062(e) of ERISA);  (ii) the  withdrawal  of a
Credit Party,  any  Subsidiary of a Credit Party or any ERISA  Affiliate  from a
Multiple Employer Plan during a plan year in which it was a substantial employer
(as such term is defined in Section  4001(a)(2) of ERISA), or the termination of
a  Multiple  Employer  Plan;  (iii)  the  distribution  of a notice of intent to
terminate or the actual  termination of a Plan pursuant to Section 4041(a)(2) or
4041A of ERISA;  (iv) the  institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA;  (v) any event or
condition  which might  constitute  grounds  under Section 4042 of ERISA for the
termination  of, or the  appointment of a trustee to administer,  any Plan; (vi)
the complete or partial withdrawal of a Credit Party, any Subsidiary of a Credit
Party or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for
imposition  of a lien under  Section  302(f) of ERISA exist with  respect to any
Plan; or (viii) the adoption of an amendment to any Plan requiring the provision
of security to such Plan pursuant to Section 307 of ERISA.

                  "Eurodollar  Loan" means a Loan  bearing  interest  based at a
rate determined by reference to the Adjusted Eurodollar Rate.

                  "Eurodollar  Rate"  means,  for any  Eurodollar  Loan  for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary,  to
the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page)
as the London  interbank  offered rate for deposits in Dollars at  approximately
11:00  a.m.  (London  time)  two  Business  Days  prior to the first day of such
Interest  Period  for a term  comparable  to  such  Interest  Period;  provided,
however,  if more  than  one  rate is  specified  on  Telerate  Page  3750,  the
applicable  rate  shall be the  arithmetic  mean of all such  rates.  If for any
reason such rate is not available,  the term  "Eurodollar  Rate" shall mean, for
any  Eurodollar  Loan for any  Interest  Period  therefor,  the  rate per  annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately  11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however,  if more than one rate is  specified on Reuters  Screen LIBO Page,  the
applicable rate shall be the arithmetic mean of all such rates.

                  "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 any Lender 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  Lender.  The  Adjusted


                                       7
<PAGE>

Eurodollar Rate shall be adjusted  automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.

                  "Event of  Default"  means any of the events or  circumstances
described in Section 9.1.

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended,  modified,  succeeded or replaced from time to time,  and the rules and
regulations promulgated thereunder.

                  "Existing  Properties"  has the  meaning  set forth in Section
5.1(f).

                  "Extension of Credit" means, as to any Lender,  the making of,
or  participation  in, a Loan by such Lender or the issuance or extension of, or
participation in, a Letter of Credit.

                  "Federal  Funds Rate"  means,  for any day, the rate per annum
(rounded  upward,  if  necessary,  to the  nearest  1/100th  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  preceding  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.

                  "Fee Letter" means that certain letter agreement,  dated as of
the Closing  Date,  between the Agent and the  Borrower,  as amended,  modified,
supplemented or replaced from time to time.

                  "Fixed Charge  Coverage  Ratio"  means,  as of the end of each
fiscal quarter of the Parent and its  Subsidiaries on a consolidated  basis, for
the fiscal  quarter  ending on such date,  the ratio of (a) (i)  EBITDAR for the
applicable period minus (ii) total Federal,  state or other domestic and foreign
taxes paid for the applicable  period to (b) the sum of (i) Interest Expense for
the applicable period plus (ii) rent expense for the applicable period.

                  "Funded  Debt"  means,  with  respect to any  Person,  without
duplication,  the sum of (a) all Indebtedness of such Person for borrowed money,
(b) all purchase money Indebtedness of such Person, (c) the principal portion of
all  obligations  of such Person  under  Capital  Leases,  (d) all  obligations,
contingent  or  otherwise,  relative to the face amount of all letters of credit
(other than letters of credit  supporting  trade payables in the ordinary course
of  business),  whether or not drawn,  and banker's  acceptances  issued for the
account  of such  Person  (it being  understood  that,  to the extent an undrawn
letter of credit supports  another  obligation  consisting of  Indebtedness,  in
calculating  aggregated   Indebtedness  only  such  other  obligation  shall  be
included),  (e) all Guaranty  Obligations  of such Person with respect to Funded
Debt of another Person,  (f) all Funded Debt of another Person secured by a Lien
on any property of such Person  whether or not such Funded Debt has been assumed
by such Person,  (g) all Funded Debt of any partnership or unincorporated  joint
venture  to the extent  such  Person is legally  obligated  or has a  reasonable
expectation  of being  liable with  respect  thereto,  net of any assets of such
partnership or joint venture and (h) the principal balance outstanding under any
synthetic  lease,  tax  retention  operating  lease,  off-balance  sheet loan or
similar  off-balance  sheet  financing  product to which such Person is a party,
where  such  transaction  is  considered  borrowed  money  indebtedness  for tax
purposes but is classified as an operating  lease in accordance  with GAAP.  The
Funded Debt of any Person shall  include the Funded Debt of any  partnership  or
joint venture in which such Person is a general partner or joint  venturer,  but
only to the extent to which  there is recourse to such Person for the payment of
such Funded Debt.

                  "GAAP" means generally accepted  accounting  principles in the
United States applied on a consistent basis and subject to Section 1.3 hereof.

                  "Ghent Arms  Facility"  means,  that certain  assisted  living
facility  located at 641 Redgate  Avenue in Norfolk,  Virginia and identified on
Schedule 1.1(a) attached hereto.

                  "Gloucester  Facility"  means,  that certain  assisted  living
facility  located at 7657 Meredith Drive in Gloucester,  Virginia and identified
on Schedule 1.1(a) attached hereto.


                                       8
<PAGE>

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

                  "Guarantor"   means  each  of  the   Parent,   Sarasota,   the
Subsidiaries  of the Borrower  identified on the signature pages hereto and each
Additional  Credit Party which has executed a Joinder  Agreement,  together with
their successors and assigns.

                  "Guaranty  Obligations"  means,  with  respect to any  Person,
without  duplication,  any obligations  (other than endorsements in the ordinary
course  of  business  of  negotiable  instruments  for  deposit  or  collection)
guaranteeing  or intended to guarantee any  Indebtedness  of any other Person in
any manner,  whether direct or indirect,  and including  without  limitation any
obligation,  whether or not contingent, (a) to purchase any such Indebtedness or
other obligation or any property constituting security therefor,  (b) to advance
or  provide  funds  or  other  support  for  the  payment  or  purchase  of such
indebtedness  or obligation or to maintain  working  capital,  solvency or other
balance sheet  condition of such other Person  (including,  without  limitation,
maintenance  agreements,   comfort  letters,  take  or  pay  arrangements,   put
agreements or similar  agreements or arrangements) for the benefit of the holder
of  Indebtedness  of such  other  Person,  (c) to  lease or  purchase  property,
securities  or services  primarily for the purpose of assuring the owner of such
Indebtedness  or (d) to  otherwise  assure  or hold  harmless  the owner of such
Indebtedness or obligation  against loss in respect  thereof.  The amount of any
Guaranty  Obligation  hereunder  shall  (subject  to any  limitations  set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum  principal  amount,  if larger) of the  Indebtedness in respect of which
such Guaranty Obligation is made.

                  "Hazardous  Materials" means any substance,  material or waste
defined or regulated in or under any Environmental Laws.

                  "Hedging   Agreements"  has  the  meaning  set  forth  in  the
definition of Credit Party Obligations.

                  "Indebtedness" of any Person means, without  duplication,  (a)
all obligations of such Person for borrowed  money,  (b) all obligations of such
Person evidenced by bonds,  debentures,  notes or similar  instruments,  or upon
which interest  payments are customarily made (c) all obligations of such Person
under conditional sale or other title retention  agreements relating to property
purchased by such Person to the extent of the value of such property (other than
customary  reservations  or retentions of title under  agreements with suppliers
entered into in the ordinary  course of business),  (d) all  obligations,  other
than  intercompany  items,  of such  Person  issued or assumed  as the  deferred
purchase  price of  property or services  purchased  by such Person  which would
appear as liabilities on a balance sheet of such Person, (e) 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,  (f) all
Guaranty   Obligations  of  such  Person,  (g)  the  principal  portion  of  all
obligations  of such  Person  under (i)  Capital  Leases and (ii) any  synthetic
lease,  tax  retention  operating  lease,  off-balance  sheet  loan  or  similar
off-balance  sheet  financing  product of such Person where such  transaction is
considered  borrowed money indebtedness for tax purposes but is classified as an
operating  lease in accordance  with GAAP, (h) all obligations of such Person in
respect of  interest  rate  protection  agreements,  foreign  currency  exchange
agreements,  or other  interest  or exchange  rate or  commodity  price  hedging
agreements,  (i) the maximum amount of all  performance  and 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), and (j) 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.  The  Indebtedness  of any Person  shall  include the
Indebtedness  of any partnership or  unincorporated  joint venture in which such
Person is legally obligated or has a reasonable expectation of being liable with
respect thereto.

                  "Interest  Expense" means,  for any period with respect to any
Person,  all interest  expense,  including the interest  component under Capital
Leases, as determined in accordance with GAAP.

                  "Interest Payment Date" means for both the Base Rate Loans and
Eurodollar  Loans,  the day in each  calendar  month that is the last day of the
single  Interest Period for Eurodollar  Loans permitted  pursuant to Section 2.1


                                       9
<PAGE>

hereof  beginning  with the first of such dates to occur after the Closing Date,
and the Revolving Loan Maturity Date;  provided,  however,  with respect to Base
Rate Loans,  the Interest Payment Date shall mean the last day of each month and
the Revolving  Loan Maturity  Date. 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.

                  "Interest  Period" means as to Eurodollar  Loans,  a period of
one month's duration,  commencing on the date of borrowing;  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, (b) no
Interest  Period shall extend beyond the Revolving Loan Maturity Date and (c) if
the single  Interest  Period  begins on a day for which there is no  numerically
corresponding  day in the calendar month in which the single  Interest Period is
to end, such Interest Period shall end on the last Business Day of such calendar
month.

                  "Investment" in any Person means (a) the acquisition  (whether
for  cash,  property,  services,  assumption  of  Indebtedness,   securities  or
otherwise)  of  assets,  shares of  capital  stock,  bonds,  notes,  debentures,
partnership,  joint ventures or other ownership interests or other securities of
such other Person or (b) any deposit with, or advance,  loan or other  extension
of credit to,  such Person  (other than  deposits  made in  connection  with the
purchase of equipment or other assets in the ordinary course of business) or (c)
any other  capital  contribution  to or  investment  in such Person,  including,
without limitation,  any Guaranty Obligation (including any support for a letter
of credit  issued on behalf of such  Person)  incurred  for the  benefit of such
Person.

                  "IHS"  means  Integrated  Health  Services,  Inc.,  a Delaware
corporation.

                  "Issuing Lender" means NationsBank.

                  "Issuing Lender Fees" shall have the meaning  assigned to such
term in Section 3.4(b).

                  "Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.12.

                  "King's Grant  Facility"  means that certain  assisted  living
facility  located at 440 N.  Lynnhaven  Road in  Virginia  Beach,  Virginia  and
identified on Schedule 1.1(a) attached hereto.

                  "Lender" means any of the Persons  identified as a "Lender" on
the signature  pages hereto,  and any Person which may become a Lender by way of
assignment in accordance with the terms hereof,  together with their  successors
and permitted assigns.

                  "Letter  of Credit"  means any letter of credit  issued by the
Issuing  Lender for the account of the Borrower in accordance  with the terms of
Section  2.2,  as such  Letter of Credit  may be  amended,  modified,  extended,
renewed or replaced.

                  "Letter of Credit Fee" shall have the meaning  given such term
in Section 3.4(b).

                  "Leverage Ratio" means the ratio of (a) as of the first day of
any  month,  the sum of  Revolving  Loans  outstanding  on such  date  plus  LOC
obligations outstanding on such date to (b) the Collateral Pool Adjusted NOI for
the fiscal quarter ending on such date, or if such date is not the last day of a
fiscal quarter, for the fiscal quarter most recently ended.

                  "Lien" means any mortgage, pledge, hypothecation,  assignment,
deposit  arrangement,   security  interest,   encumbrance,  lien  (statutory  or
otherwise),  preference,  priority  or charge of any  kind,  including,  without
limitation,  any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, and any lease in the nature thereof.
                  "Loan" or "Loans" means the  Revolving  Loans (or a portion of
any Revolving Loan), individually or collectively, as appropriate.

                  "Loan" or "Loans" means the  Revolving  Loans (or a portion of
any Revolving Loan), individually or collectively, as appropriate.


                                       10
<PAGE>

                  "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 (a) the  rights  and
obligations of the parties  concerned or at risk or (b) any collateral  security
for such obligations.

                  "LOC  Obligations"  means,  at any  time,  the  sum of (a) 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 (b) the
aggregate  amount of all drawings under Letters of Credit honored by the Issuing
Lender but not theretofore reimbursed.

                  "LOC  Participants"  means all Lenders  whose  Revolving  Loan
Commitment Percentage is greater than zero.

                  "Material  Adverse Effect" means a material  adverse effect on
(a) the  business,  assets,  operations,  condition  (financial or otherwise) or
prospects  of  the  Parent  and  its   Subsidiaries  or  the  Borrower  and  its
Subsidiaries,  (b) the  ability  of a Credit  Party to  perform  its  respective
obligations under this Credit Agreement or any of the other Credit Documents, or
(c) the validity or enforceability  of this Credit  Agreement,  any of the other
Credit  Documents,  or the rights  and  remedies  of the  Lenders  hereunder  or
thereunder taken as a whole.

                  "Materials of  Environmental  Concern" shall mean any gasoline
or petroleum (including crude oil or any fraction thereof) or petroleum products
or any hazardous or toxic substances,  materials or wastes, defined or regulated
as such in or under  any  Environmental  Laws,  including,  without  limitation,
asbestos, polychlorinated biphenyls and urea formaldehyde foam insulation.

                  "Moody's"  means  Moody's  Investors  Service,  Inc.,  or  any
successor  or assignee of the business of such company in the business of rating
securities.

                  "Mortgage   Documents"  means  the  Mortgages,   the  Mortgage
Policies  and such other  documents  and  agreements  executed or  delivered  in
connection with the Real Properties.

                  "Mortgage  Policies"  has the  meaning  set  forth in  Section
5.1(f).

                  "Mortgages" has the meaning set forth in Section 5.1(f).

                  "Multiemployer  Plan"  means a Plan  which is a  multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.

                  "Multiple   Employer   Plan"   means  a  Plan  (other  than  a
Multiemployer Plan) which a Credit Party or any ERISA Affiliate and at least one
employer  other  than a Credit  Party or any ERISA  Affiliate  are  contributing
sponsors.

                  "NationsBank"   means   NationsBank,   N.A.  (South)  and  its
successors and/or assigns.

                  "Net Cash  Proceeds"  means the gross cash  proceeds  received
from an Equity Issuance net of transaction costs payable to third parties.

                  "Net Income" means, for any period with respect to any Person,
the net income  after taxes for such period as  determined  in  accordance  with
GAAP.

                  "Net Worth" means, as of any date, the shareholders' equity or
net worth of any Person, as determined in accordance with GAAP.


                                       11
<PAGE>

                  "New  Property"  means any  parcel  of  Eligible  Real  Estate
(specifically  including any Newly Constructed  Facility or Operating  Facility)
that is being  financed  by the  Borrower  or any of its  Subsidiaries  with the
proceeds of Revolving Loans.

                  "Newly Constructed Facility" means any New Property containing
an assisted living facility property that has been in operation for a period not
exceeding nine (9) months.

                  "NOI"  means,  for any period  with  respect to an  individual
assisted living facility or with respect to the Waterside Facility, (i) assuming
management  fees for such period in an amount equal to the greater of (I) actual
management  fees paid or  incurred  during  such  period  with  respect  to such
facility  or (II) five  percent of gross  revenues  for such  facility  for such
period,  the sum of (a) net income  received and derived  from the  operation of
such facility for such period plus (b) total taxes with respect to such facility
for such  period  plus (c) all  depreciation,  amortization  and other  non-cash
charges with respect to such facility for such period minus (ii) an amount equal
to $250 per year for each Unit in such facility; provided, however, with respect
to the Churchland  Facility and the Gloucester  Facility,  those Units which are
part of the  current  expansion  projects  at such Real  Properties  will not be
considered in the calculation of net income of such Real  Properties  until such
Units have been duly licensed in accordance with the laws of the Commonwealth of
Virginia.

                  "Non-Excluded  Taxes"  has the  meaning  set forth in  Section
3.13.

                  "Note" or "Notes" means the Revolving Loan Notes, individually
or collectively, as appropriate.

                  "Notice of  Borrowing"  means a request by the  Borrower for a
Revolving Loan, in the form of Exhibit 2.1(b).

                  "Notice  of  Continuation/Conversion"  means a request  by the
Borrower to continue an existing  Eurodollar Loan to a new Interest Period or to
convert a Base Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.1(e).

                  "Operating  Facility"  means any New  Property  containing  an
assisted  living  facility  property  that has been in operation for a period in
excess of nine (9) months.

                  "Operating  Lease" means, as applied to any Person,  any lease
(including,  without limitation, leases which may be terminated by the lessee at
any time) of any  Property  (whether  real,  personal  or mixed)  which is not a
Capital Lease other than any such lease in which that Person is the lessor.

                  "Parent" means Integrated Living Communities, Inc., a Delaware
corporation.

                  "Participation  Interest" means (i) the Extension of Credit by
a Lender by way of a  purchase  of a  participation  in Letters of Credit or LOC
Obligations  as provided in Section 2.2 or (ii)  Revolving  Loans  advanced by a
Lender by way of a  purchase  of a  participation  in any Loans as  provided  in
Section 3.8.

                  "PBGC"  means  the  Pension   Benefit   Guaranty   Corporation
established  pursuant  to  Subtitle  A of Title IV of  ERISA  and any  successor
thereof.

                  "Permitted  Investments"  means Investments which are (a) cash
or Cash Equivalents,  (b) accounts receivable  created,  acquired or made in the
ordinary  course of business and payable or  dischargeable  in  accordance  with
customary  trade terms,  (c)  Investments  by one Credit Party in another Credit
Party; provided, however, this subclause (c) shall not permit Investments by the
Borrower  and/or  its  Subsidiaries  into  the  Parent  in an  amount  exceeding
$5,000,000 in the aggregate, (d) the acquisition of New Properties in accordance
with the terms hereof, (e) earnest money and similar deposits in respect of real
property  made in the  ordinary  course  of  business,  and (f) the  Investments
existing as of the Closing Date and set forth on Schedule 8.6.


                                       12
<PAGE>

                  "Permitted  Liens"  means  (a)  Liens  securing  Credit  Party
Obligations,  (b) Liens for taxes not yet due or Liens for taxes being contested
in good faith by appropriate  proceedings for which adequate reserves determined
in  accordance  with GAAP have been  established  (and as to which the  property
subject  to any such Lien is not yet  subject  to  foreclosure,  sale or loss on
account thereof), (c) Liens in respect of property imposed by law arising in the
ordinary course of business such as materialmens',  mechanics',  warehousemens',
carriers',  landlords' and other nonconsensual statutory Liens which are not yet
due and  payable  or which  are being  contested  in good  faith by  appropriate
proceedings for which adequate reserves  determined in accordance with GAAP have
been  established  (and as to which the property subject to any such Lien is not
yet subject to foreclosure,  sale or loss on account thereof), (d) Liens arising
from good faith deposits in connection with or to secure performance of tenders,
bids, leases,  government  contracts,  performance and return-of-money bonds and
other similar  obligations  incurred in the ordinary  course of business  (other
than obligations in respect of the payment of borrowed money), (e) Liens arising
from  good  faith  deposits  in  connection  with or to  secure  performance  of
statutory obligations and surety and appeal bonds, (f) easements, rights-of-way,
restrictions (including zoning restrictions),  matters of plat, minor defects or
irregularities  in title and other similar charges or  encumbrances  not, in any
material respect,  impairing the use of the encumbered property for its intended
purposes,  (g) judgment Liens that would not constitute an Event of Default, (h)
Liens  arising by virtue of any  statutory or common law  provision  relating to
bankers'  liens,  rights of setoff or similar  rights as to deposit  accounts or
other  funds  maintained  with a  creditor  depository  institution,  (i)  Liens
existing on the date hereof and  identified  on Schedule  8.2;  provided that no
such Lien shall extend to any property other than the property  subject  thereto
on the Closing Date and (j) Permitted  Encumbrances  (as defined in any Mortgage
Document).

                  "Person"  means any  individual,  partnership,  joint venture,
firm,  corporation,  limited  liability  company,  association,  trust  or other
enterprise (whether or not incorporated), or any Governmental Authority.

                  "Plan" means any employee  benefit plan (as defined in Section
3(3) of ERISA)  which is  covered  by ERISA and with  respect  to which a Credit
Party or any ERISA  Affiliate is (or, if such plan were terminated at such time,
would  under  Section  4069 of ERISA be deemed to be) an  "employer"  within the
meaning of Section 3(5) of ERISA.

                  "Pledge   Agreement"   means  that  certain  pledge  agreement
executed  and  delivered  by the Credit  Parties in favor of the Agent,  for the
benefit of the Lenders,  to secure their obligations under the Credit Documents,
as amended, modified, extended, renewed or replaced from time to time.

                  "Prime Rate" means the per annum rate of interest  established
from time to time by the Agent at its principal  office in Atlanta,  Georgia (or
such  other  principal  office of the Agent as  communicated  in  writing to the
Borrower  and the Lenders) 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.

                  "Real  Properties"  means the Existing  Properties and the New
Properties.

                  "Regulation  D, G, T, U, or X" means  Regulation D, G, T, U or
X, respectively, 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.

                  "Reportable  Event"  means  any of the  events  set  forth  in
Section  4043(c)  of ERISA,  other  than  those  events  as to which the  notice
requirement has been waived by regulation.

                  "Required  Lenders" means the Lenders whose  aggregate  Credit
Exposure  (as  hereinafter  defined)  constitutes  more  than 50% of the  Credit
Exposure  of all  Lenders at such time;  provided,  however,  that if any Lender
shall be a Defaulting  Lender at such time then there shall be excluded from the
determination  of Required  Lenders  the  aggregate  principal  amount of Credit
Exposure of such Lender at such time.  For purposes of the  preceding  sentence,
the term "Credit  Exposure" as applied to each Lender shall mean (a) at any time
prior to the  termination  of the  Commitments,  the sum of the  Revolving  Loan
Commitment  Percentage  of such Lender  multiplied  by the  Revolving  Committed
Amount and (b) at any time after the termination of the Commitments,  the sum of
(i) the principal balance of 


                                       13
<PAGE>

the  outstanding  Loans of such  Lender  plus (ii) such  Lender's  Participation
Interests in the face amount of the outstanding Letters of Credit.

                  "Requirement of Law" means, as to any Person,  the articles or
certificate of incorporation  and by-laws or other  organizational  or governing
documents of such Person,  and any law,  treaty,  rule or  regulation  or final,
non-appealable  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.

                  "Restricted   Payment"   means  (i)  any   dividend  or  other
distribution, direct or indirect, on account of any shares of any class of stock
now or hereafter outstanding, except a dividend payable solely in shares of that
class to the holders of that class and (ii) any redemption,  retirement, sinking
fund or similar  payment,  purchase or other  acquisition  for value,  direct or
indirect, of any shares of any class of stock now or hereafter outstanding,  and
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock now or
hereafter outstanding.

                  "Revolving  Committed  Amount"  means  FIFTY  MILLION  DOLLARS
($50,000,000)  or such lesser  amount as the Revolving  Committed  Amount may be
reduced pursuant to Section 2.1(d) or Section 3.3(c).

                  "Revolving Loan Commitment Percentage" means, for each Lender,
the  percentage  identified  as its  Revolving  Loan  Commitment  Percentage  on
Schedule  1.1(b),  as such  percentage  may be modified in  connection  with any
assignment made in accordance with the provisions of Section 11.3.

                  "Revolving Loan Maturity Date" means April 9, 1999.

                  "Revolving  Loans"  means  the  Revolving  Loans  made  to the
Borrower pursuant to Section 2.1.

                  "Revolving  Note" or  "Revolving  Notes" means the  promissory
notes of the Borrower in favor of each of the Lenders  evidencing  the Revolving
Loans  provided  pursuant  to Section  2.1,  individually  or  collectively,  as
appropriate,  as such promissory notes may be amended,  modified,  supplemented,
extended,  renewed or replaced from time to time and as evidenced in the form of
Exhibit 2.1(g).

                  "S&P" means  Standard & Poor's  Ratings  Group,  a division of
McGraw Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.

                  "Sarasota"  means Integrated  Living  Communities of Sarasota,
Inc., a Florida corporation.

                  "Securities Act" means the Securities Act of 1933, as amended,
modified, succeeded or replaced from time to time, and the rules and regulations
promulgated thereunder.

                  "Security  Agreement"  means that certain  security  agreement
executed  and  delivered  by the Credit  Parties in favor of the Agent,  for the
benefit of the Lenders,  to secure their obligations under the Credit Documents,
as the same may be amended,  modified,  extended,  renewed, restated or replaced
from time to time.

                  "Senior  Leverage  Ratio"  means,  as of the  last  day of any
fiscal quarter of the Parent, with respect to the Parent and its Subsidiaries on
a consolidated  basis,  the ratio of (a) the sum of (i) Funded Debt on such date
plus (ii) rent expense for the fiscal quarter ending on such date  multiplied by
32 to (b) EBITDAR for the fiscal quarter ending on such date multiplied by 4.

                  "Serviceable  Beds"  means,  those beds located at an assisted
living facility which can be presently utilized by a patient or occupant of such
assisted living facility.

                  "Single  Employer  Plan"  means any Plan  which is  covered by
Title IV of ERISA, but which is not a Multiemployer  Plan or a Multiple Employer
Plan.


                                       14
<PAGE>

                  "Solvent" means, with respect to any Person as of a particular
date,  that on such  date (a) such  Person  is able to pay its  debts  and other
liabilities,  contingent obligations and other commitments as they mature in the
normal  course of  business,  (b) such  Person  does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and  liabilities  mature in their  ordinary  course,  (c) such
Person is not engaged in a business or a transaction, and is not about to engage
in a business or a transaction,  for which such Person's assets would constitute
unreasonably  small capital  after giving due  consideration  to the  prevailing
practice in the  industry  in which such Person is engaged or is to engage,  (d)
the fair value of the assets of such Person is greater  than the total amount of
liabilities,  including,  without limitation,  contingent  liabilities,  of such
Person and (e) the present  fair  salable  value of the assets of such Person is
not less than the amount that will be required to pay the probable  liability of
such Person on its debts as they become  absolute and matured.  In computing the
amount  of  contingent  liabilities  at  any  time,  it is  intended  that  such
liabilities  will be computed at the amount which, in light of all the facts and
circumstances  existing at such time,  represents the amount that can reasonably
be expected to become an actual or matured liability.

                  "Subordinated Debt" means the obligations of the Parent to IHS
pursuant to that certain Unsecured Credit Note dated November 20, 1996.

                  "Subordination and Intercreditor Agreement" means that certain
Subordination and Intercreditor  Agreement dated as of the date hereof among the
Borrower,  the Agent (on behalf of the  Lenders)  and IHS, in the form  attached
hereto as Schedule 1.1(c).

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

                  "Termination  Event"  means  (a) with  respect  to any  Single
Employer Plan, the occurrence of a Reportable Event or the substantial cessation
of  operations  (within  the  meaning  of Section  4062(e)  of  ERISA);  (b) the
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA Affiliate
from a Multiple  Employer  Plan during a plan year in which it was a substantial
employer  (as such term is  defined  in Section  4001(a)(2)  of  ERISA),  or the
termination of a Multiple  Employer Plan;  (c) the  distribution  of a notice of
intent to  terminate  or the actual  termination  of a Plan  pursuant to Section
4041(a)(2) or 4041A of ERISA; (d) the institution of proceedings to terminate or
the actual  termination  of a Plan by the PBGC under Section 4042 of ERISA;  (e)
any event or condition which might reasonably  constitute  grounds under Section
4042 of ERISA  for the  termination  of,  or the  appointment  of a  trustee  to
administer,  any Plan;  or (f) the complete or partial  withdrawal of any Credit
Party or any of its  Subsidiaries  or any ERISA  Affiliate from a  Multiemployer
Plan.

                  "Terrace Gardens Facility" means, that certain assisted living
facility  located at 1315 N. West Street in Wichita,  Kansas and  identified  on
Schedule 1.1(a) attached hereto.

                  "Unit"  means  any  room in an  assisted  living  facility  or
continuing  care  retirement  community,  as  applicable,  used for  residential
purposes by an inhabitant or  inhabitants  of such assisted  living  facility or
continuing care retirement community.

                  "Unused Commitment" means, for any period, the amount by which
(a) the then applicable  aggregate  Revolving  Committed  Amount exceeds (b) the
daily average sum for such period of the outstanding  aggregate principal amount
of all Revolving Loans plus the aggregate amount of LOC Obligations outstanding.

                  "Unused  Fees" means the fees payable to the Lenders  pursuant
to Section Fees ~ComFees ~.

                  "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


                                       15
<PAGE>

similar  functions)  of such  Person,  even though the right so to vote has been
suspended by the happening of such a contingency.

                  "Waterside  Facility"  means,  that  certain  continuing  care
retirement  community  located at 4540 Bee Ridge Road in  Sarasota,  Florida and
identified on Schedule 1.1(a) attached hereto.

                  "West Palm Beach Facility" means, that certain assisted living
facility  located at 2939 S.  Haverhill  Road in West Palm  Beach,  Florida  and
identified on Schedule 1.1(a) attached hereto.

         1.2 Computation of Time Periods and Other Definition Provisions.

         For  purposes of  computation  of periods of time  hereunder,  the word
"from" means "from and  including"  and the words "to" and "until" each mean "to
but excluding."  References in this Credit Agreement to "Articles",  "Sections",
"Schedules" or "Exhibits" shall be to Articles,  Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.

         1.3 Accounting Terms.

         Except as otherwise  expressly  provided  herein,  all accounting terms
used herein shall be interpreted,  and all financial statements and certificates
and reports as to  financial  matters  required to be  delivered  to the Lenders
hereunder  shall be prepared,  in  accordance  with GAAP applied on a consistent
basis.  All financial  statements  delivered to the Lenders  hereunder  shall be
accompanied by a statement from the Borrower that GAAP has not changed since the
most recent financial  statements delivered by the Borrower to the Lenders or if
GAAP has  changed  describing  such  changes in detail and  explaining  how such
changes affect the financial statements.  All calculations made for the purposes
of determining  compliance with this Credit Agreement shall (except as otherwise
expressly  provided  herein) be made by  application  of GAAP applied on a basis
consistent  with  the most  recent  annual  or  quarterly  financial  statements
delivered  pursuant  to  Section  7.1 (or,  prior to the  delivery  of the first
financial  statements  pursuant to Section 7.1,  consistent  with the  financial
statements described in Section 5.1(d)); provided,  however, if (a) the Borrower
shall  object  to  determining  such  compliance  on such  basis  at the time of
delivery  of such  financial  statements  due to any change in GAAP or the rules
promulgated  with respect  thereto or (b) either  Agent or the Required  Lenders
shall so object in  writing  within 60 days  after  delivery  of such  financial
statements  (or  after the  Lenders  have been  informed  of the  change in GAAP
affecting such financial statements,  if later), then such calculations shall be
made on a basis consistent with the most recent financial  statements  delivered
by the  Borrower  to the Lenders as to which no such  objection  shall have been
made.


                                   SECTION 2

                                CREDIT FACILITY


         2.1 Revolving Loans.

                           (a) Revolving Loan  Commitment.  Subject to the terms
         and conditions set forth herein,  each Lender  severally agrees to make
         revolving  loans  (each  a  "Revolving   Loan"  and   collectively  the
         "Revolving  Loans") to the Borrower,  in Dollars,  at any time and from
         time to time,  during the period from and including the Effective  Date
         to but not including  the Revolving  Loan Maturity Date or such earlier
         date if the Revolving  Committed Amount has been terminated as provided
         herein; provided,  however, that (i) the sum of the aggregate principal
         amount of Revolving Loans  outstanding plus the aggregate amount of LOC
         Obligations  outstanding  shall  not  exceed  the  lesser  of  (x)  the
         Revolving  Committed  Amount and (y) the Borrowing  Base, and (ii) with
         respect  to each  individual  Lender,  the  Lender's  pro rata share of
         outstanding  Revolving  Loans  plus  such  Lender's  pro rata  share of
         outstanding  LOC Obligations  shall not exceed such Lender's  Revolving
         Loan Commitment  Percentage of the Revolving Committed Amount.  Subject
         to the terms of this Credit  Agreement  (including  Section  3.3),  the
         Borrower may borrow,  repay and  reborrow  Revolving  Loans.  The 


                                       16
<PAGE>

         Agent  shall keep a record of the  purpose  for which each of the Loans
         was advanced (and of repayments applied thereto), which record shall be
         conclusive absent prima facie error.

                           (b) Method of  Borrowing  for  Revolving  Loans.  The
         Borrower may borrow Revolving Loans on any Business Day,  provided that
         the Borrower  shall give the Agent  irrevocable  notice  (which must be
         received  by the Agent (A) prior to 11:00  a.m.,  three  Business  Days
         prior to the date of the  requested  borrowing of Revolving  Loans that
         will be Eurodollar  Loans, or (B) prior to 11:00 a.m. two Business Days
         prior to the date of the  requested  borrowing of Revolving  Loans that
         will be Base Rate Loans  specifying (1) the amount to be borrowed,  (2)
         the date of the requested borrowing of Revolving Loans, (3) the purpose
         for which the  requested  Revolving  Loans will be used by the Borrower
         and (4)  whether  such  Revolving  Loans  shall be Base  Rate  Loans or
         Eurodollar Loans;  provided,  however, that (x) there shall be only one
         Interest  Period  applicable  for  all  amounts  outstanding  hereunder
         bearing interest based on the Eurodollar Rate, (y) the initial Interest
         Period for  Eurodollar  Loans shall commence on the date that the first
         Eurodollar  Loan  hereunder is extended and (z) any amounts  thereafter
         borrowed or converted hereunder which are to bear interest based on the
         Eurodollar  Rate may only be borrowed or  converted on the first day of
         the Interest Period applicable to Eurodollar Loans.

                           (c) Funding of  Revolving  Loans.  Upon  receipt of a
         Notice of Borrowing,  the Agent shall promptly inform the Lenders as to
         the terms thereof. Each Lender shall make its Revolving Loan Commitment
         Percentage of the requested  Revolving  Loans available to the Agent by
         2:00 p.m. on the date  specified in the Notice of Borrowing by deposit,
         in Dollars, of immediately  available funds at the offices of the Agent
         in Charlotte,  North Carolina or at such other address as the Agent may
         designate in writing.  The amount of the requested Revolving Loans will
         then be made  available to the  Borrower by the Agent by crediting  the
         account of the  Borrower on the books of such  office of the Agent,  to
         the extent the amount of such Revolving Loans are made available to the
         Agent.

                           No Lender  shall be  responsible  for the  failure or
         delay by any other Lender in its  obligation  to make  Revolving  Loans
         hereunder; provided, however, that the failure of any Lender to fulfill
         its  obligations  hereunder  shall not relieve any other  Lender of its
         obligations hereunder. Unless the Agent shall have been notified by any
         Lender  prior to 5:00 p.m. on the date  preceding  the date of any such
         Revolving  Loan that such Lender does not intend to make  available  to
         the Agent its portion of the  Revolving  Loans to be made on such date,
         the Agent may assume that such Lender has made such amount available to
         the  Agent  on the  date of such  Revolving  Loans,  and the  Agent  in
         reliance upon such assumption,  may (in its sole discretion but without
         any obligation to do so) make available to the Borrower a corresponding
         amount. If such  corresponding  amount is not in fact made available to
         the Agent, the Agent shall be able to recover such corresponding amount
         from such Lender. If such Lender does not pay such corresponding amount
         forthwith  upon the Agent's  demand  therefor,  the Agent will promptly
         notify  the  Borrower,  and the  Borrower  shall  immediately  pay such
         corresponding  amount to the Agent. The Agent shall also be entitled to
         recover from the Lender or the Borrower,  as the case may be,  interest
         on such corresponding  amount in respect of each day from the date such
         corresponding amount was made available by the Agent to the Borrower to
         the date such  corresponding  amount is recovered by the Agent at a per
         annum rate equal to (i) from the  Borrower at the  applicable  rate for
         such Revolving Loan pursuant to the Notice of Borrowing and (ii) from a
         Lender at the Federal Funds Rate.

                           (d) Reduction or Termination  of Revolving  Committed
         Amount.  Upon at least three Business Days' notice,  the Borrower shall
         have the right to permanently  terminate or reduce the aggregate unused
         amount of the  Revolving  Committed  Amount at any time or from time to
         time; provided that (i) each partial reduction shall be in an aggregate
         amount at least  equal to  $10,000,000  and in  integral  multiples  of
         $1,000,000  above such amount and (ii) no reduction shall be made which
         would reduce the Revolving  Committed Amount to an amount less than (a)
         the aggregate amount of outstanding  Revolving Loans plus the aggregate
         amount  of  outstanding  LOC  Obligations  and  (b)  $30,000,000.   Any
         reduction in (or termination of) the Revolving  Committed  Amount shall
         be permanent and may not be reinstated.

                           (e)  Continuations  and  Conversions.  Subject to the
         terms of Section 5.3,  the  Borrower  shall have the option to continue
         existing  Eurodollar  Loans upon the expiration of the current Interest
         Period 


                                       17
<PAGE>

         with respect thereto for a subsequent  Interest Period, to convert Base
         Rate Loans into Eurodollar  Loans or to convert  Eurodollar  Loans into
         Base Rate Loans; provided,  however, that (i) each such continuation or
         conversion  must be  requested  by the  Borrower  pursuant to a written
         Notice of  Continuation/Conversion,  in the form of Exhibit 2.1(e),  in
         compliance  with the terms set forth below,  (ii) except as provided in
         Section 3.11,  Eurodollar Loans may only be continued or converted into
         Base  Rate  Loans on the last day of the  single  Interest  Period  for
         Eurodollar  Loans  permitted  pursuant to Section 2.1(b) hereof,  (iii)
         Base Rate  Loans may only be  converted  into  Eurodollar  Loans on the
         first day of the single Interest Period for Eurodollar  Loans permitted
         pursuant to Section 2.1(b)  hereof,  (iv)  Eurodollar  Loans may not be
         continued nor may Base Rate Loans be converted  into  Eurodollar  Loans
         during the existence and  continuation of a Default or Event of Default
         and (v) any request to continue a Eurodollar  Loan that fails to comply
         with the terms  hereof or any  failure to request a  continuation  of a
         Eurodollar Loan at the end of the existing Interest Period shall result
         in a conversion of such Eurodollar Loan to a Base Rate Loan on the last
         day of the existing  Interest Period.  Each  continuation or conversion
         must be  requested  by the  Borrower  no later than 11:00 a.m.  (A) two
         Business  Days  prior  to the  date  for a  requested  conversion  of a
         Eurodollar Loan to a Base Rate Loan or (B) three Business Days prior to
         the  date  for  a  requested  continuation  of  a  Eurodollar  Loan  or
         conversion  of a Base  Rate  Loan to a  Eurodollar  Loan,  in each case
         pursuant to a written  Notice of  Continuation/Conversion  submitted to
         the Agent which shall set forth whether the Borrower wishes to continue
         or convert such Loans; provided, however, if the Borrower shall fail to
         give any required Notice of Continuation/Conversion as described above,
         or if such continuation or conversion is not permitted  pursuant to the
         terms above,  the Loans shall  automatically  be converted to Base Rate
         Loans on the last day of the then expiring Interest Period.

                           (f) Minimum  Amounts.  Each  request for a borrowing,
         conversion or continuation  shall be subject to the  requirements  that
         (i) each Loan shall be in a minimum  amount of $500,000 and in integral
         multiples  of  $100,000  in  excess  thereof  or the  remaining  amount
         available under the Revolving  Committed Amount.  All Eurodollar Loans,
         because they have same  Interest  Period,  shall be  considered  as one
         Eurodollar Loan.

                           (g) Notes.  The  Revolving  Loans made by each Lender
         shall be evidenced by a duly executed  promissory  note of the Borrower
         to each  Lender in the face  amount of its  Revolving  Loan  Commitment
         Percentage of the Revolving  Committed Amount in substantially the form
         of Exhibit 2.1(g).

         2.2 Letter of Credit Subfacility.

                  (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  Lender may  reasonably  require (so long as such terms and
         conditions  do not impose any  financial  obligation  on or require any
         Lien (not otherwise  contemplated by this Credit Agreement) to be given
         by any Credit Party or conflict with any obligation of, or detract from
         any  action   which  may  be  taken  by,  any  Credit  Party  or  their
         Subsidiaries  under this Credit  Agreement),  the Issuing  Lender shall
         from  time  to  time  upon  request  issue,  in  Dollars,  and  the LOC
         Participants  shall  participate in, letters of credit (the "Letters of
         Credit") for the account of the Borrower, from the Effective Date until
         the Revolving  Loan Maturity  Date, in a form  customarily  used by and
         otherwise  reasonably  acceptable  to  the  Issuing  Lender;  provided,
         however,  that (i) the aggregate amount of LOC Obligations shall not at
         any time exceed TWO MILLION DOLLARS  ($2,000,000),  (ii) the sum of the
         aggregate  amount of LOC Obligations  outstanding  plus Revolving Loans
         outstanding shall not exceed the lesser of (x) the Revolving  Committed
         Amount  and (y) the  Borrowing  Base and  (iii)  with  respect  to each
         individual LOC  Participant,  the LOC  Participant's  pro rata share of
         outstanding  Revolving Loans plus its pro rata share of outstanding LOC
         Obligations  shall not exceed  such LOC  Participant's  Revolving  Loan
         Commitment  Percentage of the Revolving  Committed Amount. The issuance
         and  expiry  date of each  Letter of Credit  shall be a  Business  Day.
         Except as otherwise  expressly agreed upon by all the LOC Participants,
         no Letter of Credit  shall have an  original  expiry date more than one
         year from the date of issuance,  or as  extended,  shall have an expiry
         date extending  beyond the Revolving Loan Maturity Date. Each Letter of
         Credit shall be either (x) a standby letter of credit issued to support
         the   obligations   (including   pension  or  insurance   obligations),
         contingent or otherwise, of the Borrower, or (y) a commercial letter of
         credit in


                                       18
<PAGE>

         respect of the  purchase of goods or  services  by the  Borrower in the
         ordinary  course of  business.  Each Letter of Credit shall comply with
         the related LOC Documents.

                  (b) Notice and  Reports.  The  request  for the  issuance of a
         Letter of Credit  shall be  submitted  to the  Issuing  Lender at least
         three  Business  Days  prior to the  requested  date of  issuance.  The
         Issuing  Lender  will,  at least  quarterly  and more  frequently  upon
         request,  provide  to the  Agent  for  dissemination  to the  Lenders 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 the expiry  date as well as any  payments  or  expirations
         which may have occurred. The Issuing Lender will further provide to the
         Agent, promptly upon request, copies of the Letters of Credit.

                  (c) Participations.  Each LOC Participant,  upon issuance of a
         Letter of Credit,  shall be deemed to have purchased without recourse a
         risk participation from the Issuing Lender in such Letter of Credit and
         the obligations arising thereunder and any collateral relating thereto,
         in each  case in an  amount  equal  to its  Revolving  Loan  Commitment
         Percentage of the  obligations  under such Letter of Credit,  and shall
         absolutely,  unconditionally and irrevocably assume, as primary obligor
         and  not as  surety,  and be  obligated  to pay to the  Issuing  Lender
         therefor  and  discharge  when  due,  its  Revolving  Loan   Commitment
         Percentage  of the  obligations  arising  under such  Letter of Credit.
         Without  limiting  the  scope  and  nature  of each  LOC  Participant's
         participation  in any Letter of Credit,  to the extent that the Issuing
         Lender has not been reimbursed as required  hereunder or under any such
         Letter of Credit,  each such LOC  Participant  shall pay to the Issuing
         Lender its Revolving Loan  Commitment  Percentage of such  unreimbursed
         drawing  in same day funds on the day of  notification  by the  Issuing
         Lender  of an  unreimbursed  drawing  pursuant  to  the  provisions  of
         subsection  (d) hereof.  The  obligation of each LOC  Participant to so
         reimburse the Issuing  Lender shall be absolute and  unconditional  and
         shall not be  affected  by the  occurrence  of a  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 or any
         other Credit Party to reimburse the Issuing  Lender 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 Lender will promptly notify the Borrower.
         Unless the Borrower shall immediately  notify the Issuing Lender of its
         intent to otherwise reimburse the Issuing Lender, the Borrower shall be
         deemed  to have  requested  a  Revolving  Loan at the Base  Rate in the
         amount of the  drawing  as  provided  in  subsection  (e)  hereof,  the
         proceeds   of  which  will  be  used  to  satisfy   the   reimbursement
         obligations. The Borrower shall reimburse the Issuing Lender on the day
         of drawing  under any Letter of Credit  either  with the  proceeds of a
         Revolving  Loan  obtained  hereunder  or otherwise in same day funds as
         provided herein or in the LOC Documents.  If the Borrower shall fail to
         reimburse the Issuing Lender as provided hereinabove,  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 (but  without  waiver of) any rights of
         set-off,  counterclaim  or defense to payment  the  applicable  account
         party or the Borrower may claim or have against the Issuing Lender, the
         Agent, the Lenders,  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, the Borrower or any other
         Credit  Party  to  receive  consideration  or the  legality,  validity,
         regularity  or  unenforceability  of the Letter of Credit.  The Issuing
         Lender will promptly  notify the LOC  Participants of the amount of any
         unreimbursed drawing and each LOC Participant shall promptly pay to the
         Agent  for  the  account  of the  Issuing  Lender,  in  Dollars  and in
         immediately  available  funds,  the  amount  of such LOC  Participant's
         Revolving Loan Commitment Percentage of such unreimbursed drawing. Such
         payment shall be made on the day such notice is received by such Lender
         from the  Issuing  Lender if such  notice is received at or before 2:00
         p.m.,  otherwise  such payment shall be made at or before 12:00 Noon on
         the Business Day next  succeeding  the day such notice is received.  If
         such LOC Participant  does not pay such amount to the Issuing Lender in
         full upon such request,  such LOC Participant  shall, on demand, pay to
         the Agent for the account of the Issuing Lender  interest on the unpaid
         amount during the period from the date the LOC Participant received the
         notice  regarding the  unreimbursed  drawing until such LOC Participant
         pays  such 


                                       19
<PAGE>

         amount to the  Issuing  Lender in full at a rate per annum equal to, if
         paid within two Business Days of the date of drawing, the Federal Funds
         Rate  and  thereafter  at a rate  equal  to the  Base  Rate.  Each  LOC
         Participant's  obligation  to make such payment to the Issuing  Lender,
         and the right of the  Issuing  Lender  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  Credit
         Agreement or the Commitments  hereunder,  the existence of a Default or
         Event of Default or the  acceleration of the obligations  hereunder and
         shall be made without any offset,  abatement,  withholding or reduction
         whatsoever.  Simultaneously  with the making of each such  payment by a
         LOC  Participant to the Issuing  Lender,  such LOC  Participant  shall,
         automatically and without any further action on the part of the Issuing
         Lender or such LOC  Participant,  acquire a participation  in an amount
         equal  to  such  payment   (excluding   the  portion  of  such  payment
         constituting  interest  owing to the  Issuing  Lender)  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 and the other Credit Parties with respect thereto.

                  (e) Repayment  with Revolving  Loans.  On any day on which the
         Borrower  shall have  requested,  or been deemed to have  requested,  a
         Revolving  Loan  borrowing  to  reimburse  a drawing  under a Letter of
         Credit,  the Agent shall give notice to the  applicable  Lenders that a
         Revolving  Loan has been  requested or deemed  requested in  connection
         with a drawing under a Letter of Credit, in which case a Revolving Loan
         borrowing  comprised solely of Base Rate Loans (each such borrowing,  a
         "Mandatory  Borrowing")  shall be immediately  made from all applicable
         Lenders  (without  giving effect to any  termination of the Commitments
         pursuant  to Section  9.2) pro rata based on each  Lender's  respective
         Revolving Loan Commitment  Percentage and the proceeds thereof shall be
         paid directly to the Issuing  Lender for  application to the respective
         LOC  Obligations.  Each such Lender hereby  irrevocably  agrees to make
         such  Revolving  Loans  immediately  upon any such  request  or  deemed
         request on account of each such  Mandatory  Borrowing in the amount and
         in the manner specified in the preceding  sentence and on the same such
         date  notwithstanding  (i) the amount of  Mandatory  Borrowing  may not
         comply  with the  minimum  amount for  borrowings  of  Revolving  Loans
         otherwise required hereunder,  (ii) whether any conditions specified in
         Section 5 are then  satisfied,  (iii)  whether  a  Default  or Event of
         Default then exists, (iv) failure of any such request or deemed request
         for  Revolving  Loans  to  be  made  by  the  time  otherwise  required
         hereunder,  (v) the  date  of such  Mandatory  Borrowing,  or (vi)  any
         reduction in the Revolving  Committed  Amount or any termination of the
         Commitments.  In the event that any Mandatory  Borrowing 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
         Bankruptcy  Code with  respect  to the  Borrower  or any  other  Credit
         Party),  then each such Lender  hereby  agrees that it shall  forthwith
         fund (as of the date  the  Mandatory  Borrowing  would  otherwise  have
         occurred,  but adjusted for any payments  received from the Borrower on
         or after  such  date  and  prior to such  purchase)  its  Participation
         Interest in the outstanding LOC Obligations; provided, further, that in
         the event any Lender shall fail to fund its  Participation  Interest on
         the day the Mandatory Borrowing would otherwise have occurred, then the
         amount of such Lender's unfunded  Participation  Interest therein shall
         bear interest  payable to the Issuing  Lender upon demand,  at the rate
         equal to, if paid within two  Business  Days of such date,  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  Credit
         Agreement,  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 Credit  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)   Modification   and   Extension.   The  issuance  of  any
         supplement,  modification,  amendment,  renewal,  or  extensions to 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.


                                       20
<PAGE>

                  (h) Uniform Customs and Practices. The Issuing Lender 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  (Publication  No. 500 or the most
         recent  publication,   the  "UCP"),  in  which  case  the  UCP  may  be
         incorporated therein and deemed in all respects to be a part thereof.

                  (i)   Responsibility   of  Issuing  Lender.  It  is  expressly
         understood  and  agreed  that the  obligations  of the  Issuing  Lender
         hereunder to the LOC Participants are only those expressly set forth in
         this Credit  Agreement and that the Issuing Lender shall be entitled to
         assume that the  conditions  precedent set forth in Section 5 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 2.2 shall be deemed to prejudice  the
         right of any LOC  Participant  to recover  from the Issuing  Lender any
         amounts made  available by such LOC  Participant  to the Issuing Lender
         pursuant to this  Section 2.2 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 Lender.

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

                  (k)      Indemnification of Issuing Lender.

                           (i) In addition to its other  obligations  under this
                  Credit  Agreement,  the  Borrower  hereby  agrees to  protect,
                  indemnify,  pay and save the Issuing Lender  harmless from and
                  against any and all  claims,  demands,  liabilities,  damages,
                  losses,  costs,  charges and  expenses  (including  reasonable
                  attorneys'  fees)  that the  Issuing  Lender  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  Lender 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  Lender,
                  the Borrower shall assume all risks of the acts,  omissions or
                  misuse of any Letter of Credit by the beneficiary thereof. The
                  Issuing  Lender  shall not be  responsible  for: (A) 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)  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) failure of the beneficiary of
                  a Letter of Credit to comply fully with conditions required in
                  order to draw upon a Letter of Credit; (D) 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; (E) errors in interpretation
                  of technical  terms; (F) 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  (G) any  consequences  arising  from  causes  beyond  the
                  control of the Issuing Lender, including,  without limitation,
                  any Government  Acts. None of the above shall affect,  impair,
                  or prevent  the  vesting  of the  Issuing  Lender'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 Lender, under or in
                  connection   with  any   Letter  of  Credit  or  the   related
                  certificates, if taken or omitted in good faith, shall not put
                  the  Issuing  Lender  under  any  resulting  liability  to the
                  Borrower or any other Credit Party. It is the intention of the
                  parties  that this Credit  Agreement  shall be  construed  and
                  applied to protect and  indemnify the Issuing  Lender  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


                                       21
<PAGE>

                  and all risks of the acts or  omissions,  whether  rightful or
                  wrongful,  of any  present  or  future  Government  Acts.  The
                  Issuing  Lender  shall  not,  in any way,  be  liable  for any
                  failure  by the  Issuing  Lender  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 Lender.

                           (iv)  Nothing in this  subsection  (k) is intended to
                  limit the reimbursement  obligation of the Borrower  contained
                  in this  Section 2.2. The  obligations  of the Borrower  under
                  this  subsection  (k) shall  survive the  termination  of this
                  Credit  Agreement.  No act or omission of any current or prior
                  beneficiary  of a Letter of Credit  shall in any way affect or
                  impair the rights of the Issuing  Lender to enforce any right,
                  power or benefit under this Credit Agreement.

                           (v)   Notwithstanding   anything   to  the   contrary
                  contained in this  subsection  (k), the Borrower shall have no
                  obligation to indemnify  the Issuing  Lender in respect of any
                  liability incurred by the Issuing Lender arising solely out of
                  the gross  negligence  or willful  misconduct  of the  Issuing
                  Lender,  as determined  by a court of competent  jurisdiction.
                  Nothing in this  Credit  Agreement  shall  relieve the Issuing
                  Lender of any  liability  to the  Borrower  in  respect of any
                  action taken by the Issuing  Lender  which action  constitutes
                  gross  negligence or willful  misconduct of the Issuing Lender
                  or a  violation  of the UCP or  Uniform  Commercial  Code  (as
                  applicable),   as   determined   by  a  court   of   competent
                  jurisdiction.


<PAGE>


                                   SECTION 3

                     GENERAL PROVISIONS APPLICABLE TO LOANS
                             AND LETTERS OF CREDIT

         3.1 Interest.

                  (a) Interest Rate.  All Base Rate Loans shall accrue  interest
         at the Base  Rate per  annum  and all  Eurodollar  Loans  shall  accrue
         interest at a per annum rate equal to the Adjusted Eurodollar Rate plus
         the Applicable Percentage.

                  (b) Default Rate of Interest. 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 other Credit Documents  (including without
         limitation fees and expenses)  shall bear interest,  payable on demand,
         at a per annum rate equal to 2% plus the rate which would  otherwise be
         applicable  (or if no rate is  applicable,  then the rate for Revolving
         Loans that are Base Rate Loans plus two percent (2%) per annum).

                  (c)  Interest  Payments.  Interest  on Loans  shall be due and
         payable  in arrears  on each  Interest  Payment  Date.  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 on the
         next preceding Business Day.

         3.2 Place and Manner of Payments.

         All payments of principal,  interest,  fees, expenses and other amounts
to be made by a Credit Party under this Credit  Agreement  shall be received not
later  than  2:00  p.m.  on the date when due,  in  Dollars  and in  immediately
available  funds,  by the Agent for the benefit of the Lenders at its offices in
Charlotte, North Carolina.  Payments received after such time shall be deemed to
have been received on the next Business Day. The Borrower  shall, at the time it
makes any payment under this Credit Agreement,  specify to the Agent, the Loans,
Letters of Credit,  fees or other amounts  payable by the Borrower  hereunder to
which such  payment is to be applied (and in the event that it fails to specify,
or if such application  would be inconsistent  with the terms hereof,  the Agent
shall,  subject to Section 3.7, 


                                       22
<PAGE>

distribute  such  payment to the  Lenders  in such  manner as the Agent may deem
appropriate).  The Agent will  distribute any such payment to the Lenders on the
day received if such payment is received prior to 2:00 p.m.; otherwise the Agent
will distribute such payment to the Lenders on the next succeeding Business Day.
If the Agent fails to distribute  such payment on the next  succeeding  Business
Day, then the amount of such payment shall bear interest payable to the Lenders,
at the rate equal to, if paid within one Business Day of such date,  the Federal
Funds  Rate,  and  thereafter  at a rate equal to the Base Rate plus two percent
(2%). Whenever any payment hereunder shall be stated to be due on a day which is
not a  Business  Day,  the due  date  thereof  shall  be  extended  to the  next
succeeding  Business Day (subject to accrual of interest and fees for the period
of  such  extension),  except  that  in the  case of  Eurodollar  Loans,  if the
extension  would  cause the  payment to be made in the next  following  calendar
month,  then such payment shall instead be made on the next  preceding  Business
Day.

         3.3 Prepayments.

                  (a) Voluntary  Prepayments.  The Borrower shall have the right
         to prepay Loans in whole or in part from time to time  without  premium
         or penalty;  provided,  however,  that (i)Eurodollar  Loans may only be
         prepaid on three  Business  Days' prior written notice to the Agent and
         any  prepayment  of  Eurodollar  Loans will be subject to Section 3.14,
         (ii)  Base  Rate  Loans  may  only  be  prepaid  after  written  notice
         (confirmed  by a  telephone  call from the  Borrower)  to the Agent not
         later than 11:00 a.m. on the Business Day of the applicable  prepayment
         and (iii) each such partial prepayment of Loans shall be in the minimum
         principal  amount of $500,000  and  integral  multiples  of $100,000 in
         excess thereof.

                  (b)  Mandatory  Prepayments.  If at any  time  the  sum of the
         aggregate  amount of Revolving Loans  outstanding  plus LOC Obligations
         outstanding  exceeds the lesser of (x) the Revolving  Committed  Amount
         and (y) the Borrowing  Base,  the Borrower shall  immediately  (without
         need of notice or demand  therefor)  make a  principal  payment  to the
         Agent in the manner and in an amount necessary to be in compliance with
         Section 2.1 (to be applied as set forth in Section 3.3(c) below).

                  (c)  Application of  Prepayments.  All amounts  required to be
         paid  pursuant to Section  3.3(b)  shall be applied  first to Revolving
         Loans  and  second  to a cash  collateral  account  in  respect  of LOC
         Obligations.  Within the parameters of the application set forth above,
         prepayments  shall be  applied  first to Base  Rate  Loans  and then to
         Eurodollar Loans. All prepayments hereunder shall be subject to Section
         3.14.

         3.4 Fees.

                  (a) Unused Fees. In consideration  of the Revolving  Committed
         Amount  being made  available  by the Lenders  hereunder,  the Borrower
         agrees to pay to the Agent,  for the pro rata  benefit  of each  Lender
         (based on each Lender's  Revolving  Loan  Commitment  Percentage of the
         Revolving  Committed Amount), a fee equal to one-quarter of one percent
         (.25%) per annum on the Unused  Commitment  (the  "Unused  Fees").  The
         accrued  Unused Fees shall commence to accrue on the Effective Date and
         shall be due and  payable in arrears on the last  Business  Day of each
         fiscal  quarter  of the  Borrower  (as  well as on the  Revolving  Loan
         Maturity  Date and on any date that the Revolving  Committed  Amount is
         reduced)  for the  immediately  preceding  fiscal  quarter  (or portion
         thereof),  beginning  with the first of such  dates to occur  after the
         Effective Date.

                  (b)      Letter of Credit Fees.

                           (i) Letter of Credit  Fee.  In  consideration  of the
                  issuance of Letters of Credit  hereunder,  the Borrower agrees
                  to pay to the Issuing  Lender for the pro rata  benefit of the
                  Lenders  (based on each  Lender's  Revolving  Loan  Commitment
                  Percentage  of the  Revolving  Committed  Amount),  a fee (the
                  "Letter of Credit Fee") equal to two percent  (2.0%) per annum
                  on the average  daily  maximum  amount  available  to be drawn
                  under each such  Letter of Credit from the date of issuance to
                  the date of  expiration.  The  Letter  of  Credit  Fee will be
                  payable upon the issuance of each applicable Letter of Credit.


                                       23
<PAGE>

                           (ii) Issuing  Lender Fees.  In addition to the Letter
                  of Credit Fee,  the Borrower  shall pay to the Issuing  Lender
                  for its own account, without sharing by the other Lenders, (A)
                  such fronting and  negotiation  fees as may be mutually agreed
                  upon by the Issuing  Lender and the Borrower from time to time
                  and (B) the customary charges from time to time to the Issuing
                  Lender  for its  services  in  connection  with the  issuance,
                  amendment, payment, transfer, administration, cancellation and
                  conversion  of, and  drawings  under,  such  Letters of Credit
                  (collectively, the "Issuing Lender Fees").

                  (c)  Administrative  Fees.  The Borrower  agrees to pay to the
         Agent,  for its own  account,  an annual fee as agreed to  between  the
         Borrower and the Agent in the Fee Letter.

         3.5 Payment in full at Maturity.

         On the Revolving Loan Maturity Date, the entire  outstanding  principal
balance of all Revolving  Loans,  together with accrued but unpaid  interest and
all other sums owing with  respect  thereto,  shall be due and  payable in full,
unless accelerated sooner pursuant to Section 9.

         3.6 Computations of Interest and Fees.

                  (a) All  computations  of interest and fees hereunder shall be
         made on the basis of the actual  number of days  elapsed over a year of
         360 days.  Interest shall accrue from and include the date of borrowing
         (or continuation or conversion) but exclude the date of payment.

                  (b) It is the intent of the Lenders and the Credit  Parties to
         conform to and contract in strict  compliance with applicable usury law
         from time to time in effect. All agreements between the Lenders and the
         Borrower are hereby limited by the  provisions of this paragraph  which
         shall override and control all such agreements, whether now existing or
         hereafter  arising and whether  written or oral.  In no way, nor in any
         event or  contingency  (including  but not  limited  to  prepayment  or
         acceleration  of the  maturity of any  obligation),  shall the interest
         taken, reserved, contracted for, charged, or received under this Credit
         Agreement, under the Notes or otherwise, exceed the maximum nonusurious
         amount   permissible  under  applicable  law.  If,  from  any  possible
         construction  of any of the  Credit  Documents  or any other  document,
         interest   would   otherwise  be  payable  in  excess  of  the  maximum
         nonusurious  amount,  any such  construction  shall be  subject  to the
         provisions of this paragraph and such interest  shall be  automatically
         reduced to the maximum  nonusurious  amount  permitted under applicable
         law,  without  the  necessity  of  execution  of any  amendment  or new
         document.  If any Lender shall ever receive  anything of value which is
         characterized  as interest on the Loans under  applicable law and which
         would,  apart from this  provision,  be in excess of the maximum lawful
         amount,  an amount equal to the amount which would have been  excessive
         interest  shall,  without  penalty,  be applied to the reduction of the
         principal amount owing on the Loans and not to the payment of interest,
         or  refunded to the  Borrower or the other payor  thereof if and to the
         extent such amount which would have been excessive  exceeds such unpaid
         principal amount of the Loans. The right to demand payment of the Loans
         or any other indebtedness evidenced by any of the Credit Documents does
         not include the right to receive any interest  which has not  otherwise
         accrued on the date of such  demand,  and the  Lenders do not intend to
         charge or receive any  unearned  interest in the event of such  demand.
         All  interest  paid or agreed to be paid to the Lenders with respect to
         the  Loans  shall,  to the  extent  permitted  by  applicable  law,  be
         amortized,  prorated,  allocated, and spread throughout the full stated
         term  (including  any  renewal or  extension)  of the Loans so that the
         amount of interest on account of such  indebtedness does not exceed the
         maximum nonusurious amount permitted by applicable law.

         3.7 Pro Rata Treatment.

         Except to the extent otherwise provided herein:

                  (a)  Each  Revolving  Loan   borrowing   (including,   without
         limitation,  each Mandatory  Borrowing),  each payment or prepayment of
         principal  of any Loan,  each  payment of fees  (other than the Issuing
         Lender fees retained by the Issuing  Lender for its own account and the
         Administrative  Fees retained by the Agent for its own  account),  each
         reduction of the Revolving  Committed  Amount,  and each  conversion or


                                       24
<PAGE>

         continuation  of any Loan,  shall  (except  as  otherwise  provided  in
         Section  3.3(c)) be allocated  pro rata among the Lenders in accordance
         with the  respective  Revolving  Loan  Commitment  Percentages  of such
         Lenders  (or, if the  Commitments  of such Lenders have expired or been
         terminated,  in accordance with the respective principal amounts of the
         outstanding  Loans  and  Participation   Interests  of  such  Lenders);
         provided  that,  if any Lender shall have failed to pay its  applicable
         pro rata  share of any  Revolving  Loan,  then any amount to which such
         Lender would  otherwise be entitled  pursuant to this Section 3.7 shall
         instead be payable to the Agent until the share of such Loan not funded
         by such Lender has been repaid; provided further, that in the event any
         amount paid to any Lender  pursuant to this Section 3.7 is rescinded or
         must  otherwise be returned by the Agent,  each Lender shall,  upon the
         request  of the  Agent,  repay to the Agent the  amount so paid to such
         Lender,  with  interest  for the  period  commencing  on the date  such
         payment is returned by the Agent until the date the Agent receives such
         repayment  at a rate per  annum  equal  to,  during  the  period to but
         excluding the date two Business  Days after such  request,  the Federal
         Funds Rate, and thereafter,  at the Base Rate plus two percent (2%) per
         annum; and

                  (b) Letters of Credit.  Each payment of unreimbursed  drawings
         in  respect  of  LOC  Obligations   shall  be  allocated  to  each  LOC
         Participant  pro rata in accordance  with its Revolving Loan Commitment
         Percentage;  provided that, if any LOC Participant shall have failed to
         pay its  applicable  pro rata share of any drawing  under any Letter of
         Credit,  then any amount to which such LOC Participant  would otherwise
         be entitled pursuant to this subsection (b) shall instead be payable to
         the Issuing Lender; provided further, that in the event any amount paid
         to any LOC Participant  pursuant to this subsection (b) is rescinded or
         must otherwise be returned by the Issuing Lender,  each LOC Participant
         shall,  upon the request of the Issuing Lender,  repay to the Agent for
         the  account  of the  Issuing  Lender  the  amount  so paid to such LOC
         Participant,  with interest for the period  commencing on the date such
         payment is returned by the  Issuing  Lender  until the date the Issuing
         Lender receives such repayment at a rate per annum equal to, during the
         period to but  excluding the date two Business Days after such request,
         the Federal Funds Rate, and thereafter,  the Base Rate plus two percent
         (2.0%) per annum.

         3.8 Sharing of Payments.

         The Lenders agree among themselves that, except to the extent otherwise
provided herein, in the event that any Lender shall obtain payment in respect of
any Loan,  unreimbursed drawing with respect to any LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff,  banker's lien or  counterclaim,  or pursuant to a secured
claim under  Section 506 of the  Bankruptcy  Code or other  security or interest
arising from, or in lieu of, such secured  claim,  received by such Lender under
any applicable bankruptcy,  insolvency or other similar law or otherwise,  or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit  Agreement,  such Lender  shall  promptly pay in cash or purchase
from the other Lenders a participation in such Loans, LOC Obligations, and other
obligations in such amounts,  and make such other adjustments from time to time,
as shall  be  equitable  to the end  that all  Lenders  share  such  payment  in
accordance with their  respective  ratable shares as provided for in this Credit
Agreement.  The  Lenders  further  agree among  themselves  that if payment to a
Lender  obtained  by such  Lender  through  the  exercise  of a right of setoff,
banker's lien,  counterclaim  or other event as aforesaid  shall be rescinded or
must  otherwise be restored,  each Lender which shall have shared the benefit of
such  payment  shall,  by payment  in cash or a  repurchase  of a  participation
theretofore  sold,  return its share of that benefit (together with its share of
any accrued  interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise  restored.  The Borrower  agrees that any
Lender so purchasing such a participation  may, to the fullest extent  permitted
by law,  exercise  all rights of payment,  including  setoff,  banker's  lien or
counterclaim, with respect to such participation as fully as if such Lender were
a holder of such Loan, LOC Obligation or other  obligation in the amount of such
participation.  Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other  Lender
an amount  payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this  Credit  Agreement  on the date when such  amount is due,  such
payments  shall be made together  with  interest  thereon for each date from the
date such  amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal  Funds Rate.  If under any
applicable  bankruptcy,  insolvency or other similar law, any Lender  receives a
secured claim in lieu of a setoff to which this Section 3.8 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such 


                                       25
<PAGE>

secured claim in a manner  consistent  with the rights of the Lenders under this
Section 3.8 to share in the benefits of any recovery on such secured claim.





                                       26
<PAGE>

         3.9 Capital Adequacy.

         If, after the date hereof,  any Lender 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  Lender,  or its  parent  corporation,  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 Lender's (or parent corporation's)
capital or assets as a consequence of its  commitments or obligations  hereunder
to a level below that which such Lender, or its parent  corporation,  could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's (or parent  corporation's)  policies with respect to
capital  adequacy),  then,  upon notice from such  Lender to the  Borrower,  the
Borrower  shall be  obligated  to pay to such Lender such  additional  amount or
amounts as will  compensate such Lender on an after-tax basis (after taking into
account applicable  deductions and credits in respect of the amount indemnified)
for such reduction. Each determination by any such Lender of amounts owing under
this Section  shall,  absent  manifest  error,  be conclusive and binding on the
parties  hereto.  This  covenant  shall survive the  termination  of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.

         3.10 Inability To Determine Interest Rate.

         If prior to the first day of any Interest Period,  the Agent shall have
determined in good faith (which  determination  shall be conclusive  and binding
upon the  Borrower)  that,  by reason of  circumstances  affecting  the relevant
market, adequate and reasonable means do not exist for ascertaining the Adjusted
Eurodollar  Rate for such  Interest  Period,  the Agent  shall give  telecopy or
telephonic notice thereof to the Borrower and the Lenders as soon as practicable
thereafter,  and will also give prompt  written notice to the Borrower when such
conditions no longer  exist.  If such notice is given (a) any  Eurodollar  Loans
requested to be made on the first day of such  Interest  Period shall be made as
Base Rate Loans, (b) any 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 (c) 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.

         3.11 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 Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement,  (a) such
Lender 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 Lender  hereunder to make  Eurodollar
Loans,  continue  Eurodollar  Loans  as such and  convert  a Base  Rate  Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain  Eurodollar  Loans,  such
Lender  shall  then  have a  commitment  only to make a Base  Rate  Loan  when a
Eurodollar  Loan is requested and (c) such Lender's  Loans then  outstanding  as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the  respective  last days of the then current  Interest  Period 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 Lender such amounts, if any, as may be required pursuant to Section 3.14.

         3.12 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 Lender, or compliance by
any Lender  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 Lender
becomes a Lender):


                                       27
<PAGE>

                  (a)  shall  subject  such  Lender  to  any  tax  of  any  kind
         whatsoever with respect to any Letter of Credit,  any Eurodollar  Loans
         made by it or its obligation to make  Eurodollar  Loans,  or change the
         basis of taxation of payments to such Lender in respect thereof (except
         for Non-Excluded Taxes covered by Section 3.13 (including  Non-Excluded
         Taxes imposed  solely by reason of any failure of such Lender to comply
         with its  obligations  under  Section  3.13(b))  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  Lender  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  Lender  which is not
         otherwise included in the determination of the Adjusted Eurodollar Rate
         hereunder; or

                  (c) shall impose on such Lender 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 Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing  or  maintaining  Eurodollar  Loans or  issuing or  participating  in
Letters  of Credit or to reduce  any  amount  receivable  hereunder  in  respect
thereof,  then, in any such case,  upon notice to the Borrower from such Lender,
through the Agent,  in accordance  herewith,  the Borrower shall be obligated to
promptly pay such Lender,  upon its demand,  any additional amounts necessary to
compensate  such  Lender  on an  after-tax  basis  (after  taking  into  account
applicable deductions and credits in respect of the amount indemnified) 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  Lender
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
Lender,  upon  demand,  without  duplication,  such  amounts,  if any, as may be
required  pursuant to Section 3.14. If any Lender becomes  entitled to claim any
additional amounts pursuant to this Section 3.12, it shall provide prompt notice
thereof  to the  Borrower,  through  the Agent,  certifying  (x) that one of the
events  described in this Section 3.12 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
Lender and a reasonably detailed explanation of the calculation thereof.  Such a
certificate as to any additional  amounts payable  pursuant to this Section 3.12
submitted by such Lender, 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 Credit  Agreement and the payment
of the Loans and all other amounts payable hereunder.

         3.13 Taxes.

                  (a)  Except  as  provided  below  in this  Section  3.13,  all
         payments made by the Borrower under this Credit Agreement and any 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 Lender 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  Lender  or its
         applicable lending office, or any branch or affiliate thereof,  in each
         case imposed in lieu of net income taxes: (i) by the jurisdiction under
         the laws of which such Lender,  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 Lender,  applicable lending office,  branch or affiliate other
         than a  connection  arising  solely from such Lender  having  executed,
         delivered or performed its  obligations,  or received  payment under or
         enforced,  this Credit Agreement or any Notes. 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 Lender  hereunder or under any
         Notes,  (A) the amounts so payable to the Agent or such Lender shall be
         increased to the extent  necessary to yield to the Agent or such Lender
         (after 


                                       28
<PAGE>

         payment of all  Non-Excluded  Taxes) interest on any such other amounts
         payable  hereunder  at the rates or in the  amounts  specified  in this
         Credit Agreement and any Notes,  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
         Lender  that is not  organized  under the laws of the United  States of
         America or a state  thereof  if such  Lender  fails to comply  with the
         requirements  of  paragraph  (b) of  this  Section  3.13  whenever  any
         Non-Excluded Taxes are payable by the Borrower,  and (B) as promptly as
         possible  after  requested the Borrower shall send to the Agent for its
         own  account or for the account of such  Lender,  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 fails to remit to
         the Agent the required receipts or other required documentary evidence,
         the  Borrower  shall  indemnify  the  Agent  and  any  Lender  for  any
         incremental taxes, interest or penalties that may become payable by the
         Agent or any Lender as a result of any such failure.  The agreements in
         this subsection  shall survive the termination of this Credit Agreement
         and the payment of the Loans and all other amounts payable hereunder.

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

                           (i) (A) on or before  the date of any  payment by the
                  Borrower under this Credit  Agreement or Notes to such Lender,
                  deliver to the Borrower  and the Agent (x) two 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
                  Credit   Agreement   and  any  Notes   without   deduction  or
                  withholding  of any United States federal income taxes and (y)
                  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;

                                    (B)  deliver to the  Borrower  and the Agent
                  two  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

                                     (C)  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

                           (ii) in the  case of any  such  Lender  that is not a
                  "bank"  within  the  meaning of  Section  881(c)(3)(A)  of the
                  Internal  Revenue Code, (A) 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,  (B) agree to  furnish to the  Borrower,  on or
                  before the date of any payment by the Borrower, with a copy to
                  the Agent, two accurate and complete original signed copies of
                  Internal  Revenue  Service Form W-8, or  successor  applicable
                  form certifying to such Lender'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  Credit
                  Agreement  and any Notes (and to deliver to the  Borrower  and
                  the Agent  two  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 (C)  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
                  Lender  to an  exemption  from  withholding  with  respect  to
                  payments under this Credit Agreement and any Notes.

         Notwithstanding  the above, if any change in treaty,  law or regulation
         has  occurred  after the date such  Person  becomes a Lender  hereunder
         which renders all such forms  inapplicable  or which would prevent such
         Lender from duly  completing  and delivering any such form with respect
         to it and such Lender so advises the  Borrower  and the Agent then such
         Lender shall be exempt from such  requirements.  Each Person that shall
         become a 


                                       29
<PAGE>

         Lender or a  participant  of a Lender  pursuant to Section  11.3 shall,
         upon the effectiveness of the related transfer,  be required to provide
         all of the forms,  certifications  and statements  required pursuant to
         this  subsection  (b);  provided that in the case of a participant of a
         Lender,  the  obligations of such  participant of a Lender  pursuant to
         this  subsection  (b) shall be  determined as if the  participant  of a
         Lender were a Lender  except that such  participant  of a Lender  shall
         furnish all such required forms,  certifications  and statements to the
         Lender from which the related participation shall have been purchased.

         3.14 Idemnity.

         The Borrower  promises to indemnify each Lender and to hold each Lender
harmless  from any loss or expense  which such  Lender may sustain or incur 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 Credit  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 Credit  Agreement and (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. Such
indemnification  may include an amount equal to (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) minus
(ii) the amount of interest (as  reasonably  determined  by such  Lender)  which
would have  accrued to such  Lender on such  amount by  placing  such  amount on
deposit for a comparable  period with leading banks in the interbank  Eurodollar
market.  The  agreements in this Section shall survive the  termination  of this
Credit  Agreement  and the  payment of the Loans and all other  amounts  payable
hereunder.


<PAGE>

                                    SECTION 4

                                    GUARANTY


         4.1 Guaranty of Payment.

         Subject to Section 4.7 below,  each of the Guarantors  hereby,  jointly
and  severally,  unconditionally  guarantees  to each  Lender  and the Agent the
prompt  payment of the Credit  Party  Obligations  in full when due  (whether at
stated maturity, as a mandatory prepayment,  by acceleration or otherwise).  The
Guarantors  additionally,  jointly and severally,  unconditionally  guarantee to
each Lender and the Agent the timely  performance of all other obligations under
the  Credit  Documents.  This  Guaranty  is a  guaranty  of  payment  and not of
collection  and is a  continuing  guaranty  and shall apply to all Credit  Party
Obligations whenever arising.

         4.2 Obligations Unconditional.

         The   obligations  of  the   Guarantors   hereunder  are  absolute  and
unconditional,  irrespective of the value, genuineness,  validity, regularity or
enforceability  of any of the  Credit  Documents,  or  any  other  agreement  or
instrument  referred to therein,  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  guarantor.
Each Guarantor  agrees that this Guaranty may be enforced by the Lenders without
the  necessity at any time of resorting to or exhausting  any other  security or
collateral and without the necessity at any time of having recourse to the Notes
or any  other of the  Credit  Documents  or any  collateral,  if any,  hereafter
securing the Credit Party  Obligations  or otherwise and each  Guarantor  hereby
waives the right to require the Lenders to proceed  against the  Borrower or any
other Person  (including a co-guarantor) or to require the Lenders to pursue any
other remedy or enforce any other right.  Each Guarantor  further agrees that it
shall have no right of  subrogation,  indemnity,  reimbursement  or contribution
against the Borrower or any other Guarantor of the Credit Party  Obligations for
amounts paid under this  Guaranty  until such time as the Lenders have been paid
in full, all Commitments  under the 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 Lenders in 


                                       30
<PAGE>

connection  with monies  received  under the Credit  Documents.  Each  Guarantor
further  agrees that nothing  contained  herein  shall  prevent the Lenders from
suing on the Notes or any of the  other  Credit  Documents  or  foreclosing  its
security  interest in or Lien on any  collateral,  if any,  securing  the Credit
Party Obligations or from exercising any other rights available to it under this
Credit  Agreement,  the Notes, any other of the Credit  Documents,  or any other
instrument of security,  if any, and the exercise of any of the aforesaid rights
and the  completion  of any  foreclosure  proceedings  shall  not  constitute  a
discharge of any of any Guarantor's  obligations hereunder; it being the purpose
and intent of each Guarantor that its  obligations  hereunder shall be absolute,
independent  and  unconditional  under any and all  circumstances.  Neither  any
Guarantor's  obligations  under this Guaranty nor any remedy for the enforcement
thereof  shall  be  impaired,  modified,  changed  or  released  in  any  manner
whatsoever by an impairment,  modification, change, release or limitation of the
liability of the Borrower or by reason of the  bankruptcy  or  insolvency of the
Borrower.  Each  Guarantor  waives any and all notice of the creation,  renewal,
extension  or accrual of any of the Credit  Party  Obligations  and notice of or
proof  of  reliance  of by the  Agent  or any  Lender  upon  this  Guarantee  or
acceptance of this  Guarantee.  The Credit Party  Obligations,  and any of them,
shall  conclusively be deemed to have been created,  contracted or incurred,  or
renewed,  extended,  amended or waived,  in reliance  upon this  Guarantee.  All
dealings  between the Borrower and any of the  Guarantors,  on the one hand, and
the Agent and the Lenders,  on the other hand,  likewise  shall be  conclusively
presumed to have been had or consummated in reliance upon this Guarantee.

         4.3 Modifications.

         Each  Guarantor  agrees that (a) all or any part of the security now or
hereafter  held for the Credit  Party  Obligations,  if any,  may be  exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have any
obligation to protect,  perfect,  secure or insure any such security  interests,
liens or  encumbrances  now or  hereafter  held,  if any,  for the Credit  Party
Obligations or the properties subject thereto;  (c) the time or place of payment
of the Credit Party Obligations may be changed or extended, in whole or in part,
to a time certain or otherwise,  and may be renewed or accelerated,  in whole or
in part;  (d) the  Borrower  and any other party  liable for  payment  under the
Credit Documents may be granted indulgences generally; (e) any of the provisions
of the Notes or any of the other Credit  Documents  may be modified,  amended or
waived;  (f) any party  (including  any  co-guarantor)  liable  for the  payment
thereof may be granted  indulgences or be released;  and (g) any deposit balance
for the credit of the  Borrower or any other party liable for the payment of the
Credit Party  Obligations or liable upon any security  therefor may be released,
in whole or in part,  at,  before or after the stated,  extended or  accelerated
maturity  of the Credit  Party  Obligations,  all  without  notice to or further
assent by such Guarantor, which shall remain bound thereon,  notwithstanding any
such  exchange,   compromise,   surrender,   extension,  renewal,  acceleration,
modification, indulgence or release.

         4.4 Waiver of Rights.

         Each  Guarantor  expressly  waives to the fullest  extent  permitted by
applicable  law: (a) notice of acceptance of this Guaranty by the Lenders and of
all  extensions of credit to the Borrower by the Lenders;  (b)  presentment  and
demand for payment or  performance of any of the Credit Party  Obligations;  (c)
protest and notice of dishonor or of default (except as specifically required in
the Credit  Agreement)  with  respect to the Credit  Party  Obligations  or with
respect to any security therefor; (d) notice of the Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance,  if any, hereafter  securing the Credit Party  Obligations,  or the
Lenders'  subordinating,  compromising,  discharging  or releasing such security
interests,  liens or  encumbrances,  if any; (e) all other notices to which such
Guarantor  might  otherwise be entitled;  and (f) demand for payment  under this
Guaranty.

         4.5 Reinstatement.

         The  obligations  of the  Guarantors  under  this  Section  4 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  Credit  Party  Obligations  is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations,   whether  as  a  result  of  any   proceedings  in  bankruptcy  or
reorganization  or otherwise,  and each Guarantor  agrees that it will indemnify
the  Agent  and each  Lender on demand  for all  reasonable  costs and  expenses
(including,  without  limitation,  reasonable  fees of counsel)  incurred by the
Agent  or such  Lender  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.


                                       31
<PAGE>

         4.6 Remedies.

         The Guarantors agree that, as between the Guarantors,  on the one hand,
and the Agent and the Lenders,  on the other hand, the Credit Party  Obligations
may be  declared to be  forthwith  due and payable as provided in Section 9 (and
shall  be  deemed  to  have  become   automatically   due  and  payable  in  the
circumstances  provided in Section 9)  notwithstanding  any stay,  injunction or
other  prohibition  preventing such declaration (or preventing such Credit Party
Obligations  from becoming  automatically  due and payable) as against any other
Person  and  that,  in the  event  of such  declaration  (or such  Credit  Party
Obligations  being deemed to have become  automatically  due and payable),  such
Credit Party  Obligations  (whether or not due and payable by any other  Person)
shall  forthwith  become  due and  payable  by the  Guarantors.  The  Guarantors
acknowledge and agree that their obligations hereunder are secured in accordance
with the terms of the Mortgage Documents and the other Collateral  Documents and
that the Lenders may exercise their remedies  thereunder in accordance  with the
terms thereof.

         4.7 Limitations.

         Notwithstanding  any provision to the contrary  contained  herein or in
any of  the  other  Credit  Documents,  to the  extent  the  obligations  of any
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 such
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).

                                   SECTION 5

                              CONDITIONS PRECEDENT


         5.1 Closing Conditions.

         The  obligation of the Lenders to enter into this Credit  Agreement and
make the initial  Revolving  Loans is subject to  satisfaction  of the following
conditions:

                  (a) Executed  Credit  Documents.  Receipt by the Agent of duly
         executed copies of: (i) this Credit  Agreement;  (ii) the Notes;  (iii)
         the Collateral  Documents and (iv) all other Credit Documents,  each in
         form and substance acceptable to the Lenders in their sole discretion.

                  (b)  Corporate   Documents.   Receipt  by  the  Agent  of  the
         following:

                           (i)  Charter  Documents.  Copies of the  articles  or
                  certificates of  incorporation  or other charter  documents of
                  each Credit  Party  certified  to be true and complete as of a
                  recent date by the appropriate  Governmental  Authority of the
                  state or other jurisdiction of its incorporation and certified
                  by a secretary or assistant  secretary of such Credit Party to
                  be true and correct as of the Effective Date.

                           (ii)  Bylaws.  A copy of the  bylaws  of each  Credit
                  Party certified by a secretary or assistant  secretary of such
                  Credit Party to be true and correct as of the Effective Date.

                           (iii) Resolutions. Copies of resolutions of the Board
                  of Directors of each Credit Party  approving  and adopting the
                  Credit  Documents  to which it is a  party,  the  transactions
                  contemplated  therein and  authorizing  execution and delivery
                  thereof,  certified by a secretary  or assistant  secretary of
                  such  Credit  Party to be true and  correct  and in force  and
                  effect as of the Effective Date.

                           (iv) Good  Standing.  Copies of (A)  certificates  of
                  good  standing,  existence or its  equivalent  with respect to
                  each  Credit  Party  certified  as of a  recent  date  by  the
                  appropriate  


                                       32
<PAGE>

                  Governmental Authorities of the state or other jurisdiction of
                  incorporation and each other jurisdiction in which the failure
                  to so qualify  and be in good  standing  would have a Material
                  Adverse Effect on the business or operations of a Credit Party
                  in  such  jurisdiction  and  (B) to the  extent  available,  a
                  certificate  indicating  payment  of all  corporate  franchise
                  taxes  certified  as  of a  recent  date  by  the  appropriate
                  governmental taxing authorities.

                           (v)  Incumbency.  An incumbency  certificate  of each
                  Credit Party  certified by a secretary or assistant  secretary
                  to be true and correct as of the Effective Date.

                  (c)  Financial  Statements.  Receipt and approval by the Agent
         of: (i) the  consolidated  financial  statements  of the Parent and its
         Subsidiaries  for each of the fiscal years ending December 31, 1994 and
         1995,  including  balance  sheets and income and cash flow  statements,
         audited by nationally  recognized  independent  public  accountants and
         containing  an  unqualified  opinion of such firm that such  statements
         present fairly, in all material  respects,  the consolidated  financial
         position and results of operations of the Parent and its  Subsidiaries,
         and  are  prepared  in   conformity   with  GAAP  and  (ii)   unaudited
         consolidated  financial  statements of the Parent and its  Subsidiaries
         for the twelve  months  ending  December  31, 1996,  including  balance
         sheets  and  income  and  cash  flow   statements,   accompanied  by  a
         certificate of the chief financial  officer of the Parent to the effect
         that such unaudited financial statements fairly present in all material
         respects the financial condition of the Parent and its Subsidiaries and
         have  been  prepared  in  accordance  with  GAAP,  subject  to  changes
         resulting from audit and normal year-end audit adjustments.

                  (d)  Opinions  of  Counsel.  Receipt by the Agent of  opinions
         (which shall cover, among other things, authority,  legality, validity,
         binding  effect  and   enforceability),   satisfactory  to  the  Agent,
         addressed  to the Agent on behalf  of the  Lenders  and dated as of the
         Effective Date, from legal counsel to the Credit Parties.

                  (e)  Personal  Property  Collateral.   The  Agent  shall  have
         received, in form and substance satisfactory to the Agent:

                           (i)  searches  of  Uniform  Commercial  Code  ("UCC")
                  filings in the  jurisdiction of the chief executive  office of
                  each Credit Party and each  jurisdiction  where any Collateral
                  is located or where a filing would need to be made in order to
                  perfect the Agent's, for the benefit of the Lenders,  security
                  interest in the Collateral, copies of the financing statements
                  on file in such jurisdictions and evidence that no Liens exist
                  other than Permitted Liens;

                           (ii) duly executed UCC financing  statements for each
                  appropriate  jurisdiction as is necessary, in the Agent's sole
                  discretion,  to perfect  the  Agent's,  for the benefit of the
                  Lenders, security interest in the Collateral;

                           (iii) all  stock  certificates  evidencing  the stock
                  pledged to the Agent, for the benefit of the Lenders, pursuant
                  to the Pledge Agreement,  together with duly executed in blank
                  undated stock powers attached thereto; and

                           (iv)  all   instruments  and  chattel  paper  in  the
                  possession  of a Credit  Party,  as required  by the  Security
                  Agreement,  together  with allonges or  assignments  as may be
                  necessary  or  appropriate  to perfect  the  Agent's,  for the
                  benefit of the Lenders, security interest in the Collateral.

                  (f) Real Property  Collateral.  The Agent shall have received,
         in form and substance satisfactory to the Agent:

                           (i)   Mortgages.   Fully   executed   and   notarized
                  mortgages,  deeds of trust or  deeds to  secure  debt  (each a
                  "Mortgage" and collectively  the "Mortgages")  encumbering the
                  fee interest of the Credit Parties in each real property asset
                  owned by a Credit Party set forth on Schedule  1.1(a) (each an
                  "Existing    Property"   and    collectively   the   "Existing
                  Properties"), together with such UCC-1 financing statements as
                  the Agent  shall deem  appropriate  with  respect to each such
                  Existing Property.


                                       33
<PAGE>

                           (ii)  Legal  Opinions.  An  opinion of counsel in the
                  state in which each Existing  Property is located with respect
                  to the  enforceability of the form of Mortgage and sufficiency
                  of the form of UCC-1  financing  statements  to be recorded or
                  filed in such  state and such  other  matters as the Agent may
                  request, in form and substance satisfactory to the Agent.

                           (iii) Title Policies.  ALTA or other appropriate form
                  mortgagee title insurance  policies (the "Mortgage  Policies")
                  issued by a title insurer reasonably satisfactory to the Agent
                  (the "Title Insurance Company"),  in an amount satisfactory to
                  the Agent with respect to each Existing Property, assuring the
                  Agent  that  the   applicable   Mortgages   create  valid  and
                  enforceable  first  priority  mortgage liens on the respective
                  Existing  Properties,  free  and  clear  of  all  defects  and
                  encumbrances  except Permitted Liens,  which Mortgage Policies
                  shall  contain  such  coverage  and  endorsements  as shall be
                  satisfactory  to the Agent and for any other  matters that the
                  Agent may request and provide  affirmative  insurance and such
                  reinsurance as the Agent may request,  all of the foregoing in
                  form and substance satisfactory to the Agent.

                           (iv) Surveys.  Maps or plats of an as-built survey of
                  the sites of the  Existing  Properties  certified to the Agent
                  and the Title  Insurance  Company in a manner  satisfactory to
                  them,  dated a date  satisfactory  to the  Agent and the Title
                  Insurance Company by an independent professional licensed land
                  surveyor  reasonably  satisfactory  to the Agent and the Title
                  Insurance  Company,  which  maps or plats and the  surveys  on
                  which  they  are  based  shall be  sufficient  to  delete  any
                  standard printed survey exception  contained in the applicable
                  Mortgage  Policy and be made in  accordance  with the  Minimum
                  Standard  Detail  Requirements  for Land Title Surveys jointly
                  established and adopted by the American Land Title Association
                  and the American Congress on Surveying and Mapping in 1992 (or
                  such  alternative  standards as are  satisfactory to the Agent
                  and the Title Insurance  Company),  and,  without limiting the
                  generality of the foregoing, there shall be surveyed and shown
                  on  such  maps,  plats  or  surveys  the  following:  (A)  the
                  locations on such sites of all the  buildings,  structures and
                  other improvements and the established building setback lines;
                  (B) the lines of streets abutting the sites and width thereof;
                  (C) all access and other  easements  appurtenant  to the sites
                  necessary  to  use  the  sites;   (D)  all  roadways,   paths,
                  driveways,    easements,    encroachments    and   overhanging
                  projections  and  similar  encumbrances  affecting  the  site,
                  whether recorded,  apparent from a physical  inspection of the
                  sites   or   otherwise   known  to  the   surveyor;   (E)  any
                  encroachments  on  any  adjoining  property  by  the  building
                  structures and  improvements on the sites; and (F) if the site
                  is  described  as being on a filed map, a legend  relating the
                  survey to said map.

                           (v) Flood Certificates.  A current certification from
                  a  registered  engineer  or land  surveyor  or other  evidence
                  acceptable to the Agent with respect to each Existing Property
                  as to  whether  any  of  the  improvements  on  such  Existing
                  Property  are  located  within  any  area  designated  by  the
                  Director  of the  Federal  Emergency  Management  Agency  as a
                  "special  flood  hazard" area and if any  improvements  on the
                  Existing  Properties  are  located  within  a  "special  flood
                  hazard"  area,  evidence  of a flood  insurance  policy from a
                  company  and in an  amount  satisfactory  to the Agent for the
                  applicable portion of the premises,  naming the Agent, for the
                  benefit of the Lenders, as mortgagee.

                           (vi) Appraisals. A current appraisal of each Existing
                  Property  prepared for the benefit of the Agent by a qualified
                  appraiser   satisfactory   to  the  Agent  and  dated  a  date
                  satisfactory to the Agent,  which shall indicate a fair market
                  value for each Existing  Property  acceptable to the Agent and
                  which shall otherwise be in form and substance satisfactory to
                  the Agent.

                           (vii)  Environmental  Reports. A current report of an
                  environmental  assessment  of each  Existing  Property of such
                  scope (including but not limited to the taking of soil borings
                  and air and  groundwater  samples  and  other  above and below
                  ground  testing) as the Agent may request,  which report shall
                  (A) be certified to the Agent by a consulting  firm acceptable
                  to the Agent, (B) dated a date  satisfactory to the Agent, (C)
                  conform to the  current  minimum  standards  for the 


                                       34
<PAGE>

                  American  Society of Testing  and  Materials  (ASTM),  and (D)
                  otherwise be in form and substance satisfactory to the Agent.

                           (viii) Zoning Evidence.  Evidence satisfactory to the
                  Agent  that  each  Existing  Property,  and  the  uses of each
                  Existing Property,  are in compliance in all material respects
                  with all applicable laws, regulations and ordinances including
                  without  limitation health and environmental  protection laws,
                  erosion control ordinances, storm drainage control laws, doing
                  business  and/or  licensing  laws,  zoning laws (the  evidence
                  submitted as to zoning should  include the zoning  designation
                  made for each Existing  Property,  the permitted  uses of each
                  Existing  Property  under such zoning  designation  and zoning
                  requirements  as to  parking,  lot size,  ingress,  egress and
                  building  setbacks) and laws  regarding  access and facilities
                  for  disabled  persons  including,  but not  limited  to,  the
                  federal   Architectural   Barriers   Act,   the  Fair  Housing
                  Amendments Act of 1988, the Rehabilitation Act of 1973 and the
                  Americans with Disabilities Act of 1990.

                           (ix) Engineering Report. A current engineering report
                  with respect to each Existing Property prepared by an engineer
                  satisfactory  to the Agent in form and substance  satisfactory
                  to the Agent.

                           (x) Management Agreements.  Receipt by the Agent of a
                  subordination  and assignment  agreement  satisfactory in form
                  and  substance  to the Agent with  respect  to the  management
                  agreement, if any, entered into by the applicable Credit Party
                  with respect to each of the Existing Properties.

                  (g) Evidence of  Insurance.  Receipt by the Agent of copies of
         insurance  policies or  certificates of insurance of the Parent and its
         Subsidiaries  evidencing  liability and casualty  insurance meeting the
         requirements  set forth in the  Credit  Documents,  including,  but not
         limited to, naming the Agent as mortgagee and sole loss payee on behalf
         of the Lenders.

                  (h) Material  Adverse Effect.  There shall not have occurred a
         change since  September  30, 1996 that has had or could  reasonably  be
         expected to have a Material Adverse Effect.

                  (i)   Litigation.   There  shall  not  exist  any  pending  or
         threatened action,  suit,  investigation or proceeding against a Credit
         Party or any of their  Subsidiaries that would have or would reasonably
         be expected to have a Material Adverse Effect.

                  (j)  Officer's  Certificates.  The Agent shall have received a
         certificate  on behalf of the Parent as of the  Effective  Date stating
         that (i) the Parent and each of the its  Subsidiaries are in compliance
         with  all  existing  financial  obligations,   (ii)  all  governmental,
         shareholder  and third  party  consents  and  approvals,  if any,  with
         respect  to the  Credit  Documents  and the  transactions  contemplated
         thereby have been obtained,  (iii) no action,  suit,  investigation  or
         proceeding  is  pending  or  threatened  in any  court  or  before  any
         arbitrator or  governmental  instrumentality  that purports to effect a
         Credit Party or any transaction  contemplated by the Credit  Documents,
         or could  have or  could  be  reasonably  expected  to have a  Material
         Adverse Effect, and (iv) immediately after giving effect to this Credit
         Agreement,   the  other  Credit  Documents  and  all  the  transactions
         contemplated  therein  to occur on such  date,  (A) each of the  Credit
         Parties is Solvent,  (B) no Default or Event of Default exists, (C) all
         representations and warranties contained herein and in the other Credit
         Documents  are true and correct in all material  respects,  and (D) the
         Credit Parties are in compliance  with each of the financial  covenants
         set forth in Section 7.2.

                  (k) Fees and Expenses. Payment by the Borrower of all fees and
         expenses  owed by it to the Lenders and the Agent,  including,  without
         limitation,  payment  to the Agent of the fees set forth  herein and in
         the Fee Letter.

                  (l)  Borrowing  Base  Certificate.  Receipt  by the Agent of a
         Borrowing Base Certificate,  in the form of Exhibit 7.1(g), dated as of
         the Closing Date.


                                       35
<PAGE>

                  (m) Consents and Approvals. All governmental,  shareholder and
         third-party  consents and approvals necessary or, in the opinion of the
         Agent,  desirable  in  connection  with the Loans and the  transactions
         contemplated  under the Credit  Documents shall have been duly obtained
         and shall be in full force and effect,  and a copy of each such consent
         or approval shall have been delivered to the Agent.

                  (n)  Due  Diligence.  Completion  by the  Lenders  of all  due
         diligence with respect to the Credit Parties and their Subsidiaries and
         each Existing Property.

                  (o) Financial Commitments.  Receipt and review by the Agent of
         the terms and conditions of all financing  commitments available to the
         Credit  Parties  and their  Subsidiaries  from real  estate  investment
         trusts and any other lending institutions, specifically including IHS.

                  (p)  Subordinated  Debt  Documents.  Receipt by the Agent of a
         certified copy of all documents  evidencing the  Subordinated  Debt and
         execution of an acceptable  Subordination and  Intercreditor  Agreement
         with respect thereto,  together with an opinion of counsel (which shall
         cover  among   things,   authority,   validity,   binding   effect  and
         enforceability) satisfactory to the Agent.

                  (q)  Other.  Receipt by the  Lenders of such other  documents,
         instruments,  agreements or information as reasonably  requested by any
         Lender,   including,   but  not  limited  to,   information   regarding
         litigation,  tax,  accounting,  labor,  insurance,  pension liabilities
         (actual or contingent),  real estate leases,  material contracts,  debt
         agreements, property ownership and contingent liabilities of the Credit
         Parties and their Subsidiaries.

                  (r) Lenders'Consent. (i) The Agent shall have provided each of
         the Lenders with all of the items identified in this Section 5.1 (other
         than the Fee Letter),  and (ii) each of the Lenders shall have approved
         the form and substance of each of the items  identified in this Section
         5.1 (other than the Fee Letter).

         5.2   Conditions  to  Revovling  Loans to  Finance  Acquisition  of New
               Properties.

         The obligation of the Lenders to advance Revolving Loans to finance the
acquisition  of a New  Property  is subject  to  satisfaction  of the  following
conditions:

                  (a) Eligible  Real Estate,  Etc..  The New Property  shall (i)
         conform with the  definition of Eligible Real Estate,  (ii) be acquired
         by a  Subsidiary  of the  Borrower  or the  Borrower  and is  otherwise
         acceptable  to the Agent in its sole  discretion  and (iii)  after such
         financing, be free from all Liens other than Permitted Liens.

                  (b) Information. The Agent and the Lenders shall have received
         information   regarding   the  New  Property  in  form  and   substance
         satisfactory to the Lenders at least fifteen Business Days prior to the
         date on which the Revolving  Loans are requested.  The Agent shall have
         received  telephonic  notice of the  Borrower's  intent to deliver such
         information at least five Business Days prior to the delivery thereof.

                  (c)  Advance  Amount.  The  Revolving  Loans  advanced  by the
         Lenders shall not exceed the acquisition cost of the New Property.  The
         Borrower shall provide  information  satisfactory in form and substance
         to the Agent and the Lenders to evidence such acquisition cost.

                  (d) Real Property  Collateral.  The Agent shall have received,
         in form and substance satisfactory to the Agent:

                           (i) Mortgage.  Fully executed and notarized Mortgages
                  encumbering the fee interest of the Borrower or another Credit
                  Party in the New Property,  together with such UCC-1 financing
                  statements as the Agent shall deem appropriate with respect to
                  the New Property.


                                       36
<PAGE>

                           (ii)  Legal  Opinion.  An  opinion  of counsel in the
                  state in which the New Property is located with respect to the
                  enforceability  of the form of Mortgage and sufficiency of the
                  form of UCC-1 financing  statements to be recorded or filed in
                  such state and such other matters as the Agent may request, in
                  form and substance satisfactory to the Agent.

                           (iii) Title Policies. A Mortgage Policy issued by the
                  Title Insurance Company in an amount satisfactory to the Agent
                  with respect to the New Property,  assuring the Agent that the
                  applicable  Mortgage  creates  a valid and  enforceable  first
                  priority mortgage lien on the New Property,  free and clear of
                  all defects and encumbrances  except  Permitted  Liens,  which
                  Mortgage  Policy shall contain such coverage and  endorsements
                  as  shall  be  satisfactory  to the  Agent  and for any  other
                  matters  that the Agent may request  and  provide  affirmative
                  insurance and such  reinsurance as the Agent may request,  all
                  of the  foregoing in form and  substance  satisfactory  to the
                  Agent.

                           (iv) Surveys.  Maps or plats of an as-built survey of
                  the site of the New  Property  certified  to the Agent and the
                  Title  Insurance  Company  in a manner  satisfactory  to them,
                  dated a date satisfactory to the Agent and the Title Insurance
                  Company by an independent  professional licensed land surveyor
                  reasonably  satisfactory  to the Agent and the Title Insurance
                  Company, which maps or plats and the surveys on which they are
                  based  shall be  sufficient  to delete  any  standard  printed
                  survey exception  contained in the applicable  Mortgage Policy
                  and be made in  accordance  with the Minimum  Standard  Detail
                  Requirements  for Land Title Surveys  jointly  established and
                  adopted  by  the  American  Land  Title  Association  and  the
                  American  Congress on  Surveying  and Mapping in 1992 (or such
                  alternative standards as are satisfactory to the Agent and the
                  Title Insurance Company), and, without limiting the generality
                  of the  foregoing,  there shall be surveyed  and shown on such
                  maps,  plats or surveys the  following:  (A) the  locations on
                  such  sites  of  all  the  buildings,   structures  and  other
                  improvements  and the established  building setback lines; (B)
                  the lines of streets abutting the sites and width thereof; (C)
                  all  access  and  other  easements  appurtenant  to the  sites
                  necessary  to  use  the  sites;   (D)  all  roadways,   paths,
                  driveways,    easements,    encroachments    and   overhanging
                  projections  and  similar  encumbrances  affecting  the  site,
                  whether recorded,  apparent from a physical  inspection of the
                  sites   or   otherwise   known  to  the   surveyor;   (E)  any
                  encroachments  on  any  adjoining  property  by  the  building
                  structures and  improvements on the sites; and (F) if the site
                  is  described  as being on a filed map, a legend  relating the
                  survey to said map.

                           (v) Flood Certificates.  A current certification from
                  a  registered  engineer  or land  surveyor  or other  evidence
                  acceptable to the Agent as to whether any of the  improvements
                  on the New Property are located within any area  designated by
                  the Director of the Federal  Emergency  Management Agency as a
                  "special  flood hazard" area and if any  improvements  on such
                  parcel are  located  within a  "special  flood  hazard"  area,
                  evidence of a flood insurance  policy from a company and in an
                  amount satisfactory to the Agent for the applicable portion of
                  the  premises,  naming  the  Agent,  for  the  benefit  of the
                  Lenders, as mortgagee.

                           (vi)  Appraisals.  A  current  appraisal  of the  New
                  Property  prepared for the benefit of the Agent by a qualified
                  appraiser   satisfactory   to  the  Agent  and  dated  a  date
                  satisfactory to the Agent,  which shall indicate a fair market
                  value for the New Property  acceptable  to the Agent and which
                  shall  otherwise be in form and substance  satisfactory to the
                  Agent.

                           (vii)  Environmental  Reports. A current report of an
                  environmental  assessment  of the New  Property  of such scope
                  (including, but not limited to, the taking of soil borings and
                  air and  groundwater  samples and other above and below ground
                  testing) as the Agent may  request,  which report shall (A) be
                  certified to the Agent by a consulting  firm acceptable to the
                  Agent,  (B) be dated a date  satisfactory  to the  Agent,  (C)
                  conform to the  current  minimum  standards  for the  American
                  Society of Testing and Materials (ASTM),  and (D) otherwise be
                  in form and substance satisfactory to the Agent.


                                       37
<PAGE>

                           (viii) Zoning Evidence.  Evidence satisfactory to the
                  Agent that the New Property,  and the use of the New Property,
                  are in compliance in all material respects with all applicable
                  laws,  regulations and ordinances including without limitation
                  health and  environmental  protection  laws,  erosion  control
                  ordinances, storm drainage control laws, doing business and/or
                  licensing  laws,  zoning laws (the  evidence  submitted  as to
                  zoning should include the zoning  designation made for the New
                  Property,  the permitted  uses of such New Property under such
                  zoning designation and zoning requirements as to parking,  lot
                  size,   ingress,   egress  and  building  setbacks)  and  laws
                  regarding   access  and   facilities   for  disabled   persons
                  including,  but not  limited  to,  the  federal  Architectural
                  Barriers  Act, the Fair Housing  Amendments  Act of 1988,  the
                  Rehabilitation Act of 1973 and the Americans with Disabilities
                  Act of 1990.

                           (ix) Engineering Report. A current engineering report
                  with  respect  to the New  Property  prepared  by an  engineer
                  satisfactory  to the Agent in form and substance  satisfactory
                  to the Agent.

                           (x) Management Agreements.  Receipt by the Agent of a
                  subordination  and management  agreement in form and substance
                  satisfactory  to the  Agent  with  respect  to the  management
                  agreements, if any, related to the New Property.

                           (xi) Taxes.  Evidence  satisfactory to the Agent that
                  all note and mortgage taxes or other taxes,  where applicable,
                  associated with the acquisition of the New Property will be or
                  have been paid in full by the Borrower.

                  (e) Timing.  The funding of the Revolving  Loans  advanced for
         the  financing of the New Property  must occur within  forty-five  (45)
         days after the Agent has notified  the  Borrower  that the Lenders have
         completed  their  review  of the  New  Property  and  consented  to the
         acquisition.

                  (f) Financing of New  Properties  by a New Entity.  All of the
         conditions set forth in Section 7.12 must be satisfied.

                  (g)  Additional  Stock  Pledge.  The Agent shall have received
         from the Borrower, for the benefit of the Lenders, a pledge in form and
         substance   satisfactory  to  the  Agent  of  all  of  the  issued  and
         outstanding  shares of capital stock of the  Subsidiary of the Borrower
         intending to acquire the New Property,  together with the  certificates
         (or other agreements or instruments)  representing such shares, and all
         options, contractual or otherwise, with respect thereto.

                  (h) Lenders'  Consent.  (i) The Agent shall have provided each
         of the Lenders  with all of items  identified  in this Section 5.2, and
         (ii) each of the Lenders  shall have approved the  acquisition  of such
         New Property within ten (10) days of the Lenders' receipt of all of the
         items  identified in this Section 5.2. A Lender's failure to notify the
         Agent of its objection to the  acquisition of such New Property  within
         ten (10) days of its  receipt  of all of the items  identified  in this
         Section 5.2 shall be deemed to constitute such Lender's  consent to the
         acquisition of such New Property.

         Notwithstanding  the  foregoing  provisions of this Section 5.2, in the
event the Borrowing Base exceeds the Revolving  Committed Amount at the time the
Borrower desires to finance the acquisition of a New Property, the obligation of
the Lenders to advance  Revolving  Loans to finance such  acquisition is subject
only to (i) the consent of the Agent and (ii) the satisfaction of the conditions
identified in Section 5.2(a), (c), (d)(i), (d)(ii),  (d)(iii),  (d)(iv), (d)(v),
(f) and (g)  hereof.  Any New  Property  acquired  by any of the Credit  Parties
pursuant to the terms of this  paragraph  shall not be  considered  a Collateral
Pool Property  (meaning under no circumstances  may its value be included in the
calculation  of the Borrowing  Base) but rather will be referred to herein as an
"Abundance of Caution  Property;"  provided,  however,  upon the occurrence of a
Default or Event of Default,  the Credit Parties agree to provide the Agent, for
the benefit of the Lenders, with any and all additional due diligence items with
respect to the Abundance of Caution  Properties  as reasonably  requested by the
Agent or any of the Lenders.


                                       38
<PAGE>

         5.3 conditions to All Revolving Loans.

         In addition to the conditions  precedent stated elsewhere  herein,  the
Lenders shall not be obligated to make new Revolving  Loans nor shall an Issuing
Lender be required to issue or extend a Letter of Credit unless:

                  (a) Delivery of Notice and  Borrowing  Base  Certificate.  The
         Borrower  shall  have  delivered  (i) in the case of any new  Revolving
         Loan, (a) a Notice of Borrowing,  duly executed and  completed,  by the
         time specified in Section 2.1 and (b) a Borrowing  Base  Certificate in
         the form of Exhibit  7.1(e)  (which shall  include the  Borrowing  Base
         Value of the New Property to be financed,  if  applicable)  and (ii) in
         the case of any  Letter  of  Credit,  the  Issuing  Lender  shall  have
         received an  appropriate  request for issuance in  accordance  with the
         provisions of Section 2.2;

                  (b)  Representations  and Warranties.  The representations and
         warranties  made by the Credit Parties in any Credit  Document are true
         and correct in all material  respects at and as if made as of such date
         except to the extent they expressly relate to an earlier date;

                  (c) No Default.  No Default or Event of Default shall exist or
         be continuing either prior to or after giving effect thereto;

                  (d) No Material Adverse Effect.  There shall not have occurred
         any Material Adverse Effect;

                  (e)  Availability.  Immediately  after  giving  effect  to the
         making  of a  Revolving  Loan  (and  the  application  of the  proceeds
         thereof) or the issuance of a Letter of Credit, as the case may be, (i)
         the sum of the Revolving Loans  outstanding plus LOC Obligations  shall
         not exceed the lesser of (x) the Revolving Committed Amount and (y) the
         Borrowing Base.

The delivery of each Notice of Borrowing and each request for a Letter of Credit
shall  constitute  a  representation   and  warranty  by  the  Borrower  of  the
correctness of the matters specified in subsections (b), (c), (d) and (e).


                                   SECTION 6

                         REPRESENTATIONS AND WARRANTIES

         The Credit Parties hereby represent to the Agent and each Lender that:

         6.1 Financial Conditions.

         The financial  statements  delivered to the Lenders pursuant to Section
5.1(c) and Section  7.1(a) and (b): (a) have been  prepared in  accordance  with
GAAP and (b) present fairly the  consolidated  financial  condition,  results of
operations  and cash flows of the Credit  Parties and their  Subsidiaries  as of
such date and for such  periods.  Since  September  30, 1996,  there has been no
sale,  transfer  or  other  disposition  by any  Credit  Party  or any of  their
Subsidiaries  of any  material  part of the  business  or property of the Credit
Parties,  taken as a whole, and no purchase or other  acquisition by any of them
of any business or property  (including  any capital  stock of any other Person)
material in  relation  to the  consolidated  financial  condition  of the Credit
Parties, taken as a whole, in each case, which, is not (i) reflected in the most
recent financial  statements delivered to the Lenders pursuant to Section 5.1(c)
and Section 7.1 or in the notes thereto or (ii) otherwise permitted by the terms
of this Credit Agreement and communicated to the Agent.

         6.2 No Material Change.

         Since  December 31, 1995,  (a) there has been no  development  or event
relating to or affecting a Credit Party or any of its Subsidiaries which has had
or would be reasonably  expected to have a Material  Adverse Effect,  and (b) no
Restricted Payments have been made or declared or are contemplated by any Credit
Party or any of its Subsidiaries.


                                       39
<PAGE>

         6.3 Organization and Good Standing.

         Each Credit Party (a) is a corporation duly organized, validly existing
and in good standing under the laws of the State (or other  jurisdiction) of its
organization,  (b)  is  duly  qualified  and  in  good  standing  as  a  foreign
corporation and authorized to do business in every other jurisdiction unless the
failure to be so  qualified,  in good  standing or  authorized  would not have a
Material  Adverse  Effect  and  (c)  has  the  power  and  authority  to own its
properties  and to carry on its business as now  conducted and as proposed to be
conducted.

         6.4 Due Authorization.

         Each Credit Party (a) has the power and  authority to execute,  deliver
and perform this Credit  Agreement and the other Credit Documents to which it is
a party and to incur the obligations  herein and therein provided for and (b) is
duly authorized to, and has been authorized by all necessary action, to execute,
deliver and perform  this Credit  Agreement  and the other  Credit  Documents to
which it is a party.

         6.5 No Conflicts.

         Neither the  execution  and delivery of the Credit  Documents,  nor the
consummation of the transactions contemplated therein, nor the performance of or
compliance  with the terms and provisions  thereof by such Credit Party will (a)
violate or conflict  with any  provision of its  organizational  documents,  (b)
violate,  contravene or materially  conflict with any  Requirement of Law or any
other law, regulation (including, without limitation, Regulation U or Regulation
X), order, writ,  judgment,  injunction,  decree or permit applicable to it, (c)
violate,  contravene or conflict  with  contractual  provisions  of, or cause an
event of default under, any indenture, loan agreement,  mortgage, deed of trust,
contract or other  agreement or instrument to which it is a party or by which it
may be bound, the violation of which could have or might be reasonably  expected
to have a Material  Adverse Effect,  or (d) result in or require the creation of
any Lien (other than those  contemplated  in or created in  connection  with the
Credit Documents) upon or with respect to its properties.

         6.6 Consents.

         Except  for  consents,  approvals  and  authorizations  which have been
obtained,  no  consent,   approval,   authorization  or  order  of,  or  filing,
registration or qualification with, any court or Governmental Authority or third
party  in  respect  of any  Credit  Party is  required  in  connection  with the
execution,  delivery or performance of this Credit Agreement or any of the other
Credit Documents by such Credit Party.

         6.7 Enforcable Obligations.

         This Credit  Agreement  and the other Credit  Documents  have been duly
executed and delivered and constitute  legal,  valid and binding  obligations of
each Credit Party enforceable against such Credit Party in accordance with their
respective  terms,  except as may be limited by bankruptcy or insolvency laws or
similar laws  affecting  creditors'  rights  generally  or by general  equitable
principles.

         6.8 No Default.

         No Credit  Party,  nor any of its  Subsidiaries,  is in  default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other  agreement or  obligation  to which it is a party or by which
any of its  properties  is bound which default would have or would be reasonably
expected to have a Material  Adverse Effect.  No Default or Event of Default has
occurred or exists except as previously disclosed in writing to the Lenders.

         6.9 Ownership.

         Each Credit Party,  is the owner of, and has good and marketable  title
to, all of its respective  assets and none of such assets is subject to any Lien
other than Permitted Liens.


                                       40
<PAGE>

         6.10 Indebtedness.

         The Credit Parties have no Indebtedness  except (a) as disclosed in the
financial  statements  referenced  in Section  6.1, (b) as set forth on Schedule
6.10 and (c) as otherwise permitted by this Credit Agreement.

         6.11 Litigation.

         There  are no  actions,  suits  or  legal,  equitable,  arbitration  or
administrative  proceedings,  pending or, to the  knowledge of any Credit Party,
threatened  against,  a Credit Party or any of its Subsidiaries which could have
or might be reasonably  expected to have a Material Adverse Effect. Set forth on
Schedule  6.11  is a  summary  of all  claims,  litigation,  investigations  and
proceedings pending or, to the best knowledge of the Credit Parties,  threatened
by or against the Credit Parties or any of their  Subsidiaries or against any of
their respective properties or revenues, and none of such actions,  individually
or in the aggregate, is reasonably expected to have a Material Adverse Effect.

         6.12 Taxes.

         Each Credit Party, and each of its  Subsidiaries,  has filed, or caused
to be filed, all tax returns (federal,  state, local and foreign) required to be
filed and has paid (a) all amounts of taxes shown  thereon to be due  (including
interest and penalties)  and (b) all other taxes,  fees,  assessments  and other
governmental  charges  (including  mortgage  recording taxes,  documentary stamp
taxes and  intangibles  taxes) owing by it,  except for such taxes (i) which are
not yet delinquent or (ii) that are being  contested in good faith and by proper
proceedings,  and  against  which  adequate  reserves  are being  maintained  in
accordance  with GAAP. No Credit Party is aware of any proposed tax  assessments
against it or any of its Subsidiaries.

         6.13 Compliance with Law.

         Each Credit Party, and each of its Subsidiaries,  is in compliance with
all  Requirements  of Law and all other  laws,  rules,  regulations,  orders and
decrees (including without limitation  Environmental  Laws) applicable to it, or
to its properties,  unless such failure to comply would not have or would not be
reasonably  expected to have a Material  Adverse  Effect.  No Requirement of Law
would be reasonably expected to cause a Material Adverse Effect.

         6.14 Compliance with ERISA.

         Except as would not result in a Material Adverse Effect:

                  (a) During  the  five-year  period  prior to the date on which
         this  representation  is made or deemed  made:  (i) no ERISA  Event has
         occurred, and, to the best of each Credit Party's, each Subsidiary of a
         Credit  Party's  and  each  ERISA  Affiliate's  knowledge,  no event or
         condition  has  occurred or exists as a result of which any ERISA Event
         could  reasonably be expected to occur,  with respect to any Plan; (ii)
         no "accumulated funding deficiency," as such term is defined in Section
         302 of ERISA and  Section 412 of the Code,  whether or not waived,  has
         occurred with respect to any Plan; (iii) each Plan has been maintained,
         operated,  and funded in compliance  with its own terms and in material
         compliance  with the  provisions  of  ERISA,  the  Code,  and any other
         applicable federal or state laws; and (iv) no Lien in favor or the PBGC
         or a Plan has arisen or is reasonably likely to arise on account of any
         Plan.

                  (b) The actuarial  present value of all "benefit  liabilities"
         (as defined in Section  4001(a)(16)  of ERISA),  whether or not vested,
         under each Single  Employer Plan, as of the last annual  valuation date
         prior to the date on which this  representation  is made or deemed made
         (determined,  in each case, in  accordance  with  Financial  Accounting
         Standards Board Statement 87, utilizing the actuarial  assumptions used
         in such Plan's most recent actuarial valuation report),  did not exceed
         as of such  valuation  date the fair market value of the assets of such
         Plan.

                  (c) No Credit  Party,  Subsidiary  of a Credit  Party or ERISA
         Affiliate has incurred, or, to the best of each such party's knowledge,
         is reasonably  expected to incur, any withdrawal  liability under ERISA
         to any  


                                       41
<PAGE>

         Multiemployer   Plan  or  Multiple  Employer  Plan.  No  Credit  Party,
         Subsidiary of a Credit Party or ERISA Affiliate would become subject to
         any withdrawal liability under ERISA if any such party were to withdraw
         completely from all Multiemployer  Plans and Multiple Employer Plans as
         of the  valuation  date most closely  preceding  the date on which this
         representation is made or deemed made. No Credit Party, Subsidiary of a
         Credit Party or ERISA Affiliate has received any notification  that any
         Multiemployer Plan is in reorganization  (within the meaning of Section
         4241 of ERISA),  is  insolvent  (within the meaning of Section  4245 of
         ERISA),  or has been  terminated  (within  the  meaning  of Title IV of
         ERISA),  and no Multiemployer Plan is, to the best of each such party's
         knowledge,  reasonably expected to be in reorganization,  insolvent, or
         terminated.

                  (d) No prohibited  transaction  (within the meaning of Section
         406 of ERISA  or  Section  4975 of the  Code) or  breach  of  fiduciary
         responsibility  has occurred with respect to a Plan which has subjected
         or may subject any Credit  Party,  any  Subsidiary of a Credit Party or
         any ERISA Affiliate to any liability  under Sections 406, 409,  502(i),
         or 502(l) of ERISA or Section 4975 of the Code,  or under any agreement
         or other instrument  pursuant to which any Credit Party, any Subsidiary
         of a Credit Party or any ERISA  Affiliate  has agreed or is required to
         indemnify any person against any such liability.

                  (e) Except as set forth in the Financial Statements, no Credit
         Party,  Subsidiary of a Credit Party nor any of their ERISA  Affiliates
         has  material  liability  with  respect  to  "expected  post-retirement
         benefit  obligations"  within the meaning of the  Financial  Accounting
         Standards  Board  Statement  106. Each Plan which is a welfare plan (as
         defined in Section  3(1) of ERISA) to which  Sections  601-609 of ERISA
         and Section 4980B of the Code apply has been administered in compliance
         in all material respects with such sections.

         6.15 Organization Structure.

         (a) Set forth on Schedule  6.15 is a complete and accurate  list of all
Subsidiaries of the Borrower. Information on Schedule 6.15 includes jurisdiction
of  incorporation,  the number of shares of each class of capital stock or other
equity interests outstanding, the number and percentage of outstanding shares of
each class owned  (directly or indirectly)  by the Borrower;  and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and all other similar rights with respect  thereto.  The outstanding
capital  stock and other equity  interests of all such  Subsidiaries  is validly
issued, fully paid and non-assessable and is owned by the Borrower,  directly or
indirectly,  free and clear of all Liens.  Other  than as set forth in  Schedule
6.15 no Subsidiary of the Borrower has  outstanding  any securities  convertible
into or  exchangeable  for its  capital  stock  nor does any  such  Person  have
outstanding  any rights to  subscribe  for or to purchase or any options for the
purchase  of,  or any  agreements  providing  for the  issuance  (contingent  or
otherwise) of, or any calls,  commitments or claims of any character relating to
its capital stock. Sarasota does not have any Subsidiaries.

         (b)  Also   identified  on  Schedule  6.15  is  the   jurisdiction   of
incorporation  of the  Borrower  and  Sarasota,  the  number and  percentage  of
outstanding shares of capital stock or other equity interests outstanding in the
Borrower  and  Sarasota;  and  the  number  and  effect,  if  exercised,  of all
outstanding options,  warrants, rights of conversion or purchase and all similar
rights with respect to shares of Borrower and Sarasota.  The outstanding capital
stock and other equity interests of the Borrower and Sarasota is validly issued,
fully  paid  and  non-assessable  and  is  owned  by  the  Parent,  directly  or
indirectly,  free and clear of all Liens.  Other  than as set forth in  Schedule
6.15  neither  the  Borrower  nor  Sarasota  have   outstanding  any  securities
convertible  into or exchangeable for its capital stock nor does any such Person
have  outstanding  any rights to subscribe for or to purchase or any options for
the purchase of, or any  agreements  providing for the issuance  (contingent  or
otherwise) of, or any calls,  commitments or claims of any character relating to
its capital stock.

         6.16 Use of Proceeds; Margin Stock

         The  proceeds  of the  Loans  hereunder  will  be used  solely  for the
purposes  specified in Section  7.10.  None of the proceeds of the Loans will be
used for the purpose of purchasing or carrying any "margin  stock" as defined in
Regulation  U,  Regulation X or  Regulation G, or for the purpose of reducing or
retiring any  Indebtedness  which was  originally  incurred to purchase or carry
"margin  stock" or any "margin  security" or for any other  purpose  which might


                                       42
<PAGE>

constitute this  transaction a "purpose credit" within the meaning of Regulation
U,  Regulation X,  Regulation G or Regulation T. None of the Credit Parties owns
any "margin stock."

         6.17 Government Regulation.

         No Credit Party nor any of its  Subsidiaries  is subject to  regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 or the Interstate  Commerce Act, each as amended.
In addition,  no Credit Party nor any of its  Subsidiaries is (a) an "investment
company"  registered or required to be registered  under the Investment  Company
Act of 1940,  as amended,  or  controlled  by such a company,  or (b) a "holding
company," or a "Subsidiary company" of a "holding company," or an "affiliate" of
a "holding  company" or of a  "Subsidiary"  or a "holding  company,"  within the
meaning of the Public  Utility  Holding  Company  Act of 1935,  as  amended.  No
director, executive officer or principal shareholder of a Credit Party or any of
its Subsidiaries is a director,  executive  officer or principal  shareholder of
any Lender.  For the purposes hereof the terms "director,"  "executive  officer"
and  "principal  shareholder"  (when used with reference to any Lender) have the
respective  meanings  assigned  thereto in  Regulation  O issued by the Board of
Governors of the Federal Reserve System.

         6.18 Environmental Matters.

         (a)      Except as set forth on Schedule 6.18:

                           (i) Each of the Real Properties and all operations at
                  the  Real  Properties  are in  material  compliance  with  all
                  applicable  Environmental  Laws,  and there is no violation of
                  any  Environmental  Law with respect to the Real Properties or
                  the  businesses  operated  by a  Credit  Party  or  any of its
                  Subsidiaries (the  "Businesses"),  and there are no conditions
                  relating to the  Businesses or Real  Properties  that would be
                  reasonably  expected  to give  rise  to  liability  under  any
                  applicable Environmental Laws.

                           (ii) No Credit Party nor any of its  Subsidiaries has
                  received   any  written   notice  of,  or  inquiry   from  any
                  Governmental  Authority  regarding,  any  violation,   alleged
                  violation,  non-compliance,  liability or potential  liability
                  regarding Hazardous Materials or compliance with Environmental
                  Laws  with  regard  to  any  of  the  Real  Properties  or the
                  Businesses,   nor  does  any  Credit   Party  or  any  of  its
                  Subsidiaries  have  knowledge  that any such  notice  is being
                  threatened.

                           (iii) Hazardous  Materials have not been  transported
                  or  disposed  of  from  the  Real  Properties,  or  generated,
                  treated, stored or disposed of at, on or under any of the Real
                  Properties  or any  other  location,  in each  case by,  or on
                  behalf or with the  permission  of, any Credit Party or any of
                  its Subsidiaries in a manner that would reasonably be expected
                  to give rise to liability  under any applicable  Environmental
                  Law.

                           (iv)  No  judicial   proceeding  or  governmental  or
                  administrative  action is pending or, to the  knowledge of any
                  Credit Party or any of its Subsidiaries, threatened, under any
                  Environmental  Law to  which  any  Credit  Party or any of its
                  Subsidiaries is or will be named as a party, nor are there any
                  consent   decrees   or   other   decrees,    consent   orders,
                  administrative orders or other orders, or other administrative
                  or judicial  requirements  outstanding under any Environmental
                  Law  with   respect  to  any  Credit   Party  or  any  of  its
                  Subsidiaries,  the Real Properties or the  Businesses,  in any
                  amount    reportable    under   the   federal    Comprehensive
                  Environmental Response,  Compensation and Liability Act or any
                  analogous  state law,  except  releases in compliance with any
                  Environmental Laws.

                           (v) There has been no release or threat of release of
                  Hazardous Materials at or from the Real Properties, or arising
                  from  or  related  to  the  operations   (including,   without
                  limitation,  disposal)  of  a  Credit  Party  or  any  of  its
                  Subsidiaries   in  connection  with  the  Real  Properties  or
                  otherwise in connection with the Businesses.


                                       43
<PAGE>

                           (vi) None of the Real Properties contains,  or to the
                  best of our knowledge has previously contained,  any Hazardous
                  Materials  at, on or under the Real  Properties  in amounts or
                  concentrations that, if released,  constitute or constituted a
                  violation   of,  or  could  give  rise  to  liability   under,
                  Environmental Laws.

                           (vii) No Credit  Party has assumed any  liability  of
                  any  Person  (other  than  another  Credit  Party)  under  any
                  Environmental Law.

                  (b) Each Credit Party and each of its Subsidiaries has adopted
         procedures that are designed to (i) ensure that each such party, any of
         its operations and each of the properties owned or leased by such party
         remains  in  compliance  with  applicable  Environmental  Laws and (ii)
         minimize any liabilities or potential liabilities that each such party,
         any of its  operations  and each of the  properties  owned or leased by
         each such party may have under applicable Environmental Laws.

         6.19 Solvency.

         Each Credit  Party,  is and,  after  consummation  of the  transactions
contemplated by this Credit Agreement, will be Solvent.

         6.20 Investments.

         All Investments of the Credit Parties are either Permitted  Investments
or otherwise permitted by the terms of this Credit Agreement.

         6.21 Location of Collateral

         Set forth on Schedule  6.21(a) is a list of all Real  Properties  (with
street address,  county and state where located).  Set forth on Schedule 6.21(b)
is a list of all locations where any personal property of Sarasota, the Borrower
or any of the Borrower's  Subsidiaries  are located,  including county and state
where located.  Set forth on Schedule  6.21(c) is the chief executive office and
principal place of business of the Credit Parties.  Schedules  6.21(a),  6.21(b)
and 6.21(c) may be updated from time to time by the  Borrower by giving  written
notice thereof to the Agent.

         6.22 Disclosure.

         Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other  document,  certificate or statement  furnished to the
Lenders by or on behalf of any Credit Party in connection with the  transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a  material  fact  necessary  in order to make  the  statements  contained
therein or herein not misleading.

         6.23 Licenses, etc.

         The Credit Parties and their  Subsidiaries  have obtained,  and hold in
full  force  and  effect,  all  franchises,   licenses,  permits,  certificates,
authorizations,  qualifications,  accreditations,  easements,  rights of way and
other rights,  consents and  approvals  which are necessary for the operation of
their respective businesses as presently conducted,  except where the failure to
obtain the same would not have a Material Adverse Effect.

         6.24 No Burdensome Restrictions.

         No Credit Party nor any of its Subsidiaries is a party to any agreement
or  instrument  or subject to any other  obligation  or any charter or corporate
restriction  or any provision of any applicable  law, rule or regulation  which,
individually or in the aggregate, would have or be reasonably expected to have a
Material Adverse Effect.


                                       44
<PAGE>

         6.25 Collateral Documents.

         The Collateral Documents create valid first priority security interests
in, and first mortgage Liens on, the Collateral purported to be covered thereby,
which  security  interests  and  mortgage  Liens are and will  remain  perfected
security  interests  and  mortgage  Liens,  prior to all other  Liens other than
Permitted Liens. Each of the  representations  and warranties made by the Credit
Parties  in the  Collateral  Documents  is  true  and  correct  in all  material
respects.

         6.26 Intellectual Property.

         Each  of  the  Parent,   Sarasota,  the  Borrower  and  the  Borrower's
Subsidiaries  owns, or has the legal right to use, all  trademarks,  tradenames,
copyrights,  technology,  know-how and processes,  if any, necessary for each of
them  to  conduct  its  business  as  currently   conducted  (the  "Intellectual
Property")  except for those the  failure to own or have such legal right to use
would not be reasonably  expected to have a Material  Adverse Effect.  Except as
provided  on Schedule  6.26,  no claim has been  asserted  and is pending by any
Person  challenging or questioning the use of any such Intellectual  Property or
the validity or effectiveness of any such  Intellectual  Property,  nor does any
Credit Party know of any such claim, and the use of such  Intellectual  Property
by the Parent, Sarasota, the Borrower or any of the Borrower's Subsidiaries does
not  infringe  on  the  rights  of  any  Person,  except  for  such  claims  and
infringements that in the aggregate,  would not be reasonably expected to have a
Material Adverse Effect.

         6.27 Management Agreements.

         The Borrower,  Sarasota and/or any of the Borrower's  Subsidiaries  are
not party to any management agreement with respect to the Real Properties.


                                   SECTION 7

                             AFFIRMATIVE COVENANTS


         Each  Credit  Party  hereby  covenants  and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations,  together
with interest and fees and other obligations  hereunder,  have been paid in full
and the Commitments and Letters of Credit hereunder shall have terminated:

         7.1 Information Covenants.

         The Borrower will furnish,  or cause to be furnished,  to the Agent and
each of the Lenders:

                  (a) Annual Financial Statements.  As soon as available, and in
         any event  within 90 days  after the close of each  fiscal  year of the
         Credit Parties,  a consolidated  balance sheet and income  statement of
         the  Parent and its  Subsidiaries  as of the end of such  fiscal  year,
         together  with  related  consolidated   statements  of  operations  and
         retained earnings and of cash flows for such fiscal year, setting forth
         in comparative form consolidated figures for the preceding fiscal year,
         all such financial information described above to be in reasonable form
         and detail and (i) audited by independent  certified public accountants
         of recognized national standing reasonably  acceptable to the Agent and
         whose  opinion  shall be to the effect that such  financial  statements
         have been  prepared in  accordance  with GAAP  (except for changes with
         which such accountants concur) and shall not be limited as to the scope
         of the audit or  qualified  in any  manner  and (ii)  accompanied  by a
         certificate of the chief financial  officer of the Parent to the effect
         that such annual  financial  statements  fairly present in all material
         respects the financial condition of the Parent and its Subsidiaries and
         have  been  prepared  in  accordance  with  GAAP,  subject  to  changes
         resulting from audit adjustments.  Furthermore,  the Parent shall cause
         its  Subsidiaries  to  furnish to the  Lenders  all  audited  financial
         statements that are prepared on behalf of any such entities.


                                       45
<PAGE>

                  (b) Quarterly Financial Statements.  As soon as available, and
         in any event  within 45 days after the close of each fiscal  quarter of
         the Parent,  a consolidated  balance sheet and income  statement of the
         Parent  and its  Subsidiaries  as of the end of  such  fiscal  quarter,
         together  with  related  consolidated   statements  of  operations  and
         retained  earnings  and of cash flows for such  fiscal  quarter in each
         case setting forth in comparative form consolidated figures for (i) the
         corresponding period of the preceding fiscal year and (ii) management's
         proposed  budget  for  such  period,  all  such  financial  information
         described  above to be in  reasonable  form and detail  and  reasonably
         acceptable to the Agent,  and accompanied by a certificate of the chief
         financial  officer  of the  Parent to the  effect  that such  quarterly
         financial  statements  fairly  present  in all  material  respects  the
         financial  condition of the Parent and its  Subsidiaries  and have been
         prepared in accordance  with GAAP,  subject to changes  resulting  from
         audit and normal year-end audit adjustments.

                  (c) Quarterly Operating Statements.  As soon as available, and
         in any event  within 15 days after the close of each fiscal  quarter of
         the Credit  Parties,  an operating  statement for each  Collateral Pool
         Property and each  Abundance of Caution  Property as of the end of such
         fiscal quarter,  together with the Average Economic  Occupancy Rate for
         the applicable Collateral Pool Property and the applicable Abundance of
         Caution Property as of the end of such fiscal quarter, setting forth in
         detail the earnings and expenses of each  Collateral  Pool Property and
         each Abundance of Caution  Property for such fiscal  quarter,  together
         with  comparative  form figures for the preceding  fiscal quarter,  all
         such  information  to be in reasonable  form and detail and  reasonably
         acceptable  to the  Agent  accompanied  by a  certificate  of the chief
         financial  officer  of  the  Borrower  that  such  quarterly  operating
         statements  fairly  present  in all  material  respects  the  financial
         condition of the applicable Collateral Pool Property and the applicable
         Abundance of Caution Property.

                  (d) Monthly Operating Statements. As soon as available, and in
         any event  within 15 days after the close of each  calendar  month,  an
         operating   statement  for  each  Collateral  Pool  Property  and  each
         Abundance  of Caution  Property as of the end of each  calendar  month,
         together with the Economic Occupancy Rate for the applicable Collateral
         Pool Property and  applicable  Abundance of Caution  Property as of the
         end of such  calendar  month,  setting forth in detail the earnings and
         expenses of each Collateral Pool Property and each Abundance of Caution
         Property  for such  calendar  month,  together  with  comparative  form
         figures for the preceding calendar month, all such information to be in
         reasonable  form and  detail  and  reasonably  acceptable  to the Agent
         accompanied  by a  certificate  of the chief  financial  officer of the
         Borrower that such monthly  operating  statements fairly present in all
         material respects the financial condition of the applicable  Collateral
         Pool Property and the applicable Abundance of Caution Property.

                  (e)  Officer's  Certificate.  At the time of  delivery  of the
         financial  statements  and other  statements  provided  for in Sections
         7.1(a),  7.1(b) and 7(c) above,  a certificate  of the chief  financial
         officer of the Borrower,  substantially  in the form of Exhibit 7.1(d),
         (i) demonstrating  compliance with the financial covenants contained in
         Section  7.2 by  calculation  thereof as of the end of each such fiscal
         period and (ii) stating that no Default or Event of Default exists,  or
         if any Default or Event of Default  does exist,  specifying  the nature
         and extent  thereof and what action the Borrower  proposes to take with
         respect  thereto.  The  Borrower  shall  also  deliver  a copy  of such
         certificate to the Agency Services Address.

                  (f) Accountant's  Certificate and Reports.  Concurrently  with
         the  delivery of the  financial  statements  referred to in  subsection
         7.1(a)  above,  a  certificate  of  the  independent  certified  public
         accountants  reporting  on such  financial  statements  stating that in
         making the examination  necessary therefor no knowledge was obtained of
         any  Default  or  Event  of  Default,   except  as  specified  in  such
         certificate.

                  (g) Borrowing Base  Certificate.  Within 15 days after the end
         of each fiscal quarter,  a Borrowing Base  Certificate as of the end of
         the immediately preceding quarter, substantially in the form of Exhibit
         7.1(g) and certified by the chief financial  officer of the Borrower to
         be true and correct as of such date.

                  (h) Reports.  Promptly upon  transmission or receipt  thereof,
         (i) copies of any filings  and  registrations  with,  and reports to or
         from, the Securities and Exchange Commission,  or any successor agency,
         and copies of all financial statements,  proxy statements,  notices and
         reports as any Credit  Party or any of its  Subsidiaries  shall send to
         its  shareholders  generally,  (ii)  copies  of  any  and  all  notices
         (regardless of form) or 


                                       46
<PAGE>

         other  reports or other  information  provided to or from any licensing
         and/or certifying agency or other  Governmental  Authority with respect
         to a Collateral  Pool  Property or Abundance of Caution  Property,  and
         (iii) upon the  written  request of the Agent,  all reports and written
         information  to and from the  United  States  Environmental  Protection
         Agency,  or any state or local  agency  responsible  for  environmental
         matters,   the   United   States   Occupational   Health   and   Safety
         Administration, or any state or local agency responsible for health and
         safety  matters,  or any successor  agencies or authorities  concerning
         environmental, health or safety matters.

                  (i) Notices.  Upon a Credit Party obtaining knowledge thereof,
         such Credit Party will give written notice to the Agent  immediately of
         (i) the occurrence of an event or condition  consisting of a Default or
         Event of Default,  specifying the nature and existence thereof and what
         action the Borrower proposes to take with respect thereto, and (ii) the
         occurrence of any of the following  with respect to any Credit Party or
         any of  its  Subsidiaries  (A)  the  pendency  or  commencement  of any
         litigation,  arbitral  or  governmental  proceeding  against any Credit
         Party or any of its  Subsidiaries  which if adversely  determined would
         have or would be reasonably expected to have a Material Adverse Effect,
         or (B) the institution of any  proceedings  against any Credit Party or
         any of its  Subsidiaries  with  respect to, or the receipt of notice by
         such Person of potential liability or responsibility for violation,  or
         alleged  violation  of  any  federal,  state  or  local  law,  rule  or
         regulation,  including  but not limited  to,  Environmental  Laws,  the
         violation of which would have or would be reasonably expected to have a
         Material Adverse Effect.

                  (j)  ERISA.  Upon  a  Credit  Party  or  any  ERISA  Affiliate
         obtaining  knowledge thereof,  the Borrower will give written notice to
         the Agent promptly (and in any event within five Business Days) of: (i)
         any event or condition,  including,  but not limited to, any Reportable
         Event,  that  constitutes,  or might reasonably lead to, a ERISA Event;
         (ii) with respect to any  Multiemployer  Plan, the receipt of notice as
         prescribed in ERISA or otherwise of any withdrawal  liability  assessed
         against a Credit Party or any ERISA  Affiliate,  or of a  determination
         that any  Multiemployer  Plan is in  reorganization  or insolvent (both
         within the  meaning of Title IV of  ERISA);  (iii) the  failure to make
         full payment on or before the due date (including  extensions)  thereof
         of all amounts which a Credit Party or any ERISA  Affiliate is required
         to  contribute  to each Plan  pursuant  to its terms and as required to
         meet the minimum funding  standard set forth in ERISA and the Code with
         respect  thereto;  or (iv) any change in the funding status of any Plan
         that could have a Material Adverse Effect; together, with a description
         of any such  event or  condition  or a copy of any  such  notice  and a
         statement  by the chief  financial  officer of a Credit  Party  briefly
         setting forth the details regarding such event,  condition,  or notice,
         and the action, if any, which has been or is being taken or is proposed
         to be taken  by a Credit  Party or any  ERISA  Affiliate  with  respect
         thereto.  Promptly upon request,  the Borrower  shall furnish the Agent
         and the Lenders with such additional information concerning any Plan as
         may be reasonably requested,  including,  but not limited to, copies of
         each annual  report/return (Form 5500 series), as well as all schedules
         and attachments  thereto required to filed with the Department of Labor
         and/or the  Internal  Revenue  Service  pursuant to ERISA and the Code,
         respectively, for each "plan year" (within the meaning of Section 3(39)
         of ERISA).

                  (k) Environmental.

                           (i)  Subsequent  to a notice  from  any  Governmental
                  Authority  that would  reasonably  cause concern or during the
                  existence of an Event of Default, and upon the written request
                  of the  Agent,  the  Borrower  will  furnish  or  cause  to be
                  furnished to the Agent, at the Borrower's  expense, an updated
                  report of an  environmental  assessment of  reasonable  scope,
                  form and depth, including, where appropriate, invasive soil or
                  groundwater sampling, by a consultant reasonably acceptable to
                  the Agent as to the nature and extent of the  presence  of any
                  Hazardous  Materials on any property owned, leased or operated
                  by Credit Party and as to the compliance by the Credit Parties
                  with Environmental Laws. If the Borrower fails to deliver such
                  an environmental  report within  seventy-five  (75) days after
                  receipt of such written request then the Agent may arrange for
                  same,  and the  Borrower  hereby  grants  to the Agent and its
                  representatives access to the Real Properties and a license of
                  a scope  reasonably  necessary to undertake such an assessment
                  (including,  where  appropriate,  invasive soil or groundwater
                  sampling).  The reasonable cost of any assessment arranged for
                  by the Agent pursuant to


                                       47
<PAGE>

                  this  provision  will be payable by the Borrower on demand and
                  added to the obligations secured by the Collateral Documents.

                           (ii) Each Credit  Party will conduct and complete all
                  investigations,   studies,   sampling,  and  testing  and  all
                  remedial,  removal, and other actions necessary to address all
                  Hazardous  Materials  on, from, or affecting any real property
                  owned or leased by a Credit  Party to the extent  necessary to
                  be in  compliance  with all  Environmental  Laws and all other
                  applicable federal, state, and local laws, regulations,  rules
                  and  policies  and  with  the  orders  and  directives  of all
                  Governmental  Authorities  exercising  jurisdiction  over such
                  real  property  to the  extent  any  failure  would have or be
                  reasonably expected to have a Material Adverse Effect.

                  (l) Capital Expenditure  Report. As soon as available,  and in
         any event within 15 days after the close of each fiscal  quarter of the
         Borrower,  a Capital Expenditure budget for each of the Collateral Pool
         Properties  and each of the Abundance of Caution  Properties  detailing
         the Capital  Expenditures  planned by the Borrower or its  Subsidiaries
         with respect to each of the Collateral  Pool Properties and each of the
         Abundance of Caution Properties for the succeeding fiscal quarter.

                  (m) Other  Information.  With  reasonable  promptness upon any
         such request, such other information regarding the business, properties
         or financial condition of the Credit Parties as the Agent or any Lender
         may reasonably request.

         7.2 Financial Covenants.

                  (a) Liquidity.  The Parent,  the Borrower and the other Credit
         Parties on a  consolidated  basis shall at all times maintain (i) prior
         to May 1, 1997 cash and Cash  Equivalents in the aggregate in excess of
         $5,000,000,  (ii) from May 1, 1997  through June 30, 1997 cash and Cash
         Equivalents  in the  aggregate in excess of  $6,000,000  and (iii) from
         July 1, 1997 and thereafter cash and Cash  Equivalents in the aggregate
         in excess of $7,000,000.

                  (b)  Fixed  Charge   Coverage   Ratio.   The  Parent  and  its
         Subsidiaries  on a  consolidated  basis shall maintain as of the end of
         each fiscal  quarter shown below,  a Fixed Charge  Coverage Ratio of at
         least:

         March 31, 1997                                                0.75:1.0
         June 30, 1997                                                 0.75:1.0
         September 30, 1997                                            0.75:1.0
         December 31, 1997                                             0.75:1.0
         March 31, 1998                                                1.25:1.0
         June 30, 1998                                                 1.25:1.0
         September 30, 1998 and each fiscal quarter ending
          thereafter                                                   1.30:1.0


                  (c) Senior Leverage Ratio.  The Parent and its Subsidiaries on
         a  consolidated  basis  shall  maintain,  as of the end of each  fiscal
         quarter shown below, a Senior Leverage Ratio of at least:

          March 31, 1998                                               6.50:1.00
          June 30, 1998                                                6.25:1.00
          September 30, 1998                                           6.15:1.00
          December 31, 1998 and each fiscal quarter ending 
           thereafter
                                                                       6.10:1.00

                  (d) Net  Worth.  At all times the Net Worth of the  Parent and
         its Subsidiaries on a consolidated  basis shall be no less than the sum
         of (i) Fifty Five  Million  ($55,000,000)  plus (ii) an amount equal to
         ninety percent (90%) of the Net Cash Proceeds from any Equity  Issuance
         occurring subsequent to the Closing Date.


                                       48
<PAGE>

         7.3 Preservation of Existence and Franchises.

         Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its  existence,  rights,  franchises and authority
except as permitted by Section 8.4 or except (with respect to rights, franchises
and  authority)  where  the  failure  to do so would  not have or be  reasonably
expected to have a Material Adverse Effect.

         7.4 Books and Records.

         Each of the Credit  Parties will, and will cause its  Subsidiaries  to,
keep complete and accurate books and records of its  transactions  in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).

         7.5 Compliance with Law.

         Each of the Credit  Parties will, and will cause its  Subsidiaries  to,
comply with all laws, rules, regulations,  orders, covenants and restrictions of
record,  and all applicable  material  restrictions  imposed by all Governmental
Authorities,  applicable to it and its property (including,  without limitation,
Environmental  Laws  and  ERISA)  if  noncompliance  with any  such  law,  rule,
regulation,  order, covenant or restriction would have or reasonably be expected
to have a Material Adverse Effect.

         7.6 Payment of Taxes and Other Indebtedness.

         Each of the Credit  Parties will, and will cause its  Subsidiaries  to,
pay, settle or discharge (a) all taxes,  assessments and governmental charges or
levies  imposed  upon it,  or upon its  income  or  profits,  or upon any of its
properties,   before  they  shall  become  delinquent,  (b)  all  lawful  claims
(including  claims for labor,  materials and supplies)  which, if unpaid,  might
give rise to a Lien upon any of its  properties,  and (c)  except as  prohibited
hereunder,  all of its other  Indebtedness  as it shall  become  due;  provided,
however,  that a Credit Party or its Subsidiary shall not be required to pay any
such  tax,  assessment,  charge,  levy,  claim  or  Indebtedness  which is being
contested  in good faith by  appropriate  proceedings  and as to which  adequate
reserves  therefor have been  established  in accordance  with GAAP,  unless the
failure to make any such  payment (i) would give rise to an  immediate  right to
foreclose on a Lien securing such amounts or (ii) would have a Material  Adverse
Effect.

         7.7 Insurance.

         Each of the Credit Parties will, and will cause its Subsidiaries to, at
all times  maintain  in full  force and  effect  insurance  (including  worker's
compensation  insurance,  liability  insurance,  casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such  deductibles or  self-insurance  retentions as are in accordance  with
normal industry  practice.  All liability  policies of the Credit Parties (other
than  the  Parent)  shall  have the  Agent,  on  behalf  of the  Lenders,  as an
additional  insured and all casualty policies shall have the Agent, on behalf of
the Lenders, as mortgagee and loss payee with respect to the Collateral.

In the event there occurs any material  loss,  damage to or  destruction  of the
Collateral  or any part  thereof,  the  Credit  Party  that  owns  such  item of
Collateral  shall promptly give written  notice  thereof to the Agent  generally
describing  the nature and extent of such damage or  destruction.  Subsequent to
any loss,  damage to or destruction of the Collateral of any Credit Party or any
part thereof,  such Credit Party, whether or not the insurance proceeds, if any,
received on account of such damage or  destruction  shall be sufficient for that
purpose,  at such Credit  Party's  cost and  expense,  will  promptly  repair or
replace the  Collateral of such Credit Party so lost,  damaged or destroyed.  In
the event such Credit Party shall receive any insurance proceeds, as a result of
any loss,  damage or  destruction  with respect to the  Collateral,  such Credit
Party will  immediately  pay over such proceeds to the Agent as cash  collateral
for the Credit Party  Obligations.  The Agent  agrees to release such  insurance
proceeds to such Credit Party for  replacement  or restoration of the portion of
the  Collateral  lost,  damaged or destroyed if (A) the value of the  Collateral
Pool Property (not including the value of any Collateral  Pool Property that was
a part of the  Collateral  that was lost,  damaged  or  destroyed)  exceeds  the
Revolving  Committed Amount, (B) within 15 days from the date the Agent receives
such insurance  proceeds,  the Agent 


                                       49
<PAGE>

has  received  written  application  for such  release  from such Credit  Party,
together with evidence  reasonably  satisfactory to it that the Collateral lost,
damaged or destroyed  has been or will be replaced or restored to its  condition
immediately  prior to the loss,  destruction  or other event  giving rise to the
payment  of such  insurance  proceeds  and (C) on the  date of such  release  no
Default or Event of Default exists. If the conditions in the preceding  sentence
are not met, the Agent shall,  on the first  Business Day subsequent to the date
30 days after it received such insurance proceeds, apply such insurance proceeds
as a mandatory  prepayment of the Credit Party  Obligations  for  application in
accordance  with the terms of Section  3.3(c).  All insurance  proceeds shall be
subject to the security  interest of the Agent,  for the benefit of the Lenders,
under the Collateral Documents.

The present insurance  coverage of the Credit Parties (other than the Parent) is
outlined as to  carrier,  policy  number,  expiration  date,  type and amount on
Schedule 7.7(a),  as Schedule 7.7(a) may be amended from time to time by written
notice to the Agent.

         7.8 Maintenance of Property

         Each of the Credit  Parties will  maintain and preserve its  properties
and equipment in good repair, working order and condition,  normal wear and tear
excepted and casualty and condemnation  excepted,  and will make, or cause to be
made, in such properties and equipment from time to time all repairs,  renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper,  to the extent and in the manner customary for companies in
similar businesses.

         7.9 Performance of Obligations.

         Each of the Credit Parties will perform in all material respects all of
its  obligations  under  the  terms  of  all  material  agreements,  indentures,
mortgages,  security agreements or other debt instruments to which it is a party
or by which it is bound.

         7.10 Use of Proceeds.

         The Borrower will use the proceeds of the Loans solely (a) to repay all
loans and  obligations  owing to the Agent  pursuant to that certain  promissory
note dated January 24, 1997, (b) to finance the  acquisition of New  Properties,
and  (c)  for  other  general  corporate   purposes  of  the  Borrower  and  its
Subsidiaries;  provided,  however,  that (i) the sum of the aggregate  principal
amount of  outstanding  Revolving  Loans made and  Letters of Credit  issued for
general corporate purposes of the Borrower and its Subsidiaries shall not exceed
$5,000,000.

         7.11 Audits/Inspections.

         Upon reasonable  notice and during normal  business hours,  each Credit
Party will, and will cause its Subsidiaries to, permit representatives appointed
by  the  Agent  or  any  Lender,  including,  without  limitation,   independent
accountants,  agents,  attorneys and appraisers to visit and inspect such Credit
Party's or such Subsidiary's property,  including,  without limitation, the Real
Properties,  including  its books  and  records,  its  accounts  receivable  and
inventory, its facilities and its other business assets, and to make photocopies
or  photographs  thereof  and to write  down and  record  any  information  such
representative  obtains  and  shall  permit  the  Agent or any  Lender  or their
respective representatives to investigate and verify the accuracy of information
provided  to the  Lenders and to discuss  all such  matters  with the  officers,
employees and representatives of the Credit Parties and their Subsidiaries.

         7.12 Additional Credit Parties.

         At the time any  Subsidiary of the Borrower (not already a Credit Party
hereunder) desires to purchase a New Property,  the Borrower shall so notify the
Agent and  immediately  shall  cause such  Subsidiary  to (a)  execute a Joinder
Agreement in  substantially  the same form as Exhibit 7.12,  (b) execute any and
all  necessary  mortgages,  deeds  of  trust,  deeds  to  secure  debt or  other
appropriate real estate collateral documentation in a form substantially similar
to the Mortgages,  with appropriate  covenants as necessary and (c) deliver such
other  documentation as the Agent may reasonably  request in connection with the
foregoing,   including,   without   limitation,   appropriate   UCC-1  financing


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<PAGE>

statements,  real  estate  title  insurance  policies,   environmental  reports,
certified resolutions and other organizational and authorizing documents of such
Subsidiary  and favorable  opinions of counsel to such  Subsidiary  (which shall
cover,  among  other  things,  the  legality,   validity,   binding  effect  and
enforceability of the documentation referred to above), all in form, content and
scope reasonably satisfactory to the Agent.

         7.13 Collateral.

         If  subsequent to the Closing Date,  any of the Credit  Parties  (other
than the Parent) (a)  acquires or leases any real  property or (b)  acquires any
personal  property  required to be  delivered  by the  Collateral  Documents  or
located in a new  jurisdiction not set forth on Schedule  6.21(b),  the Borrower
shall  promptly  notify the Agent of same.  The Credit  Parties  shall take such
action as  requested  by the Agent,  at the  Borrower's  expense,  to ensure the
Agent,  for the benefit of the Lenders,  has a first priority Lien in all assets
of the Credit Parties (other than the Parent), subject only to Permitted Liens.

         7.14 Environmental Indemnity.

         The Credit  Parties agree that they will  reimburse the Lenders for and
hereby  hold the Lenders  harmless  from all fines or  penalties  made or levied
against any of the Lenders by any  Governmental  Authority  as a result of or in
connection  with (i) the use of Materials of  Environmental  Concern at the Real
Properties, (ii) the use of Materials of Environmental Concern at the facilities
thereon,  or (iii)  the use,  generation,  storage,  transportation,  discharge,
release  or  handling  of any  Materials  of  Environmental  Concern at the Real
Properties,  or as a result of any  release of any  Materials  of  Environmental
Concern  onto  the  ground  or into  the  water  or air  from or upon  the  Real
Properties at any time.  The Credit  Parties also agree that they will reimburse
the Lenders for and  indemnify  and hold the Lenders  harmless  from any and all
costs,  expenses  (including  reasonably  attorneys'  fees)  and for  all  civil
judgments or penalties incurred entered,  assessed, or levied against any of the
Lenders  as a  result  of  any of  the  Credit  Parties'  use  of  Materials  of
Environmental  Concern at the Real  Properties  or as a result of any release of
any Materials of Environmental Concern on the ground or into the water or air by
any of the Credit Parties from or upon the Real Properties.  Such  reimbursement
or indemnification  shall include but not be limited to any and all judgments or
penalties  to recover  the costs of  cleanup  of any such  release by any of the
Credit Parties from or upon Real Properties and all reasonable expenses incurred
by the Lenders as a result of such a civil action,  including but not limited to
reasonable  attorneys' fees. The Credit Parties'  obligations under this section
shall survive the repayment of the Loans and any deed in lieu of  foreclosure or
any foreclosure of the Mortgage  Documents.  The  environmental  indemnities set
forth in this  paragraph  shall not be extended to any claim or liability of any
of the Lenders arising from the gross negligence or willful misconduct of any of
the Lenders  occurring  during any of the Lender's (i) actual  possession of the
Real  Properties  prior to  foreclosure  or  exercise of a power of sale or (ii)
ownership of the Real  Properties  after a foreclosure or exercise of such power
of sale.

         7.15 Abundance of Caution Properties.

         The  Credit  Parties  agree  that  each  of the  Abundance  of  Caution
Properties  shall satisfy at all times all of the  Collateral  Pool  Eligibility
Conditions.

         7. 16 Environmental Assessment.

         The Credit Parties hereby agree that the Agent shall have the right (at
the cost and  expense of the Credit  Parties)  to order a current  environmental
assessment of any of the Collateral Pool Properties upon the reasonable  request
of the Required Lenders.

         7.17 Expansion of Units.

         The  Credit  Parties  hereby  agree  that  upon the  completion  of the
construction of the expansion Units at the (i) Churchland  Facility and (ii) the
Gloucester Facility,  the Credit Parties (a) shall provide the Agent with copies
of all lien  affidavits  and other  documentation  requested by the Agent in its
sole  discretion  with respect to each such 


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<PAGE>

facility and (b) agree to cause the Title Company to issue an endorsement to the
applicable  Mortgage  Policies  satisfactory  in form and substance to the Agent
upon the request of the Agent in its sole discretion.


                                   SECTION 8

                               NEGATIVE COVENANTS


         Each  Credit  Party  hereby  covenants  and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations,  together
with interest, fees and other obligations hereunder,  have been paid in full and
the Commitments hereunder shall have terminated:

         8.1 Indebtedness.

         No Credit  Party  (other than the Parent)  will,  nor will the Borrower
permit any of its Subsidiaries to, contract,  create, incur, assume or permit to
exist any Indebtedness, except:

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

                  (b) Indebtedness existing as of the Closing Date as referenced
         in Section 6.10 (and renewals,  refinancings  or extensions  thereof on
         terms and  conditions no less  favorable to such Credit Party than such
         existing Indebtedness);

                  (c) the  refinancing  of Loans  incurred  by the  Borrower  to
         finance the  acquisition of an Abundance of Caution  Property  provided
         that (i) the Loans used by the  Borrower  to  originally  finance  such
         Abundance  of Caution  Property  are repaid in full to the Lenders with
         the proceeds of such  refinancing,  (ii) no Default or Event of Default
         exists,  (iii)  after the  refinancing  of such  Abundance  of  Caution
         Property  has taken  effect  (including  giving  effect to the releases
         referred to in the  following  paragraph),  none of the Credit  Parties
         shall  be the  fee  holder  of such  refinanced  Abundance  of  Caution
         Property and (iv) such indebtedness shall be non-recourse to all of the
         Credit Parties.

                  In connection  with a  refinancing  of an Abundance of Caution
         Property in accordance with the conditions  identified in the preceding
         paragraph,  the Agent  agrees that it shall (and the Lenders  authorize
         the Agent to), at the  Borrower's  request and expense,  deliver to the
         Borrower such documentation as is reasonably  necessary to evidence the
         release  (i) of the Agent's  security  interest  in such  Abundance  of
         Caution  Property and (ii) in the event the Credit Party which formerly
         held fee simple title to such  Abundance of Caution  Property no longer
         owns  or  operates  an  assisted  living  facility  on one of the  Real
         Properties,   provide  documentation  as  is  reasonably  necessary  to
         evidence the release of such Credit  Party from all of its  liabilities
         and obligations under this Credit Agreement.

         8.2 Liens.

         No Credit  Party  (other than the Parent)  will,  nor will the Borrower
permit any of its Subsidiaries to, contract,  create, incur, assume or permit to
exist  any Lien  with  respect  to any of its  property  or  assets  of any kind
(whether real or personal,  tangible or intangible),  whether now owned or after
acquired, except for Permitted Liens.

         8.3 Nature of Business.

         The  Credit  Parties  will  not,  nor  will  they  permit  any of their
Subsidiaries  to, alter the character of its business from that  conducted as of
the Closing Date or engage in any business other than the business  conducted as
of the Closing Date.


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<PAGE>

         8.4 Consolidation and Merger.

         The Credit  Parties will not,  nor will the Borrower  permit any of its
Subsidiaries  to,  enter  into any  transaction  of merger or  consolidation  or
liquidate,   wind  up  or  dissolve   itself  (or  suffer  any   liquidation  or
dissolution);  provided that  notwithstanding  the foregoing  provisions of this
Section 8.4, any Subsidiary of the Borrower may be merged or  consolidated  with
or into  the  Borrower  if (a)  the  Borrower  is the  continuing  or  surviving
corporation; (b) the Agent is given prior written notice of such action, and the
Borrower and such Subsidiary execute and deliver such documents, instruments and
certificates  as the Agent may request in order to maintain the  perfection  and
priority of the Liens on the assets of the Credit Parties;  and (c) after giving
effect thereto no Default or Event of Default exists.

         8.5 Sale or Lease of Assets.

         Neither the Credit  Parties,  nor any of the  Borrower's  Subsidiaries,
will (other than in the  ordinary  course of  business  for fair  consideration)
convey,  sell, lease,  transfer or otherwise dispose of, in one transaction or a
series of  transactions,  all or any part of its business or assets  whether now
owned or hereafter acquired.

         Notwithstanding the foregoing paragraph, a Credit Party may sell any of
the Collateral  Pool  Properties and obtain the release of the Agent's  security
interest with respect to such Collateral  Pool Property  provided (i) no Default
or Event  of  Default  exists  at the time of such  sale and  release,  (ii) the
Borrowing  Base shall  continue to exceed the Revolving  Committed  Amount after
giving  effect to such sale and release and (iii)  after  giving  effect to such
sale and release,  the Collateral  Pool continues to consist of at least six (6)
Real  Properties.  Upon the sale of assets  permitted  by this  Section 8.5, the
Agent shall deliver to the Borrower (and the Lenders hereby  authorize the Agent
to),  upon  the  Borrower's  request  and  at  the  Borrower's   expense,   such
documentation as is reasonably  necessary to evidence the release of the Agent's
security interest in such assets, including,  without limitation,  amendments or
terminations of UCC financing statements.

         8.6 Advances, Investments and Loans.

         Neither the Credit Parties,  nor any of their  Subsidiaries,  will make
any Investments except for Permitted Investments.

         8.7 Restricted Payments.

         The  Credit  Parties  will  not,  nor  will  they  permit  any of their
Subsidiaries to, directly or indirectly, make or permit any Restricted Payments;
provided,  however,  notwithstanding  the  above,  the  Borrower  or  any of its
Subsidiaries  may pay  dividends  to the Parent  provided no Default or Event of
Default  exists or will occur as a result of such  payment of  dividends  to the
Parent.

         8.8 Subordinated Debt.

         No Credit Party will (a) make or offer to make any  principal  payments
with  respect to the  Subordinated  Debt other  than  those  payments  permitted
pursuant to the Subordination and Intercreditor  Agreement;  (b) redeem or offer
to redeem any of the  Subordinated  Debt;  or (c) deposit any funds  intended to
discharge or defease any or all of the Subordinated  Debt. The Subordinated Debt
may not be amended or modified in any manner  without the prior written  consent
of the Required Lenders.

         8.9 Transactions with Affiliates.

         No Credit  Party will,  nor will they permit any of their  Subsidiaries
to,  enter into or permit to exist any  transaction  or series of  transactions,
whether or not in the ordinary course of business,  with any officer,  director,
shareholder,  Subsidiary  or  Affiliate  other  than  on  terms  and  conditions
substantially  as favorable as would be obtainable in a comparable  arm's-length
transaction  with  a  Person  other  than  an  officer,  director,  shareholder,
Subsidiary or Affiliate.


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<PAGE>

         8.10 Fiscal Year; Organizational Documents.

         No Credit  Party  will (a)  change  its  fiscal  year or (b) change its
articles or certificate of incorporation or its bylaws if such change would have
or be reasonably expected to have a Material Adverse Effect.

         8.11 Limitations.

         None of the Credit  Parties (other than the Parent) will, nor will they
permit any of their Subsidiaries to, 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 such
Person  to (a) pay  dividends  or make  any  other  distribution  on any of such
Person's  capital stock,  (b) pay any  Indebtedness  owed to the Borrower or any
other Credit Party,  (c) make loans or advances to any other Credit Party or (d)
transfer any of its property to any other Credit Party,  except for encumbrances
and  restrictions  existing under or by reason of (i) this Credit  Agreement and
the other Credit Documents, (ii) the Subordinated Debt and (iii) Requirements of
Law.

         8.12 Negative Pledges.

         None of the Credit  Parties (other than the Parent) will, nor will they
permit any of their Subsidiaries to, enter into, assume or become subject to any
agreement prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets,  whether now owned or hereafter acquired, or
requiring the grant of any security for such obligation if security is given for
some other obligation.

         8.13 Creation of Subsidiaries.

         The Credit  Parties  (other than the Parent) shall not form or organize
any additional subsidiary  corporations other than those subsidiary corporations
of the Borrower  which will acquire New  Properties  and become  Credit  Parties
hereunder.

         8.14 Issuance and Sale of Subsidiary Stock.

         The Borrower will not, nor will it permit any of its  Subsidiaries  to,
except to qualify directors 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. Furthermore, the Parent will
not, nor will it permit Sarasota to, except to qualify  directors where required
by applicable law, sell, transfer or otherwise dispose of, any shares of capital
stock of Sarasota or permit Sarasota to issue, sell or otherwise dispose of, any
shares of capital stock of Sarasota.

         8.15 Sale Leasebacks.

         The Credit  Parties  (other  than the  Parent)  will not,  nor will the
Borrower permit any of its  Subsidiaries  to, directly or indirectly,  become or
remain  liable as lessee or as  guarantor  or other  surety with  respect to any
lease,  whether an Operating Lease or a Capital Lease, of any Property  (whether
real or personal or mixed),  whether now owned or hereafter acquired,  (a) which
such  Person  has sold or  transferred  or is to sell or  transfer  to any other
Person  other than a Credit  Party or (b) which such  Person  intends to use for
substantially  the same purpose as any other  Property which has been sold or is
to be sold or transferred by such Person to any other Person in connection  with
such lease.

         8.16 Ownership of Assets.

         None of the Credit  Parties  (other than the Parent) will, nor will the
Borrower  permit any of its  Subsidiaries  to, (i) own any assets other than the
Collateral  Pool  Properties  and the Abundance of Caution  Properties and those
items of furniture,  equipment, supplies and other assets customarily associated
with the ownership of assisted living facilities and (ii) engage in any business
activities  other  than the  operation  of the  Collateral  Pool  Properties  or
Abundance of Caution Properties, as applicable.


                                       54
<PAGE>

         8.17 Serviceable Beds.

         None of the  Credit  Parties  will,  nor will they  permit any of their
Subsidiaries  to,  reduce the number of  Serviceable  Beds located at any of the
Collateral Pool Properties or any of the Abundance of Caution Properties without
first having received the prior written consent of the Lenders.

         8.18 Management Agreements.

         None of the  Credit  Parties  will,  nor will they  permit any of their
Subsidiaries  to, enter into a management  agreement  with respect to any of the
Collateral Pool Properties or any of the Abundance of Caution Properties without
first  having (i)  received  the prior  written  consent of the Lenders and (ii)
provided  the Agent,  for the benefit of the  Lenders,  with an  assignment  and
subordination of such management agreement satisfactory in form and substance to
the Lenders, in their sole discretion.


                                   SECTION 9

                               EVENTS OF DEFAULT


         9.1 Events of Default.

         An Event of  Default  shall  exist  upon the  occurrence  of any of the
following specified events (each an "Event of Default"):

                  (a) Payment. Any Credit Party shall (i) default in the payment
         when due of any principal of any of the Loans, or of any  reimbursement
         obligations  arising  from  drawings  under  Letters  of Credit or (ii)
         default,  and such default  shall  continue  for five or more  Business
         Days,  in the payment when due of any interest on the Loans,  or on any
         reimbursement obligations arising from drawings under Letters of Credit
         or of any fees or other amounts owing hereunder, under any of the other
         Credit Documents or in connection herewith.

                  (b) Representations. Any representation, warranty or statement
         made or deemed to be made by any  Credit  Party  herein,  in any of the
         other Credit Documents, or in any statement or certificate delivered or
         required to be delivered  pursuant hereto or thereto shall prove untrue
         in any  material  respect on the date as of which it was made or deemed
         to have been made.

                  (c)      Covenants.  Any Credit Party shall:

                           (i) default in the due  performance  or observance of
                  any term,  covenant or agreement  contained  in Sections  7.2,
                  7.3,  7.5, 7.6,  7.7,  7.10,  7.11,  7.12,  7.13,  7.14 or 8.1
                  through 8.18 inclusive; or

                           (ii) default in the due  performance or observance by
                  it of any  term,  covenant  or  agreement  (other  than  those
                  referred to in subsections  (a), (b) or (c)(i) of this Section
                  9.1) contained in this Credit Agreement and such default shall
                  continue unremedied for a period of at least 30 days after the
                  earlier of an officer of a Credit Party becoming aware of such
                  default or notice thereof given by the Agent.

                  (d) Other Credit Documents. (i) Any Credit Party shall default
         in the due performance or observance of any term, covenant or agreement
         in any of the other Credit  Documents  (subject to applicable  grace or
         cure periods,  if any), or (ii) any Credit Document shall fail to be in
         full  force and  effect or to give the Agent  and/or  the  Lenders  the
         security interests,  liens, rights,  powers and privileges purported to
         be created thereby.

                  (e)  Guaranties.  The  guaranty  given  by any  of the  Credit
         Parties  hereunder or by any Additional  Credit Party  hereafter or any
         provision  thereof  shall cease to be in full force and effect,  or any
         Guarantor  


                                       55
<PAGE>

         hereunder or any Person acting by or on behalf of such Guarantor  shall
         deny or disaffirm such Guarantor's  obligations  under such guaranty or
         any Guarantor shall default in the due performance or observance of any
         term,  covenant or  agreement  on its part to be  performed or observed
         pursuant to such guaranty.

                  (f)  Bankruptcy,  etc. The  occurrence of any of the following
         with respect to any Credit Party or any of its Subsidiaries (i) a court
         or governmental  agency having jurisdiction in the premises shall enter
         a decree or order for relief in  respect of any Credit  Party or any of
         its   Subsidiaries   in  an  involuntary   case  under  any  applicable
         bankruptcy,  insolvency,  receivership,   liquidation,   administrative
         supervision or other similar law now or hereafter in effect, or appoint
         a receiver,  liquidator,  assignee, custodian, trustee, sequestrator or
         similar  official of any Credit Party or any of its Subsidiaries or for
         any  substantial  part of its  property or  ordering  the winding up or
         liquidation  of its  affairs;  or (ii) an  involuntary  case  under any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in  effect  is  commenced  against  any  Credit  Party  or  any  of its
         Subsidiaries  and such  petition  remains  unstayed and in effect for a
         period of 60 consecutive  days; or (iii) any Credit Party or any of its
         Subsidiaries  shall  commence a  voluntary  case  under any  applicable
         bankruptcy, insolvency or other similar law now or hereafter in effect,
         or consent to the entry of an order for relief in an  involuntary  case
         under any such law, or consent to the appointment or taking  possession
         by a receiver,  liquidator,  assignee, custodian, trustee, sequestrator
         or  similar  official  of such  Person or any  substantial  part of its
         property or make any general  assignment  for the benefit of creditors;
         or (iv) any  Credit  Party or any of its  Subsidiaries  shall  admit in
         writing its inability to pay its debts  generally as they become due or
         any action shall be taken by such Person in  furtherance  of any of the
         aforesaid purposes.

                  (g)      Defaults under Other Agreements.

                                    (i)  Any   Credit   Party   or  any  of  its
                  Subsidiaries  shall default in the  performance  or observance
                  (beyond the applicable grace period with respect  thereto,  if
                  any) of any material  obligation  or condition of any contract
                  or lease  material to such Credit Party and its  Subsidiaries,
                  taken as a whole; or

                                    (ii) With respect to any Indebtedness (other
                  than Indebtedness  outstanding under this Credit Agreement) of
                  any Credit  Party or any of its  Subsidiaries  in an aggregate
                  principal amount in excess of $500,000,  (A) a Credit Party or
                  any of its  Subsidiaries  shall  (1)  default  in any  payment
                  (beyond the applicable grace period with respect  thereto,  if
                  any) with  respect to any such  Indebtedness,  or (2)  default
                  (after  giving effect to any  applicable  grace period) in the
                  observance or performance  of any term,  covenant or agreement
                  relating to such  Indebtedness  or contained in any instrument
                  or agreement evidencing,  securing or relating thereto, or any
                  other event or condition shall occur or condition  exist,  the
                  effect of which  default  or other  event or  condition  is to
                  cause, or permit,  the holder or holders of such  Indebtedness
                  (or  trustee  or agent on  behalf  of such  holders)  to cause
                  (determined  without  regard to whether any notice or lapse of
                  time is required) any such Indebtedness to become due prior to
                  its stated  maturity;  or (3) any such  Indebtedness  shall be
                  declared due and payable, or required to be prepaid other than
                  by a  regularly  scheduled  required  prepayment  prior to the
                  stated maturity thereof;  or (4) any such  Indebtedness  shall
                  mature and remain unpaid.

                  (h) Judgments. One or more judgments, orders, or decrees shall
         be  entered  against  any one or more of the  Credit  Parties or any of
         their Subsidiaries  involving a liability of $1,000,000 or more, in the
         aggregate (to the extent not paid or covered by insurance provided by a
         carrier who has acknowledged coverage),  and such judgments,  orders or
         decrees  shall not have been  vacated,  discharged  or stayed or bonded
         pending appeal within 30 days from the entry thereof.

                  (i)  ERISA  Events.  The  occurrence  of any of the  following
         events or conditions, unless such event or occurrence would not have or
         be  reasonably  expected  to have a Material  Adverse  Effect:  (1) any
         "accumulated  funding  deficiency,"  as such term is defined in Section
         302 of ERISA and Section 412 of the Code, whether or not waived,  shall
         exist with  respect to any Plan,  or any lien shall arise on the assets
         of a Credit  Party  or any  ERISA  Affiliate  in favor of the PBGC or a
         Plan; (2) an ERISA Event shall occur with respect to a Single  Employer
         Plan,  which is, in the  reasonable  opinion  of the  Agent,  likely to
         result  in the  


                                       56
<PAGE>

         termination  of such Plan for  purposes  of Title IV of  ERISA;  (3) an
         ERISA  Event  shall  occur  with  respect  to a  Multiemployer  Plan or
         Multiple  Employer  Plan,  which is, in the  reasonable  opinion of the
         Agent,  likely  to  result  in (i) the  termination  of such  Plan  for
         purposes  of Title IV of  ERISA,  or (ii) a Credit  Party or any  ERISA
         Affiliate incurring any liability in connection with a withdrawal from,
         reorganization  of (within  the meaning of Section  4241 of ERISA),  or
         insolvency  (within the meaning of Section 4245 of ERISA) of such Plan;
         or (4) any prohibited transaction (within the meaning of Section 406 of
         ERISA  or   Section   4975  of  the  Code)  or   breach  of   fiduciary
         responsibility  shall  occur  which may  subject a Credit  Party or any
         ERISA  Affiliate to any liability under Sections 406, 409,  502(i),  or
         502(l) of ERISA or Section 4975 of the Code,  or under any agreement or
         other  instrument  pursuant  to  which  a  Credit  Party  or any  ERISA
         Affiliate has agreed or is required to indemnify any person against any
         such liability.

                  (j) Ownership. There shall occur a Change of Control.

         9.2 Acceleration; Remedies.

         Upon the occurrence of an Event of Default,  and at any time thereafter
unless  and until  such  Event of  Default  has been  waived in  writing  by the
Required Lenders (or the Lenders as may be required hereunder), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower, take any of the following actions:

                  (a)  Termination  of  Commitments.   Declare  the  Commitments
         terminated whereupon the Commitments shall be immediately terminated.

                  (b) Acceleration of Loans. Declare the unpaid principal of and
         any  accrued  interest  in  respect  of all  Loans,  any  reimbursement
         obligations  arising from drawings  under Letters of Credit and any and
         all other  indebtedness or obligations of any and every kind owing by a
         Credit Party to any of the Lenders  hereunder to be due  whereupon  the
         same shall be immediately due and payable without presentment,  demand,
         protest or other notice of any kind,  all of which are hereby waived by
         the Credit Parties.

                  (c)  Cash  Collateral.  Direct  the  Borrower  to pay (and the
         Borrower  agrees  that  upon  receipt  of  such  notice,  or  upon  the
         occurrence  of an Event of  Default  under  Section  9.1(f),  they will
         immediately pay) to the Agent additional cash, to be held by the Agent,
         for  the  benefit  of the  Lenders,  in a cash  collateral  account  as
         additional  security for the LOC  Obligations  in respect of subsequent
         drawings  under  all then  outstanding  Letters  of Credit in an amount
         equal to the  maximum  aggregate  amount  which may be drawn  under all
         Letters of Credit then outstanding.

                  (d)  Enforcement  of  Rights.  Enforce  any and all rights and
         interests created and existing under the Credit  Documents,  including,
         without  limitation,   all  rights  and  remedies  existing  under  the
         Collateral  Documents,  all rights and remedies against a Guarantor and
         all rights of set-off.

Notwithstanding  the  foregoing,  if an Event of  Default  specified  in Section
9.1(f) shall occur, then the Commitments shall  automatically  terminate and all
Loans,  all  reimbursement  obligations  under  Letters of Credit,  all  accrued
interest in respect thereof,  all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders  hereunder shall immediately  become due and
payable  without  the giving of any  notice or other  action by the Agent or the
Lenders, which notice or other action is expressly waived by the Credit Parties.

Notwithstanding  the fact that  enforcement  powers  reside  primarily  with the
Agent,  each  Lender has, to the extent  permitted  by law, a separate  right of
payment and shall be considered a separate "creditor" holding a separate "claim"
within  the  meaning  of  Section  101(5)  of the  Bankruptcy  Code or any other
insolvency statute.


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<PAGE>

         9.3 Allocation of Payments After Event of Default.

         Notwithstanding  any other provisions of this Credit  Agreement,  after
the  occurrence and during the  continuance of an Event of Default,  all amounts
collected  or  received  by the  Agent  or any  Lender  on  account  of  amounts
outstanding  under any of the Credit  Documents or in respect of the  Collateral
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 Lenders
         under the Credit  Documents  and any  protective  advances  made by the
         Agent with respect to the Collateral  under or pursuant to the terms of
         the Collateral Documents;

                  SECOND,  to  payment  of any fees owed to the  Agent,  for the
         benefit of the Lenders, or the Issuing Lender;

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

                  FOURTH, to the payment of the  administrative  fee owed to the
         Agent  and  all  accrued  fees  and  interest  payable  to the  Lenders
         hereunder;

                  FIFTH, to the payment of the outstanding  principal  amount of
         the Loans, to the payment or cash  collateralization of the outstanding
         LOC Obligations and to any principal amounts  outstanding under Hedging
         Agreements, pro rata, as set forth below;

                  SIXTH,  to all other  obligations  which shall have become due
         and  payable  under the Credit  Documents  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,  (a) amounts  received  shall be applied in the
numerical  order  provided  until  exhausted  prior to  application  to the next
succeeding  category;  and (b) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then  outstanding  Loans
held  by  such  Lender  bears  to the  aggregate  then  outstanding  Loans,  LOC
Obligations and obligations under Hedging Agreements) of amounts available to be
applied pursuant to clauses "THIRD",  "FOURTH,"  "FIFTH," and "SIXTH" above; and
(c) 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 (x) first, to reimburse the Issuing Lender from time to time
for any  drawings  under  such  Letters of Credit  and (y) then,  following  the
expiration  of all  Letters  of  Credit,  to all other  obligations  of the type
described in clauses  "FIFTH" and "SIXTH"  above in the manner  provided in this
Section 9.3.


                                   SECTION 10

                               AGENCY PROVISIONS


         10.1 Appointment.

         Each Lender hereby designates and appoints NationsBank, N.A. (South) as
Agent of such Lender to act as specified herein and the other Credit  Documents,
and each such Lender hereby  authorizes the Agent, as the agent for such Lender,
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.
Without  limiting the 


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<PAGE>

generality   of  the   foregoing,   the  Agent  is  authorized  to  execute  the
Subordination  and  Intercreditor  Agreement and releases  referenced in Section
8.5.  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   Lender,   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 Lenders 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 an agent of the  Lenders  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.  The Agent agrees that it shall  administer
the Loans and the Credit  Documents in a manner  consistent with that ordinarily
employed  by the  Agent  in the  administration  of  similar  loans  for its own
account.

         10.2 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;  provided,  however, the
Agent  shall  take  such  action  with  respect  to  such  negligent  agents  or
attorneys-in-fact as reasonably directed by the Required Lenders.

         10.3 Exculpatory Provisions.

         Neither  the  Agent  nor  any of its  officers,  directors,  employees,
agents,  attorneys-in-fact  or  affiliates  shall be (a)  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
(b)  responsible  in  any  manner  to  any  of the  Lenders  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
the Borrower to perform its obligations hereunder or thereunder. The Agent shall
not be responsible to any Lender for the effectiveness,  genuineness,  validity,
enforceability,  collectibility or sufficiency of this Credit 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 Lenders or by or on behalf of
the Credit  Parties to the Agent or any Lender 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 use of the Letters of Credit or of the existence
or  possible  existence  of any  Default or Event of  Default or to inspect  the
properties,  books or records of the Credit Parties.  The Agent is not a trustee
for the Lenders and owes no fiduciary duty to the Lenders.

         10.4 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 each Lender as the owner of its  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  11.3(b).  The Agent
shall be fully  justified  in failing or refusing to take any action  under this
Credit  Agreement  or under any of the other  Credit  Documents  unless it shall
first  receive such advice or  concurrence  of the Required  Lenders as it deems
appropriate or it shall first be indemnified to its  satisfaction by the Lenders
against any and all  liability and expense 


                                       59
<PAGE>

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 Required Lenders (or to the extent specifically
provided in Section 11.6, all the Lenders) and such request and any action taken
or  failure  to act  pursuant  thereto  shall be  binding  upon all the  Lenders
(including their successors and assigns).

         10.5 Notice of Default.

         The  Agent  shall  not be  deemed  to have  knowledge  or notice of the
occurrence  of any  Default or Event of Default  hereunder  unless the Agent has
received  notice  from a  Lender  or a  Credit  Party  referring  to the  Credit
Document,  describing  such  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 Lenders.  Furthermore,
the Agent shall  endeavor but not be required to notify the Lenders of any other
Default or Event of Default which it gains actual  knowledge of. The Agent shall
take such  action with  respect to such  Default or Event of Default as shall be
reasonably directed by the Required Lenders.

         10.6 Non-Reliance on Agent and Other Lenders.

         Each Lender expressly acknowledges that neither the Agent,  NationsBanc
Capital Markets, Inc. ("NCMI") nor any of their officers, directors,  employees,
agents,   attorneys-in-fact  or  affiliates  has  made  any  representations  or
warranties  to it other than as set forth in this Credit  Agreement  and that no
act by the Agent, NCMI or any affiliate thereof hereinafter taken, including any
review of the affairs of any Credit  Party,  shall be deemed to  constitute  any
representation  or  warranty  by the Agent or NCMI to any  Lender.  Each  Lender
represents to the Agent and NCMI that it has, independently and without reliance
upon the Agent or NCMI or any other  Lender,  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 Credit Parties and made
its own  decision  to make its  Loans  hereunder  and  enter  into  this  Credit
Agreement.  Each Lender also represents that it will,  independently and without
reliance upon the Agent,  NCMI or any other Lender,  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  Credit  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  creditworthiness  of the Credit
Parties.  Except for notices,  reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent and NCMI shall not
have any duty or  responsibility  to provide any Lender with any credit or other
information concerning the business,  operations, assets, property, financial or
other conditions,  prospects or creditworthiness of the Credit Parties which may
come into the possession of the Agent, NCMI or any of their officers, directors,
employees, agents, attorneys-in-fact or affiliates; provided, however, the Agent
shall provide the Lenders with copies of the Credit  Documents,  the  conditions
precedent  identified  in  Sections  5.1  and  5.2 and  such  other  information
reasonably requested by a Lender; provided, further however, the Agent shall not
be required  to provide the Lenders  with a copy of the Fee Letter and shall not
be required to generate any additional  information not supplied to the Agent by
the Borrower or any other Credit Party.

         10.7 Indemnification.

         The Lenders  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 Commitments (or if
the  Commitments  have  expired  or been  terminated,  in  accordance  with  the
respective principal amounts of outstanding Loans and Participation  Interest of
the Lenders),  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  payment in full of the Credit Party  Obligations) 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  Credit  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
Lender  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 


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<PAGE>

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 payment of the
Credit Party  Obligations and all other amounts payable  hereunder and under the
other Credit Documents.

         10.8 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 or any other
Credit Party as though the Agent were not the Agent  hereunder.  With respect to
the Loans made and Letters of Credit issued and all obligations owing to it, the
Agent shall have the same rights and powers  under this Credit  Agreement as any
Lender and may exercise the same as though it were not the Agent,  and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.

         10.9 Successor Agent.

         The Agent may, at any time,  resign upon 20 days written  notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders,  and shall have accepted such appointment,  within 45 days
after  the  notice  of  resignation,  then the  retiring  Agent  shall  select a
successor  Agent provided such  successor is a Lender  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 the 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 the Agent,  as
appropriate,  under this Credit Agreement and the other Credit Documents and the
provisions  of this  Section  10.9 shall  inure to its benefit as to any actions
taken or  omitted  to be taken by it while it was the Agent  under  this  Credit
Agreement.


                                   SECTION 11

                                 MISCELLANEOUS


         11.1 Notices.

         Except as otherwise  expressly  provided herein,  all notices and other
communications  shall  have been duly  given  and  shall be  effective  (a) when
delivered,  (b) when transmitted via telecopy (or other facsimile device) to the
number set out below,  (c) the Business Day  following the day on which the same
has been  delivered  prepaid  to a  reputable  national  overnight  air  courier
service,  or (d) the third  Business Day  following the day on which the same is
sent by certified  or  registered  mail,  postage  prepaid,  in each case to the
respective  parties at the  address or  telecopy  numbers  set forth on Schedule
11.1,  or at such other  address as such party may specify by written  notice to
the other parties hereto.

         11.2 Right of Set-Off

         In addition to any rights now or hereafter granted under applicable law
or  otherwise,  and  not by way of  limitation  of any  such  rights,  upon  the
occurrence  of an Event of Default,  each Lender is  authorized  at any time and
from time to time, without presentment,  demand,  protest or other notice of any
kind (all of which  rights  being hereby  expressly  waived),  to set-off and to
appropriate  and apply any and all  deposits  (general or special) and any other
indebtedness  at any  time  held or  owing by such  Lender  (including,  without
limitation, branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit  Party  against  obligations  and
liabilities of such Credit Party to the Lenders hereunder,  under the Notes, the
other Credit  Documents or otherwise,  irrespective of whether such Lender shall
have made any demand  hereunder and although such  obligations,  liabilities  or
claims,  or any of them,  may be contingent  or unmatured,  and any such set-off
shall be deemed to have been made immediately upon 


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<PAGE>

the occurrence of an Event of Default even though such charge is made or entered
on the  books  of such  Lender  subsequent  thereto.  Any  Person  purchasing  a
participation in the Loans and Commitments hereunder pursuant to Section 11.3(c)
or 3.8 may  exercise  all rights of set-off  with  respect to its  participation
interest as fully as if such Person were a Lender hereunder.

         11.3 Benefit of Agreement.

                  (a) Generally. This Credit Agreement shall be binding upon and
         inure to the benefit of and be enforceable by the respective successors
         and assigns of the  parties  hereto;  provided  that none of the Credit
         Parties may assign and transfer any of its interests  without the prior
         written consent of the Lenders; and provided further that the rights of
         each Lender to transfer,  assign or grant  participations in its rights
         and/or  obligations  hereunder  shall be limited as set forth  below in
         subsections (b) and (c) of this Section 11.3. Notwithstanding the above
         (including  anything  set  forth  in  subsections  (b)  and (c) of this
         Section 11.3),  nothing herein shall restrict,  prevent or prohibit any
         Lender from (A) pledging its Loans  hereunder to a Federal Reserve Bank
         in support of borrowings  made by such Lender from such Federal Reserve
         Bank, or (B) granting  assignments or  participations  in such Lender's
         Loans and/or Commitments  hereunder to its parent company and/or to any
         Affiliate of such Lender.

                  (b) Assignments.  In addition to the assignments  permitted by
         Section 11.3(a),  each Lender may assign all or a portion of its rights
         and  obligations   hereunder,   pursuant  to  an  assignment  agreement
         substantially  in the form of  Exhibit  11.3,  to (i) any Lender or any
         Affiliate or Subsidiary of a Lender, or (ii) any other commercial bank,
         financial   institution  or   "accredited   investor"  (as  defined  in
         Regulation  D of the  Securities  and Exchange  Commission)  reasonably
         acceptable  to the Agent and, so long as no Default or Event of Default
         has occurred and is  continuing,  the  Borrower;  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 Commitment being assigned by
         such Lender) of the Commitments and in integral multiples of $1,000,000
         above such amount and (ii) each such assignment shall be of a constant,
         not varying,  percentage  of all of the assigning  Lender's  rights and
         obligations under the Credit Agreement.  Any assignment hereunder shall
         be effective  upon delivery to the Agent of a duly executed  assignment
         agreement  together with a transfer fee of $3,500  payable to the Agent
         for its own account from and after the later of (i) the effective  date
         specified in the applicable  assignment  agreement and (ii) the date of
         recording of such  assignment in the Register  pursuant to the terms of
         Subsection (d) below.  The assigning  Lender will give prompt notice to
         the  Agent  and  the  Borrower  of  any  such   assignment.   Upon  the
         effectiveness  of any such assignment (and after notice to, and (to the
         extent required pursuant to the terms hereof), with the consent of, the
         Borrower as provided herein),  the assignee shall become a "Lender" for
         all purposes of this Credit  Agreement  and the other Credit  Documents
         and, to the extent of such  assignment,  the assigning  Lender shall be
         relieved of its  obligations  hereunder  to the extent of the Loans and
         Commitment  components  being  assigned.  The Borrower agrees that upon
         notice of any such assignment and surrender of the appropriate  Note or
         Notes,  it will  promptly  provide to the  assigning  Lender and to the
         assignee  separate  promissory  notes in the amount of their respective
         interests  substantially in the form of the original Note or Notes (but
         with  notation  thereon  that  it is  given  in  substitution  for  and
         replacement  of the  original  Note or Notes or any  replacement  notes
         thereof). Notwithstanding the foregoing, the Agent agrees that it shall
         maintain a Commitment  of at least  $10,000,000  for its own account so
         long as it is the Agent.

                  By  executing  and  delivering  an  assignment   agreement  in
         accordance with this Section 11.3(b),  the assigning Lender  thereunder
         and the  assignee  thereunder  shall be deemed to  confirm to and agree
         with each  other  and the other  parties  hereto as  follows:  (i) such
         assigning  Lender warrants that it is the legal and beneficial owner of
         the  interest  being  assigned  thereby  free and clear of any  adverse
         claim;  (ii)  except as set forth in clause (i) above,  such  assigning
         Lender   makes  no   representation   or   warranty   and   assumes  no
         responsibility   with  respect  to  any   statements,   warranties   or
         representations  made in or in connection  with this Credit  Agreement,
         any of the other Credit  Documents or any other  instrument or document
         furnished  pursuant  hereto or  thereto,  or the  execution,  legality,
         validity,  enforceability,  genuineness,  sufficiency  or value of this
         Credit  Agreement,  any of the  other  Credit  Documents  or any  other
         instrument  or  document  furnished  pursuant  hereto or thereto or the
         financial   condition  of  any  Credit  Party  or  the  performance  or
         observance  by any Credit  Party of any of its  obligations  under this
         Credit  Agreement,  any of the  other  Credit  Documents  or any  other


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<PAGE>

         instrument or document furnished pursuant hereto or thereto; (iii) such
         assignee represents and warrants that it is legally authorized to enter
         into such assignment agreement; (iv) such assignee confirms that it has
         received a copy of this Credit  Agreement,  the other Credit  Documents
         and such other documents and  information as it has deemed  appropriate
         to make  its own  credit  analysis  and  decision  to enter  into  such
         assignment agreement;  (v) such assignee will independently and without
         reliance upon the Agent, such assigning Lender or any other Lender, and
         based on such documents and information as it shall deem appropriate at
         the time,  continue to make its own credit  decisions  in taking or not
         taking  action  under  this  Credit  Agreement  and  the  other  Credit
         Documents; (vi) such assignee appoints and authorizes the Agent to take
         such action on its behalf and to exercise such powers under this Credit
         Agreement or any other Credit Document as are delegated to the Agent by
         the  terms  hereof  or  thereof,  together  with  such  powers  as  are
         reasonably  incidental thereto;  and (vii) such assignee agrees that it
         will perform in accordance with their terms all the  obligations  which
         by the terms of this Credit  Agreement  and the other Credit  Documents
         are required to be performed by it as a Lender.

                  The  Agent  hereby  agrees  that it shall  notify  each of the
Lenders of any assignment hereunder.

                  (c) Participations.  Each Lender may sell, transfer,  grant or
         assign participations in all or any part of such Lender's interests and
         obligations  hereunder;  provided  that (i) such  selling  Lender shall
         remain a "Lender" for all purposes  under this Credit  Agreement  (such
         selling  Lender's  obligations  under the  Credit  Documents  remaining
         unchanged) and the participant shall not constitute a Lender hereunder,
         (ii) no such participant  shall have, or be granted,  rights to approve
         any amendment or waiver relating to this Credit  Agreement or the other
         Credit  Documents  except to the  extent any such  amendment  or waiver
         would (A) reduce the  principal  of or rate of  interest  on or fees in
         respect  of any  Loans in which the  participant  is  participating  or
         increase any Commitments  with respect  thereto,  (B) postpone the date
         fixed for any payment of  principal  (including  the  extension  of the
         final  maturity of any Loan or the date of any  mandatory  prepayment),
         interest  or fees in which the  participant  is  participating,  or (C)
         release  all  or  substantially  all of the  collateral  or  guaranties
         (except as expressly  provided in the Credit Documents)  supporting any
         of the Loans or Commitments in which the participant is  participating,
         (iii)  sub-participations  by the participant  (except to an Affiliate,
         parent  company or  Affiliate of a parent  company of the  participant)
         shall be  prohibited  and (iv)  any such  participations  shall be in a
         minimum  aggregate  amount  of  $5,000,000  of the  Commitments  and in
         integral multiples of $1,000,000 in excess thereof.  In the case of any
         such  participation,  the  participant  shall not have any rights under
         this Credit Agreement or the other Credit Documents (the  participant's
         rights against the selling Lender in respect of such  participation  to
         be those  set forth in the  participation  agreement  with such  Lender
         creating such  participation)  and all amounts  payable by the Borrower
         hereunder  shall be  determined  as if such  Lender  had not sold  such
         participation;  provided,  however,  that  such  participant  shall  be
         entitled to receive  additional  amounts under Sections 3.9, 3.12, 3.13
         and 3.14 to the same extent that the Lender from which such participant
         acquired  its  participation  would be  entitled to the benefit of such
         cost protection provisions.

                  (d)  Maintenance of Register.  The Agent shall maintain at one
         of its  offices in  Charlotte,  North  Carolina  a copy of each  Lender
         assignment  agreement  delivered to it in accordance  with the terms of
         subsection (b) above and a register for the recordation of the identity
         of the principal  amount and type of each Loan  outstanding  hereunder,
         the names, addresses and the Commitments of the Lenders pursuant to the
         terms  hereof from time to time (the  "Register").  The Agent will make
         reasonable  efforts to maintain  the  accuracy of the  Register  and to
         promptly  update the  Register  from time to time,  as  necessary.  The
         entries in the Register  shall be conclusive in the absence of manifest
         error and the Borrower, the Agent and the Lenders may treat each Person
         whose name is recorded in the Register  pursuant to the terms hereof as
         a Lender  hereunder  for all  purposes  of this Credit  Agreement.  The
         Register  shall be available  for  inspection  by the Borrower and each
         Lender,  at any reasonable  time and from time to time upon  reasonable
         prior notice.

         11.4 No Waiver; Remedies Cumulative.

         No  failure  or  delay  on the  part  of the  Agent  or any  Lender  in
exercising  any right,  power or  privilege  hereunder or under any other Credit
Document  and no course of dealing  between the Borrower or any Credit Party and
the Agent or any Lender shall operate as a waiver thereof;  nor shall any single
or partial  exercise of any right,  power or  privilege  


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<PAGE>

hereunder  or under any other  Credit  Document  preclude  any other or  further
exercise  thereof  or the  exercise  of any  other  right,  power  or  privilege
hereunder or thereunder.  The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies  which the Agent or any Lender would
otherwise  have.  No notice to or demand on any  Credit  Party in any case shall
entitle any Credit Party to any other or further  notice or demand in similar or
other  circumstances  or  constitute  a waiver of the rights of the Agent or the
Lenders to any other or further  action in any  circumstances  without notice or
demand.

         11.5 Payment of Expenses; Indemnification.

         The Credit Parties agree to: (a) pay all reasonable out-of-pocket costs
and expenses of (i) the Agent, the Lenders  involved in the initial  syndication
of the Commitments and NationsBanc Capital Markets,  Inc. ("NCMI") in connection
with (A) the negotiation,  preparation,  execution and delivery, syndication and
administration  of this Credit  Agreement and the other Credit Documents and the
documents and instruments  referred to therein  (including,  without limitation,
the reasonable fees and expenses of Moore & Van Allen,  PLLC, special counsel to
the Agent and the fees and expenses of counsel for the Agent in connection  with
collateral issues), and (B) any amendment, waiver or consent relating hereto and
thereto including, but not limited to, any such amendments,  waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Credit Parties under this Credit  Agreement,  (ii) the
Agent and the Lenders in connection with (A) enforcement of the Credit Documents
and the  documents  and  instruments  referred  to therein,  including,  without
limitation,  in connection  with any such  enforcement,  the reasonable fees and
disbursements  of  counsel  for the Agent and each of the  Lenders,  and (B) any
bankruptcy  or   insolvency   proceeding  of  a  Credit  Party  of  any  of  its
Subsidiaries, and (iii) the Agent in connection with the making of any Loans for
the financing of New Properties, including, without limitation, travel costs and
costs to third parties (e.g., for appraisals, environmental reports, engineering
reports, etc.), and (b) indemnify the Agent, NCMI and each Lender, its officers,
directors,  employees,  representatives  and  Agent  from and hold  each of them
harmless against any and all losses,  liabilities,  claims,  damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation,  litigation or other proceeding (whether
or not the Agent, NCMI or Lender is a party thereto) related to (i) the entering
into  and/or  performance  of any Credit  Document or the use of proceeds of any
Loans (including  other  extensions of credit)  hereunder or the consummation of
any other transactions contemplated in any Credit Document,  including,  without
limitation,  the  reasonable  fees and  disbursements  of  counsel  incurred  in
connection  with any such  investigation,  litigation or other  proceeding  (but
excluding  any such  losses,  liabilities,  claims,  damages or  expenses to the
extent incurred by reason of gross negligence or willful  misconduct on the part
of the Person to be  indemnified),  (ii) any  Environmental  Claim and (iii) any
claims for Non-Excluded Taxes.

         11.6 Amendments, Waivers and Consents.

         Neither this Credit  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 and signed by the Required Lenders and the then Credit Parties; provided
that no such amendment,  change, waiver,  discharge or termination shall without
the consent of each Lender affected thereby:

                  (a)  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 scheduled
         amortization payment of any Loan or any portion thereof;

                  (b)  reduce  the rate,  waive or extend the time of payment of
         interest  (other than as a result of waiving the  applicability  of any
         post-default increase in interest rates) thereon or fees hereunder;

                  (c) 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;

                  (d)  increase  the  Commitment  of the Lenders over the amount
         thereof in effect (it being  understood and agreed that a waiver of any
         Default or Event of Default or a waiver of any  mandatory  reduction in
         the  Commitments  shall  not  constitute  a change  in the terms of any
         Commitment of any Lender);


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<PAGE>

                  (e)  release  all  or  substantially  all  of  the  Collateral
         securing  the Credit Party  Obligations  hereunder  (provided  that the
         Agent  may,  without  consent  from  any  other  Lender,   release  any
         Collateral that is sold or transferred by a Credit Party in conformance
         with Section 8.5);

                  (f) release the Borrower or any other Credit Party from its or
         their obligations under the Credit Documents;

                  (g) amend,  modify or waive any  provision  of this Section or
         Section 3.4(a), 3.4(b), 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 4,
         5, 9.1(a), 9.2, 9.3, 10, 11.2, 11.3 or 11.5;

                  (h) reduce any percentage  specified in, or otherwise  modify,
         the definition of Required Lenders;

                  (i) consent to the  assignment or transfer by the Borrower (or
         another Credit Party) of any of its rights and obligations under (or in
         respect of) the Credit Documents;

                  (j) no  provision  of Section  2.2 may be amended  without the
         consent of the  Issuing  Lender and no  provision  of Section 10 may be
         amended without the consent of the Agent.

         11.7 Counterparts.

         This Credit  Agreement  may be executed in any number of  counterparts,
each of which when so executed and  delivered  shall be an original,  but all of
which shall constitute one and the same instrument. It shall not be necessary in
making  proof of this Credit  Agreement  to produce or account for more than one
such counterpart.

         11.8 Headings.

         The headings of the sections  and  subsections  hereof are provided for
convenience  only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

         11.9 Defaulting Lender.

         Each Lender  understands and agrees that if such Lender is a Defaulting
Lender  then  notwithstanding  the  provisions  of Section  11.6 it shall not be
entitled to vote on any matter  requiring the consent of the Required Lenders or
to object to any matter  requiring  the  consent of all the  Lenders;  provided,
however,  that all other  benefits and  obligations  under the Credit  Documents
shall apply to such Defaulting Lender.

         11.10 Survival of Indemnification and Representations and Warranties.

         All indemnities set forth herein and all representations and warranties
made herein shall survive the  execution and delivery of this Credit  Agreement,
the making of the Loans, the issuance of the Letters of Credit and the repayment
of the Loans,  the LOC Obligations and other  obligations and the termination of
the Commitments hereunder.

         11.11 Governing Law; Jurisdiction.

                  (a) THIS AGREEMENT AND THE OTHER CREDIT  DOCUMENTS (OTHER THAN
         THE MORTGAGES) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES  HEREUNDER
         AND  THEREUNDER  SHALL BE GOVERNED BY AND CONSTRUED AND  INTERPRETED IN
         ACCORDANCE  WITH THE LAWS OF THE STATE OF FLORIDA.  Any legal action or
         proceeding  with respect to this Agreement or any other Credit Document
         may be brought in the courts of the State of Florida,  or of the United
         States  located in the State of Florida and, by execution  and delivery
         of this Credit Agreement,  each Credit Party hereby irrevocably accepts
         for   itself   and  in  respect   of  its   property,   generally   and
         unconditionally,  the  jurisdiction  of such courts.  Each Credit Party
         further  irrevocably  consents  to the service of process out of any of
         the  aforementioned  courts  in any such  action or  proceeding  by the
         mailing of copies  thereof by  registered  or certified  mail,  postage
         prepaid,  to it at the address for  notices  pursuant to Section  11.1,


                                       65
<PAGE>

         such service to become  effective 15 days after such  mailing.  Nothing
         herein shall affect the right of a Lender to serve process in any other
         manner  permitted  by  law  or  to  commence  legal  proceedings  or to
         otherwise  proceed  against a Credit  Party in any other  jurisdiction.
         Each  Credit  Party  agrees  that a final  judgment  in any  action  or
         proceeding   shall  be   conclusive   and  may  be  enforced  in  other
         jurisdictions  by suit on the judgment or in any other manner  provided
         by law;  provided that nothing in this Section  11.11(a) is intended to
         impair a Credit Party's right under  applicable law to appeal or seek a
         stay of any judgment.

                  (b) Each Credit Party hereby  irrevocably waives any objection
         which it may now or hereafter have to the laying of venue of any of the
         aforesaid  actions or proceedings  arising out of or in connection with
         this  Credit  Agreement  or any other  Credit  Document  brought in the
         courts  referred  to  in  subsection  (a)  hereof  and  hereby  further
         irrevocably  waives  and agrees not to plead or claim in any such court
         that any such action or  proceeding  brought in any such court has been
         brought in an inconvenient forum.

         11.12 Waiver of Jury Trial.

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

         11.13 Time.

         All  references to time herein shall be references to Eastern  Standard
Time or Eastern Daylight Time, as the case may be, unless specified otherwise.

         11.14 Severability.

         If any  provision of any of the Credit  Documents is  determined  to be
illegal,  invalid or unenforceable,  such provision shall be fully severable and
the  remaining  provisions  shall  remain in full  force and effect and shall be
construed  without  giving  effect  to the  illegal,  invalid  or  unenforceable
provisions.

         11.15 Entirety.

                  (a) This  Credit  Agreement  together  with the  other  Credit
         Documents  represent  the entire  agreement  of the parties  hereto and
         thereto, and supersede all prior agreements and understandings, oral or
         written,  if any,  including any commitment  letters or  correspondence
         relating  to the  Credit  Documents  or the  transactions  contemplated
         herein and therein.

                  (b) With respect to the Mortgage  governed by Kansas law, this
         Credit Agreement together with the other Credit Documents are the final
         expression  of the  agreement of the parties and  represent  the entire
         agreement  of  the  parties   hereto  and  thereto  and  supersede  any
         contemporaneous   oral   agreement   and  all  prior   agreements   and
         understandings,  oral or  written,  if any,  including  any  commitment
         letters  or  correspondence  relating  to the Credit  Documents  or the
         transactions related herein and therein; provided, however, the parties
         hereto agree that (i) the Credit  Documents  may be amended or modified
         subsequent  to  the  date  hereof  and  (ii)  other  additional  Credit
         Documents may be entered into from time to time.

         11.16 Binding Effect.

         This Credit  Agreement shall become  effective at such time when all of
the  conditions  set forth in Section 5.1 have been  satisfied  or waived by the
Lenders and it shall have been executed by the Borrower,  the Guarantors and the
Agent, and the Agent shall have received copies hereof  (telefaxed or otherwise)
which, when taken together,  bear the signatures of each Lender,  and thereafter
this  Credit  Agreement  shall be binding  upon and inure to the  benefit of the
Borrower,  the  Guarantors,  the Agent  and each  Lender  and  their  respective
successors and assigns.


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<PAGE>

         11.17 Confidentiality.

         Each Lender agrees that it will use its reasonable best efforts to keep
confidential  and to cause any  representative  designated under Section 7.11 to
keep  confidential  any non-public  information from time to time supplied to it
under any Credit Document;  provided, however, that nothing herein shall prevent
the disclosure of any such  information to (a) the extent a Lender in good faith
believes such  disclosure is required by  Requirement  of Law, (b) counsel for a
Lender or to its  accountants,  (c) bank  examiners  or auditors  or  comparable
Persons,  (d) any affiliate of a Lender,  (e) any other Lender, or any assignee,
transferee or participant, or any potential assignee, transferee or participant,
of all or any portion of any Lender's rights under this Credit  Agreement who is
notified of the  confidential  nature of the information or (f) any other Person
in connection  with any  litigation to which any one or more of the Lenders is a
party;  and provided further that no Lender shall have any obligation under this
Section  11.17  to the  extent  any  such  information  becomes  available  on a
non-confidential  basis  from a source  other  than a  Credit  Party or that any
information  becomes  publicly  available other than by a breach of this Section
11.17.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]






                                       67
<PAGE>

         Each of the  parties  hereto has caused a  counterpart  of this  Credit
Agreement to be duly executed and delivered as of the date first above written.

BORROWER:
                        INTEGRATED LIVING COMMUNITIES
                        HOLDING, INC., a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



GUARANTORS:             INTEGRATED LIVING COMMUNITIES,
                        INC., a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



                        INTEGRATED LIVING COMMUNITIES OF
                        VIRGINIA BEACH, INC., a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



                        INTEGRATED LIVING COMMUNITIES OF
                        REDGATE, INC., a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________

                              (Signatures Continue)




                                       68
<PAGE>


                                                    Signature Page to Integrated
                                             Living Communities Credit Agreement



                        INTEGRATED LIVING COMMUNITIES OF
                        PORTSMOUTH, INC., a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



                        INTEGRATED LIVING COMMUNITIES OF
                        GLOUCESTER, INC., a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



                        INTEGRATED LIVING COMMUNITIES OF
                        SARASOTA, INC., a Florida corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________


                        INTEGRATED MANAGEMENT-
                        CARRINGTON POINTE, INC.,
                        a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________

                              (Signatures Continue)




                                       69
<PAGE>

                                                    Signature Page to Integrated
                                             Living Communities Credit Agreement


                        INTEGRATED LIVING COMMUNITIES OF
                        WEST PALM BEACH, INC.,
                        a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



                        INTEGRATED LIVING COMMUNITIES AT
                        TERRACE GARDENS, INC.,
                        a Delaware corporation


                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________

                              (Signatures Continue)





                                       70
<PAGE>

                                                    Signature Page to Integrated
                                             Living Communities Credit Agreement


LENDERS:                NATIONSBANK , N.A. (SOUTH),
                        individually in its capacity as a Lender and
                        in its capacity as Agent

                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________


                        SOUTHTRUST BANK OF ALABAMA,
                        NATIONAL ASSOCIATION

                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________



                        SUNTRUST BANK, CENTRAL FLORIDA, N.A.

                        By:__________________________________
                        Name:________________________________
                        Title:_______________________________





                                       71
<PAGE>


STATE OF GEORGIA

COUNTY OF FULTON

         On the ___ day of April, 1997 personally appeared  ___________________,
as  the  _________  PRESIDENT  of  SunTrust  Bank,  Central  Florida,   National
Association,  and before me executed the attached  CREDIT  AGREEMENT dated as of
April __, 1997 between Integrated Living Communities Holding,  Inc. as Borrower;
Integrated Living  Communities,  Inc. as Parent and Certain  Subsidiaries of the
Borrower  and  Parent;  Nationsbank,  N.A.  (South)  as  Agent  and the  lenders
identified therein (including SunTrust Bank, Central Florida, N.A. as Lender).

         IN WITNESS  WHEREOF,  I have hereunto set my hand and official seal, in
the state and county aforesaid.




                                    ____________________________________________
                                    Signature of Notary Public, State of________




                                    (Print,  Type of Stamp  Commissioned Name of
                                    Notary Public) Personally known ________; OR
                                    Produced      identification     Type     of
                                    identification produced:____________________
                                    ____________________________________________




                                    (Notary Seal)