Document:

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                                                                     EXHIBIT 4.1

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                            LENNOX INTERNATIONAL INC.

                                       AND

                    CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,

                                  RIGHTS AGENT

                                   ----------

                                RIGHTS AGREEMENT

                            DATED AS OF JULY 27, 2000

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                                TABLE OF CONTENTS

<TABLE>
<S>               <C>                                                                                           <C>
Section 1.        Certain Definitions.............................................................................1

Section 2.        Appointment of Rights Agent.....................................................................8

Section 3.        Issue of Rights Certificates....................................................................8

Section 4.        Form of Rights Certificates....................................................................10

Section 5.        Countersignature and Registration..............................................................11

Section 6.        Transfer, Split-Up, Combination and Exchange of Rights Certificates;
                  Mutilated, Destroyed, Lost or Stolen Rights Certificates.......................................11

Section 7.        Exercise of Rights; Purchase Price.............................................................12

Section 8.        Cancellation and Destruction of Rights Certificates............................................14

Section 9.        Reservation and Availability of Capital Stock..................................................14

Section 10.       Preferred Stock Record Date....................................................................16

Section 11.       Adjustment of Purchase Price, Number and Kind of Shares or Number
                  of Rights......................................................................................16

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares.....................................23

Section 13.       Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
                  Earning Power..................................................................................24

Section 14.       Fractional Rights and Fractional Shares........................................................26

Section 15.       Rights of Action...............................................................................27

Section 16.       Agreement of Rights Holders....................................................................28

Section 17.       Rights Certificate Holder Not Deemed a Stockholder.............................................28

Section 18.       Concerning the Rights Agent....................................................................29

Section 19.       Merger or Consolidation or Change of Name of Rights Agent......................................29

Section 20.       Duties of Rights Agent.........................................................................30
</TABLE>

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<TABLE>
<S>              <C>                                                                                             <C>
Section 21.       Change of Rights Agent.........................................................................32

Section 22.       Issuance of New Rights Certificates............................................................33

Section 23.       Redemption and Termination.....................................................................33

Section 24.       Exchange.......................................................................................34

Section 25.       Notice of Certain Events.......................................................................35

Section 26.       Notices........................................................................................36

Section 27.       Supplements and Amendments.....................................................................36

Section 28.       Successors.....................................................................................37

Section 29.       Determinations and Actions by the Board of Directors, etc......................................37

Section 30.       Benefits of this Agreement.....................................................................37

Section 31.       Severability...................................................................................38

Section 32.       Governing Law..................................................................................38

Section 33.       Counterparts...................................................................................38

Section 34.       Descriptive Headings...........................................................................38

Exhibit A -       Form of Certificate of Designations of Series A Junior Participating
                  Preferred Stock

Exhibit B -       Form of Rights Certificate

Exhibit C -       Summary of Rights
</TABLE>

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                                RIGHTS AGREEMENT

                  This Rights Agreement, dated as of July 27, 2000 (the
"Agreement"), between Lennox International Inc., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability Company (the "Rights Agent").

                                   WITNESSETH:

                  WHEREAS, on July 27, 2000 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company (the "Board of Directors")
authorized and declared a dividend of one Right for each share of common stock,
par value $.01 per share, of the Company (the "Common Stock") outstanding at the
close of business on August 7, 2000 (the "Record Date"), and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued (whether originally issued or delivered from the Company's
treasury) between the Record Date and the earlier of the Distribution Date (as
hereinafter defined) and the Expiration Date (as hereinafter defined), and, in
certain circumstances provided for in Section 22 hereof, after the Distribution
Date, each Right initially representing the right to purchase one Fractional
Share (as hereinafter defined) of Series A Junior Participating Preferred Stock
of the Company, upon the terms and subject to the conditions hereinafter set
forth (the "Rights");

                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:

                  Section 1. Certain Definitions. For purposes of this
Agreement, the following terms shall have the meanings indicated:

                  "Acquiring Person" shall mean any Person (other than an Exempt
Person) who or which, together with all Affiliates and Associates (excluding
Affiliates and Associates that are Exempt Persons) of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that a Person shall not be or become an Acquiring Person if
such Person, together with its Affiliates and Associates (excluding Affiliates
and Associates that are Exempt Persons), shall become the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding solely as a result of
a reduction in the number of shares of Common Stock outstanding due to the
repurchase of Common Stock by the Company, unless and until such time as such
Person (other than an Exempt Person) together with its Affiliates and Associates
(excluding Affiliates and Associates that are Exempt Persons) shall purchase or
otherwise become the Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock or any
other Person (or Persons), other than an Exempt Person or Exempt Persons, who is
(or collectively are) the Beneficial Owner of shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock shall
become an Affiliate or Associate of such Person, unless, in either such case,
such Person, together with all Affiliates and Associates of such Person, is not
then the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding; and provided, further, that if the Board of Directors, with the
concurrence of a majority of the members of the Board of Directors who are not,
and are not

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representatives, nominees, Affiliates or Associates of, such Person or an
Acquiring Person, determines in good faith that a Person that would otherwise be
an "Acquiring Person" has become such inadvertently (including, without
limitation, because (i) such Person was unaware that it beneficially owned a
percentage of Common Stock that would otherwise cause such Person to be an
"Acquiring Person" or (ii) such Person was aware of the extent of its Beneficial
Ownership of Common Stock but had no actual knowledge of the consequences of
such Beneficial Ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person as promptly
as practicable divested or divests itself of Beneficial Ownership of a
sufficient number of shares of Common Stock so that such Person would no longer
be an "Acquiring Person," then such Person shall not be deemed to be or to have
become an "Acquiring Person" for any purposes of this Agreement.

                  At any time that the Rights are redeemable, the Board of
Directors may, generally or with respect to any specified Person or Persons,
determine to increase to a specified percentage or amount greater than that set
forth herein or decrease to a specified percentage or amount lower than that set
forth herein or determine a number of shares to be (but in no event less than or
equal to the percentage or number of shares of Common Stock then beneficially
owned by such Person), the level of Beneficial Ownership of Common Stock at
which a Person or such Person or Persons becomes an Acquiring Person.

                  "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.

                  "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date of this Agreement.

                  "Associate" shall mean, with reference to any Person, (1) any
corporation, firm, partnership, association, trust, joint venture,
unincorporated organization, limited liability company or other entity (other
than the Company or a Subsidiary of the Company) of which such Person is an
officer or general partner (or officer or general partner of a general partner)
or is, directly or indirectly, the Beneficial Owner of 10% or more of any class
of equity securities, (2) any trust or other estate (other than a Norris Family
Trust) in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity and (3) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.

                  A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:

                  (i) that such Person or any of such Person's Affiliates or
         Associates (excluding Affiliates and Associates that are Exempt
         Persons), directly or indirectly, is the "beneficial owner" of (as
         determined pursuant to Rule 13d-3 of the General Rules and Regulations
         under the Exchange Act as in effect on the date of this Agreement) or
         otherwise has the right to vote or dispose of, including pursuant to
         any agreement, arrangement or understanding (whether or not in
         writing); provided, however, that a Person shall not be deemed the
         "Beneficial Owner" of, or to "beneficially own," any security under
         this subparagraph (i) as

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         a result of an agreement, arrangement or understanding to vote such
         security if such agreement, arrangement or understanding: (A) arises
         solely from a revocable proxy or consent given in response to a public
         (i.e., not including a solicitation exempted by Rule 14a- 2(b)(2) of
         the General Rules and Regulations under the Exchange Act as in effect
         on the date of this Agreement) proxy or consent solicitation made
         pursuant to, and in accordance with, the applicable provisions of the
         General Rules and Regulations under the Exchange Act, (B) is not then
         reportable by such Person on Schedule 13D under the Exchange Act (or
         any comparable or successor report) and (C) does not constitute a trust
         (other than a Norris Family Trust), proxy, power of attorney or other
         device with the purpose or effect of allowing two or more persons,
         acting in concert, to avoid being deemed "beneficial owners" of such
         security or otherwise avoid the status of "Acquiring Person" under the
         terms of this Agreement or as part of a plan or scheme to evade the
         reporting requirements under Schedule 13D or Sections 13(d) or 13(g) of
         the Exchange Act;

                  (ii) that such Person or any of such Person's Affiliates or
         Associates (excluding Affiliates and Associates that are Exempt
         Persons), directly or indirectly, has the right or obligation to
         acquire (whether such right or obligation is exercisable or effective
         immediately or only after the passage of time or the occurrence of an
         event) pursuant to any agreement, arrangement or understanding (whether
         or not in writing) or upon the exercise of conversion rights, exchange
         rights, other rights, warrants or options, or otherwise; provided,
         however, that a Person shall not be deemed the "Beneficial Owner" of,
         or to "beneficially own," (A) securities tendered pursuant to a tender
         or exchange offer made by such Person or any of such Person's
         Affiliates or Associates until such tendered securities are accepted
         for purchase or exchange, (B) securities issuable upon exercise of
         Rights at any time prior to the occurrence of a Triggering Event, or
         (C) securities issuable upon exercise of Rights from and after the
         occurrence of a Triggering Event which Rights were acquired by such
         Person or any of such Person's Affiliates or Associates prior to the
         Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
         "Original Rights") or pursuant to Section 11(i) or (p) hereof in
         connection with an adjustment made with respect to any Original Rights;
         or

                  (iii) that are beneficially owned, directly or indirectly, by
         (A) any other Person (other than an Exempt Person) or any Affiliate or
         Associate thereof (excluding Affiliates and Associates that are Exempt
         Persons) with which such Person or any of such Person's Affiliates or
         Associates (excluding Affiliates and Associates that are Exempt
         Persons) has any agreement, arrangement or understanding (whether or
         not in writing) for the purpose of acquiring, holding, voting (except
         pursuant to a revocable proxy or consent as described in the proviso to
         subparagraph (i) of this definition) or disposing of any voting
         securities of the Company or (B) any group (as that term is used in
         Rule 13d-5(b) of the General Rules and Regulations under the Exchange
         Act, as in effect on the date of this Agreement) of which such Person
         is a member that includes any other Person (excluding for purposes of
         this calculation securities beneficially owned by Exempt Persons);

provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own" any security held by a Norris Family Trust with respect
to which such Person acts in the capacity of trustee, personal representative,
custodian, administrator, executor, officer, partner,

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member, or other fiduciary; provided, further, that nothing in this definition
shall cause a Person engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own," any securities acquired
through such Person's participation in good faith in a firm commitment
underwriting (including, without limitation, securities acquired pursuant to
stabilizing transactions to facilitate a public offering in accordance with
Regulation M promulgated under the Exchange Act, or to cover overallotments
created in connection with a public offering) until the expiration of forty days
after the date of such acquisition. For purposes of this Agreement, "voting" a
security shall include voting, granting a proxy, acting by consent, making a
request or demand relating to corporate action (including, without limitation,
calling a stockholder meeting), entering into a voting trust or voting agreement
or otherwise giving an authorization (within the meaning of Section 14(a) of the
Exchange Act, as in effect on the date of this Agreement) in respect of such
security.

                  "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.

                  "close of business" on any given date shall mean 5:00 p.m.,
New York City time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.

                  "Closing Price" of a security for any day shall mean the last
sales price, regular way, on such day or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, on such
day, in either case as reported in the principal transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if such security is not listed or
admitted to trading on any national securities exchange but sales price
information is reported for such security, as reported by NASDAQ or such other
self-regulatory organization or registered securities information processor (as
such terms are used under the Exchange Act) that then reports information
concerning such security, or, if sales price information is not so reported, the
average of the high bid and low asked prices in the over-the-counter market on
such day, as reported by NASDAQ or such other entity, or, if on such day such
security is not quoted by any such entity, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in such
security selected by the Board of Directors. If on such day no market maker is
making a market in such security, the fair value of such security on such day as
determined in good faith by the Board of Directors shall be used.

                  "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, except that "Common Stock" when used with reference to
equity interests issued by any Person other than the Company shall mean the
capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.

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                  "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                  "Company" shall mean the Person named as the "Company" in the
preamble of this Agreement until a successor Person shall have become such or
until a Principal Party shall assume, and thereafter be liable for, all
obligations and duties of the Company hereunder, pursuant to the applicable
provisions of this Agreement, and thereafter "Company" shall mean such successor
Person or Principal Party.

                  "Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.

                  "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.

                  "Distribution Date" shall mean the earlier of (i) the close of
business on the tenth day (or, if such Stock Acquisition Date results from the
consummation of a Permitted Offer, such later date as may be determined by the
Company's Board of Directors as set forth below before the Distribution Date
occurs) after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date) or (ii) the close of business on the tenth Business Day (or such
later date as may be determined by the Company's Board of Directors as set forth
below before the Distribution Date occurs) after the date that a tender offer or
exchange offer by any Person (other than any Exempt Person) is first published
or sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act as then in effect, if upon consummation
thereof, such Person would be an Acquiring Person, other than a tender or
exchange offer that is determined before the Distribution Date occurs to be a
Permitted Offer. The Board of Directors may, to the extent set forth in the
preceding sentence, defer the date set forth in clause (i) or (ii) of the
preceding sentence to a specified later date or to an unspecified later date to
be determined by a subsequent action or event (but in no event to a date later
than the close of business on the tenth day after the first occurrence of a
Triggering Event).

                  "Equivalent Preferred Stock" shall have the meaning set forth
in Section 11(b) hereof.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

                  "Exchange Ratio" shall have the meaning set forth in Section
24 hereof.

                  "Exempt Person" shall mean (i) the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, and any Person organized, appointed or established by the Company
for or pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or any
Subsidiary of the Company, (ii) any Person who is shown under the caption
"Principal and Selling Stockholders" in the Company's final prospectus dated
July 28, 1999 relating to its initial public offering of Common Stock as owning
1% or more of the Common Stock, (iii) any Norris Family Trust and (iv) any
lineal descendant and any spouse of any such lineal descendant of D.W. Norris,
but only if such lineal descendant and any spouse of any such lineal descendant
shall

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not at any time hold shares of Common Stock with the primary purpose of
effecting with respect to the Company (A) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, (B) a sale or
transfer of a material amount of assets, (C) any material change in the
capitalization, (D) any other material change in the business or corporate
structure or operations, (E) changes in the corporate charter or bylaws or (F) a
change in the composition of the Board of Directors or of the members of senior
management.

                  "Expiration Date" shall mean the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof, (iii) the time at which the Rights expire pursuant to Section
13(d) hereof and (iv) the time at which all Rights then outstanding and
exercisable are exchanged pursuant to Section 24 hereof.

                  "Final Expiration Date" shall mean the close of business on
July 27, 2010.

                  "Flip-In Event" shall mean an event described in Section
11(a)(ii) hereof.

                  "Flip-In Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                  "Flip-Over Event" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof, but excluding any transaction described
in Section 13(d) hereof that causes the Rights to expire.

                  "Fractional Share" with respect to the Preferred Stock shall
mean one one-hundredth of a share of Preferred Stock.

                  "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.

                  "Norris Family Trust" shall mean any trust, estate,
custodianship, other fiduciary arrangement, corporation, limited partnership,
limited liability company or other entity (collectively, a "Family Entity")
formed, owned, held, or existing primarily for the benefit of the lineal
descendants of D.W. Norris and any spouses of such lineal descendants, but only
if such Family Entity shall not at any time hold Common Stock of the Company
with the primary purpose of effecting with respect to the Company (i) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, (ii) a sale or transfer of a material amount of assets, (iii) any
material change in capitalization, (iv) any other material change in business or
corporate structure or operations, (v) changes in corporate charter or bylaws,
or (vi) a change in the composition of the Board of Directors or of the members
of senior management.

                  "Original Rights" shall have the meaning set forth in the
definition of "Beneficial Owner."

                  "Permitted Offer" shall mean a tender offer or an exchange
offer for all outstanding shares of Common Stock at a price and on terms
determined, prior to the time the Person making the offer or any Affiliate or
Associate thereof is an Acquiring Person, by at least a majority of the

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members of the Board of Directors who are not officers or employees of the
Company and who are not, and are not representatives, nominees, Affiliates or
Associates of, an Acquiring Person or the person making the offer, after
receiving advice from one or more investment banking firms, to be (a) at a price
and on terms that are fair to stockholders (taking into account all factors that
such members of the Board deem relevant including, without limitation, prices
that could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders.

                  "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, association, trust, joint venture,
unincorporated organization or other entity or any group of Persons acting in
concert.

                  "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company having
the rights, powers and preferences set forth in the form of Certificate of
Designations attached hereto as Exhibit A and, to the extent that there is not a
sufficient number of shares of Series A Junior Participating Preferred Stock
authorized to permit the full exercise of the Rights, any other series of
Preferred Stock, par value $.01 per share, of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.

                  "Principal Party" shall have the meaning set forth in Section
13(b) hereof.

                  "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.

                  "Record Date" shall have the meaning set forth in the recitals
clause at the beginning of this Agreement.

                  "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.

                  "Rights" shall have the meaning set forth in the recitals
clause at the beginning of this Agreement.

                  "Rights Agent" shall mean the Person named as the "Rights
Agent" in the preamble of this Agreement until a successor Rights Agent shall
have become such pursuant to the applicable provisions hereof, and thereafter
"Rights Agent" shall mean such successor Rights Agent. If at any time there is
more than one Person appointed by the Company as Rights Agent pursuant to the
applicable provisions of this Agreement, "Rights Agent" shall mean and include
each such Person.

                  "Rights Certificates" shall mean the certificates evidencing
the Rights.

                  "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals clause at the beginning of this Agreement.

                  "Securities Act" shall mean the Securities Act of 1933, as
amended.

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                  "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.

                  "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition and Section 23, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.

                  "Subsidiary" shall mean, with reference to any Person, any
corporation or other Person of which an amount of voting securities sufficient
to elect at least a majority of the directors or other persons performing
similar functions is beneficially owned, directly or indirectly, by such Person,
or otherwise controlled by such Person.

                  "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                  "Summary of Rights" shall mean the Summary of Rights sent
pursuant to Section 3(b) hereof.

                  "Trading Day" with respect to a security shall mean a day on
which the principal national securities exchange on which such security is
listed or admitted to trading is open for the transaction of business, or, if
such security is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
such security is not so quoted, a Business Day.

                  "Triggering Event" shall mean any Flip-In Event or any
Flip-Over Event.

                  Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent (i) to act as agent for the Company and (ii) to take
certain actions in respect of the holders of the Rights (who, in accordance with
Section 3 hereof, shall prior to the Distribution Date also be the holders of
the Common Stock) which actions are expressly set forth in this Agreement
(although it is expressly agreed that the Rights Agent shall not act as agent
for such holders) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or desirable. The Rights
Agent shall have no duty to supervise, and in no event shall be liable for, the
acts or omissions of any such co-rights Agent.

                  Section 3. Issue of Rights Certificates.

                  (a) Until the Distribution Date, (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Stock registered in the names of the holders of the
Common Stock and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). The Company must promptly
notify the Rights Agent in writing and request the transfer agent to provide a
shareholders list. Upon receipt by the Rights Agent of such written notice and
shareholders list, and as soon as practicable after the Distribution Date, the
Rights Agent will send by first-class, insured, postage prepaid mail, to each
record holder

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of the Common Stock as of the close of business on the Distribution Date (other
than any Person referred to in the first sentence of Section 7(e)), at the
address of such holder shown on the records of the Company, one or more Rights
Certificates, evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.

                  (b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C, by first-class, postage prepaid mail, to each
record holder of Common Stock as of the close of business on the Record Date, at
the address of such holder shown on the records of the Company. With respect to
certificates for Common Stock outstanding as of the Record Date, until the
Distribution Date or the earlier surrender for transfer thereof or the
Expiration Date, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates for
Common Stock together with the Summary of Rights, and the registered holders of
the Common Stock shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any of the certificates for Common Stock outstanding on the Record Date, with
or without a copy of the Summary of Rights, shall also constitute the transfer
of the Rights associated with the Common Stock represented by such certificates.

                  (c) Rights shall be issued in respect of all shares of Common
Stock that are issued (whether originally issued or delivered from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates issued representing such
shares of Common Stock that shall so become outstanding or shall be transferred
or exchanged after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date shall also be deemed to be certificates for Rights,
and shall bear the following legend:

                  This certificate also evidences and entitles the holder hereof
         to certain Rights as set forth in the Rights Agreement between Lennox
         International Inc. (the "Company") and ChaseMellon Shareholder
         Services, L.L.C. (the "Rights Agent") dated as of July 27, 2000 as it
         may from time to time be supplemented or amended (the "Rights
         Agreement"), the terms of which are hereby incorporated herein by
         reference and a copy of which is on file at the principal offices of
         the Company. Under certain circumstances, as set forth in the Rights
         Agreement, such Rights may be redeemed, may be exchanged, may expire or
         may be evidenced by separate certificates and will no longer be
         evidenced by this certificate. The Company will mail to the holder of
         this certificate a copy of the Rights Agreement, as in effect on the
         date of mailing, without charge promptly after receipt of a written
         request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
         AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON
         WHO IS, WAS OR BECOMES AN

                                       9
<PAGE>   13

         ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS
         ARE DEFINED IN THE RIGHTS AGREEMENT), AND CERTAIN TRANSFEREES THEREOF,
         WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.

                  Section 4. Form of Rights Certificates.

                  (a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof), when, as and
if issued, shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation system
on which the Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever issued, shall be dated as of the Record Date and on their
face shall entitle the holders thereof to purchase such number of Fractional
Shares of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per Fractional Share (or, as set forth in this
Agreement, for other securities), the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.

                  (b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by a Person
described in the first sentence of Section 7(e), and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any such Rights, shall contain (to the extent
feasible) the following legend, modified as applicable to apply to such Person:

         The Rights represented by this Rights Certificate are or were
         beneficially owned by a Person who was or became an Acquiring Person or
         an Affiliate or Associate of an Acquiring Person (as such terms are
         defined in the Rights Agreement). Accordingly, this Rights Certificate
         and the Rights represented hereby [will] [have] become null and void in
         the circumstances and with the effect specified in Section 7(e) of such
         Rights Agreement.

The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate. The
Company shall give notice to the Rights Agent promptly after it becomes aware of
the existence of any Acquiring Person or any Associate or Affiliate thereof.

                                       10
<PAGE>   14

                  Section 5. Countersignature and Registration.

                  (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof, which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.

                  (b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its office or offices designated, pursuant to
Section 26, as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the certificate
number and the date of each of the Rights Certificates.

                  Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

                  (a) Subject to the provisions of Section 4(b), Section 7(e),
Section 13(d), Section 14 and Section 24 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of Fractional Shares of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Rights Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office or offices of the
Rights Agent designated, pursuant to Section 26, for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have properly completed and signed the certificate
contained in the form of assignment on the reverse side of such Rights
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) thereof or of the Affiliates
or Associates thereof as the Company or the Rights Agent shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4(b), Section

                                       11
<PAGE>   15

7(e), Section 13(d), Section 14 and Section 24 hereof, countersign and deliver
to the Person entitled thereto a Rights Certificate or Rights Certificates, as
the case may be, as so requested. The Company may require payment by the holder
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer, split-up, combination or exchange of Rights
Certificates. The Rights Agent shall have no duty or obligation under this
Section 6 or any other similar provision of this Agreement unless and until it
is satisfied that all such taxes and/or governmental charges have been paid in
full.

                  (b) Upon receipt by the Company and the Rights Agent of
evidence satisfactory to them of the loss, theft, destruction or mutilation of a
Rights Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Rights Certificate if mutilated, the
Company will, subject to Section 4(b), Section 7(e), Section 13(d), Section 14
and Section 24, execute and deliver a new Rights Certificate of like tenor to
the Rights Agent for countersignature and delivery to the registered owner in
lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

                  Section 7. Exercise of Rights; Purchase Price.

                  (a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly completed and executed, to the
Rights Agent at the office or offices of the Rights Agent designated, pursuant
to Section 26, for such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of Fractional Shares of Preferred Stock
(or other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the Expiration Date.

                  (b) The Purchase Price for each Fractional Share of Preferred
Stock pursuant to the exercise of a Right shall initially be $75.00, and shall
be subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.

                  (c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment, with respect to
each Right so exercised, of the Purchase Price per Fractional Share of Preferred
Stock (or other shares, securities, cash or other assets, as the case may be) to
be purchased as set forth below and an amount equal to any applicable tax or
governmental charge, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i)(A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of Fractional Shares of
Preferred Stock to be purchased, and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company, in
its sole discretion, shall have elected to deposit the

                                       12
<PAGE>   16

shares of Preferred Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing interests in such number of Fractional Shares of Preferred Stock as
are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and (iv) after receipt thereof, deliver such cash, if any, to or upon the
order of the registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) may be made in cash or by certified check, cashier's or official bank
check or bank draft payable to the order of the Company or the Rights Agent. In
the event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property pursuant
to Section 11(a) or Section 13(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when necessary to comply
with this Agreement. The Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon exercise of Rights, a number of
Rights be exercised so that only whole shares of Preferred Stock would be
issued.

                  (d) In case the registered holder of any Rights Certificate
shall exercise fewer than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.

                  (e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by or transferred to (i) an Acquiring Person or an Associate
or Affiliate of an Acquiring Person other than any such Person that became such
pursuant to a Permitted Offer and the Board of Directors in good faith
determines was not involved in and did not cause or facilitate, directly or
indirectly, such Triggering Event, (ii) a direct or indirect transferee of such
Rights from such Acquiring Person (or any such Associate or Affiliate) who
becomes a transferee after such Triggering Event or (iii) a direct or indirect
transferee of such Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with such Triggering Event and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person (or such Affiliate or Associate) to
holders of equity interests in such Acquiring Person (or such Affiliate or
Associate) or to any Person with whom such Acquiring Person (or such Affiliate
or Associate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board of Directors
determines is part of a agreement, arrangement or understanding that has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action, no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise, and such Rights shall not be transferable. The
Company shall notify the Rights Agent when this Section 7(e) applies and shall
use

                                       13
<PAGE>   17

all reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of Rights Certificates or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.

                  (f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) properly completed and signed the certificate contained in
the form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agreement shall
reasonably request.

                  Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split-up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.

                  Section 9. Reservation and Availability of Capital Stock.

                  (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares, or out of
its authorized and issued shares held in its treasury, the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement, including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.

                  (b) So long as any shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights are listed on any
national securities exchange or quoted on any trading system, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange, or quoted on such system, upon official notice of issuance upon such
exercise. Following the occurrence of a Triggering Event, the Company will use
its best efforts to list (or continue the listing of) the Rights and the
securities issuable and deliverable upon the exercise of the Rights on one or
more national securities exchanges or to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by NASDAQ or such other
transaction reporting system then in use.

                                       14
<PAGE>   18

                  (c) The Company shall use its best efforts to (i) prepare and
file, as soon as practicable following the first occurrence of a Flip-In Event
or, if applicable, as soon as practicable following the earliest date after the
first occurrence of a Flip-In Event on which the consideration to be delivered
by the Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed 90 days after the date set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability of the Rights in order
to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that the Securities Act
requires an effective registration statement under the Securities Act following
the Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as such a registration statement has been declared
effective. Upon any such suspension, the Company shall promptly notify the
Rights Agent thereof and shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement (with prompt notice thereof to the Rights Agent) at such time as
the suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, the exercise thereof shall not be permitted under applicable law
or any required registration statement shall not have been declared effective.

                  (d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Fractional Shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.

                  (e) The Company further covenants and agrees that it will pay
when due and payable any and all taxes and governmental charges that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to pay any tax or charge that may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of Fractional Shares
of Preferred Stock (or Common Stock and/or other securities, as the case may be)
in respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) in a name other than that of
the registered holder upon the exercise of any Rights until such tax or charge
shall have been paid (any such tax or charge being payable by the holder of

                                       15
<PAGE>   19

such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax or charge is due.

                  Section 10. Preferred Stock Record Date. Each Person in whose
name any certificate for a number of Fractional Shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such shares (fractional or otherwise) of Preferred Stock (or Common
Stock and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable taxes and governmental charges) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate, as such, shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

                  Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares or
other securities subject to purchase upon exercise of each Right and the number
of Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.

                           (a)(i) In the event the Company shall at any time
         after the Rights Dividend Declaration Date (A) declare a dividend on
         the outstanding shares of Preferred Stock payable in shares of
         Preferred Stock, (B) subdivide the outstanding shares of Preferred
         Stock, (C) combine the outstanding shares of Preferred Stock into a
         smaller number of shares or (D) otherwise reclassify the outstanding
         shares of Preferred Stock (including any such reclassification in
         connection with a consolidation or merger in which the Company is the
         continuing or surviving corporation), except as otherwise provided in
         this Section 11(a) and Section 7(e) hereof, the Purchase Price in
         effect at the time of the record date for such dividend or of the
         effective date of such subdivision, combination or reclassification,
         and the number and kind of shares of Preferred Stock or capital stock
         or other securities, as the case may be, issuable on such date, shall
         be proportionately adjusted so that the holder of any Right exercised
         after such time shall be entitled to receive, upon payment of the
         Purchase Price then in effect, the aggregate number and kind of shares
         of Preferred Stock or capital stock or other securities, as the case
         may be, which, if such Right had been exercised immediately prior to
         such date and at a time when the Preferred Stock transfer books of the
         Company were open, he would have owned upon such exercise and been
         entitled to receive by virtue of such dividend, subdivision,
         combination or reclassification. If an event occurs that would require
         an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)

                                       16
<PAGE>   20

         hereof, the adjustment provided for in this Section 11(a)(i) shall be
         in addition to, and shall be made prior to, any adjustment required
         pursuant to Section 11(a)(ii) hereof.

                           (ii) Subject to Sections 23 and 24 of this Agreement,
         in the event any Person shall, at any time after the Rights Dividend
         Declaration Date, become an Acquiring Person, unless the event causing
         such Person to become an Acquiring Person is (1) a Flip- Over Event or
         (2) an acquisition of shares of Common Stock pursuant to a Permitted
         Offer (provided that this clause (2) shall cease to apply if such
         Acquiring Person thereafter becomes the Beneficial Owner of any
         additional shares of Common Stock other than pursuant to such Permitted
         Offer or a transaction set forth in Section 13(a) or 13(d) hereof),
         then, (x) the Purchase Price shall be adjusted to be the Purchase Price
         immediately prior to the first occurrence of a Flip-In Event multiplied
         by the number of Fractional Shares of Preferred Stock for which a Right
         was exercisable immediately prior to such first occurrence and (y) each
         holder of a Right (except as provided below in Section 11(a)(iii) and
         in Section 7(e) hereof) shall thereafter have the right to receive,
         upon exercise thereof at a price equal to the Purchase Price in
         accordance with the terms of this Agreement, in lieu of the shares of
         Preferred Stock otherwise purchasable thereunder, such number of shares
         of Common Stock of the Company as shall equal the result obtained by
         dividing the Purchase Price by 50% of the Current Market Price per
         share of Common Stock on the date of such first occurrence (such number
         of shares, the "Adjustment Shares"); provided that the Purchase Price
         and the number of Adjustment Shares shall be further adjusted as
         provided in this Agreement to reflect any events occurring after the
         date of such first occurrence.

                           (iii) In the event that the number of shares of
         Common Stock that are authorized by the Company's certificate of
         incorporation but not outstanding or reserved for issuance for purposes
         other than upon exercise of the Rights is not sufficient to permit the
         exercise in full of the Rights in accordance with the foregoing
         subparagraph (ii) of this Section 11(a), the Company shall, to the
         extent permitted by applicable law and regulation, (A) determine the
         excess of (1) the value of the Adjustment Shares issuable upon the
         exercise of a Right (computed using the Current Market Price used to
         determine the number of Adjustment Shares) (the "Current Value") over
         (2) the Purchase Price (such excess is herein referred to as the
         "Spread"), and (B) with respect to each Right, make adequate provision
         to substitute for the Adjustment Shares, upon the exercise of the
         Rights and payment of the applicable Purchase Price, (1) cash, (2) a
         reduction in the Purchase Price, (3) Common Stock or other equity
         securities of the Company (including, without limitation, shares, or
         units of shares, of preferred stock (including, without limitation, the
         Preferred Stock) that the Board of Directors has determined to have the
         same value as shares of Common Stock (such shares of preferred stock
         are herein referred to as "Common Stock Equivalents")), (4) debt
         securities of the Company, (5) other assets or (6) any combination of
         the foregoing, having an aggregate value equal to the Current Value,
         where such aggregate value has been determined by the Board of
         Directors based upon the advice of a nationally recognized investment
         banking firm selected by the Board of Directors; provided, however, if
         the Company shall not have made adequate provision to deliver value
         pursuant to clause (B) above within 30 days following the later of (x)
         the first occurrence of a Flip-In Event and (y) the date on which the
         Company's right of redemption pursuant to Section 23(a) expires

                                       17
<PAGE>   21

         (the later of (x) and (y) being referred to herein as the "Flip-In
         Trigger Date"), then the Company shall be obligated to deliver, upon
         the surrender for exercise of a Right and without requiring payment of
         the Purchase Price, shares of Common Stock (to the extent available)
         and then, if necessary, cash, which shares and/or cash have an
         aggregate value equal to the Spread. If the Board of Directors shall
         determine in good faith that it is likely that sufficient additional
         shares of Common Stock could be authorized for issuance upon exercise
         in full of the Rights, the 30-day period set forth above may be
         extended to the extent necessary, but not more than 90 days after the
         Flip-In Trigger Date, in order that the Company may seek stockholder
         approval for the authorization of such additional shares (such period,
         as it may be extended, the "Substitution Period"). To the extent that
         the Company or the Board of Directors determines that some action need
         be taken pursuant to the first and/or second sentences of this Section
         11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
         hereof, that such action shall apply uniformly to all outstanding
         Rights, and (y) may suspend the exercisability of the Rights until the
         expiration of the Substitution Period in order to seek any
         authorization of additional shares and/or to decide the appropriate
         form of distribution to be made pursuant to such first sentence and to
         determine the value thereof. In the event of any such suspension, the
         Company shall promptly notify the Rights Agent thereof and shall issue
         a public announcement stating that the exercisability of the Rights has
         been temporarily suspended, as well as a public announcement (with
         prompt notice thereof to the Rights Agent) at such time as the
         suspension is no longer in effect. For purposes of this Section
         11(a)(iii), the value of the Common Stock shall be the Current Market
         Price per share of the Common Stock on the Flip-In Trigger Date and the
         value of any Common Stock Equivalent shall be deemed to have the same
         value as the Common Stock on such date.

                  (b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within 45
calendar days after such record date) Preferred Stock (or shares having
substantially the same rights, privileges and preferences as the shares of
Preferred Stock ("Equivalent Preferred Stock")) or securities convertible into
Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred
Stock or per share of Equivalent Preferred Stock (or having a conversion price
per share, if a security convertible into Preferred Stock or Equivalent
Preferred Stock) less than the Current Market Price per share of Preferred Stock
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of shares of Preferred Stock that the aggregate offering price of the
total number of shares of Preferred Stock and/or Equivalent Preferred Stock so
to be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price, and
the denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration, part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the holders of the Rights. Shares of

                                       18
<PAGE>   22

Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price that would then be in effect if such record
date had not been fixed.

                  (c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price that
would have been in effect if such record date had not been fixed.

                  (d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock of a Person on any date shall be deemed
to be the average of the daily Closing Prices per share of such Common Stock for
the 30 consecutive Trading Days immediately prior to, but not including, such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of Common Stock on any date shall
be deemed to be the average of the daily Closing Prices per share of such Common
Stock for the 10 consecutive Trading Days immediately following, but not
including, such date; provided, however, that in the event that the Current
Market Price per share of Common Stock is determined during a period following
the announcement of (A) a dividend or distribution on such Common Stock other
than a regular quarterly cash dividend or the dividend of the Rights, or (B) any
subdivision, combination or reclassification of such Common Stock, and the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, shall not have occurred prior to
the commencement of the requisite 30 Trading Day or 10 Trading Day period, as
set forth above, then, and in each such case, the Current Market Price shall be
properly adjusted to take into account ex-dividend trading. If the Common Stock
is not publicly held or not so listed or traded, "Current Market Price" per
share shall mean the fair value per share as determined in good faith by the
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.

                                       19
<PAGE>   23

                  (ii) For the purpose of any computation hereunder, the
"Current Market Price" per share (or Fractional Share) of Preferred Stock shall
be determined in the same manner as set forth above for the Common Stock in
clause (i) of this Section 11(d) (other than the last sentence thereof). If the
Current Market Price per share (or Fractional Share) of Preferred Stock cannot
be determined in the manner provided above or if the Preferred Stock is not
publicly held or listed or traded in a manner described in clause (i) of this
Section 11(d), the "Current Market Price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of the Common
Stock. If neither the Common Stock nor the Preferred Stock is publicly held or
so listed or traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all purposes of this
Agreement, the Current Market Price of a Fractional Share of Preferred Stock
shall be equal to the Current Market Price of one share of Preferred Stock
divided by 100.

                  (e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments that by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share or to the nearest ten- thousandth of a Fractional Share of Preferred
Stock, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which mandates
such adjustment or (ii) the Expiration Date.

                  (f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive in respect of such Right any shares of capital
stock other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (f), (g), (h), (i), (j), (k) and (m)
hereof, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Stock shall apply on like terms to any such other shares.

                  (g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Fractional Shares of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

                  (h) Unless the Company shall have exercised its election as
provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such

                                       20
<PAGE>   24

adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of Fractional Shares of Preferred Stock (calculated
to the nearest one ten-thousandth of a Fractional Share) obtained by (i)
multiplying (x) the number of Fractional Shares of Preferred Stock covered by a
Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

                  (i) The Company may elect, on or after the date of any
adjustment of the Purchase Price, to adjust the number of Rights in lieu of any
adjustment in the number of Fractional Shares of Preferred Stock purchasable
upon the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of
Fractional Shares of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall notify the Rights Agent thereof and shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.

                  (j) Irrespective of any adjustment or change in the Purchase
Price or the number of Fractional Shares of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per Fractional Share and the
number of Fractional Shares that were expressed in the initial Rights
Certificates issued hereunder.

                  (k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, or the stated
capital of the number of Fractional Shares of Preferred Stock or of the number
of shares of Common Stock or other securities issuable upon exercise of a Right,
the Company shall take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and

                                       21
<PAGE>   25

nonassessable such number of Fractional Shares of Preferred Stock or such number
of shares of Common Stock or other securities at such adjusted Purchase Price.

                  (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Fractional Shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Fractional Shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment. The Company shall provide the Rights Agent with
written notice of any adjustment in the Purchase Price.

                  (m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11 hereafter made by the Company to holders of its Preferred Stock shall
not be taxable to such stockholders.

                  (n) The Company covenants and agrees that it shall not, at any
time that there is an Acquiring Person, (i) consolidate with any other Person,
(ii) merge with or into any other Person, or (iii) sell, lease or transfer (or
permit one or more Subsidiaries to sell, lease or transfer), in one transaction
or a series of related transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons, if (x) at the time of or
immediately after such consolidation, merger, sale, lease or transfer there are
any rights, warrants or other instruments or securities of the Company or any
other Person outstanding or agreements, arrangements or understandings in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (y) prior to, simultaneously with or immediately
after such consolidation, merger, sale, lease or transfer, the stockholders or
other equity owners of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
or Associates, or (z) the identity, form or nature of organization of the
Principal Party (including, without limitation, the selection of the Person that
will be the Principal Party as a result of the Company's entering into one or
more consolidations, mergers, sales, leases, transfers or transactions with more
than one party) would preclude or limit the exercise of Rights or otherwise
diminish substantially or eliminate the benefits intended to be afforded by the
Rights.

                                       22
<PAGE>   26

                  (o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, Section 24 or
Section 27 hereof, take (or permit any Subsidiary to take) any action if the
purpose of such action is to, or if at the time such action is taken it is
reasonably foreseeable that such action will, diminish substantially or
eliminate the benefits intended to be afforded by the Rights.

                  (p) Notwithstanding Section 3(c) hereof or any other provision
of this Agreement to the contrary, in the event that the Company shall at any
time after the Rights Dividend Declaration Date and prior to the Distribution
Date (i) declare a dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares or (iv) otherwise reclassify the outstanding shares of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter with Rights, shall be proportionately adjusted so
that the number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately prior to
such event by a fraction (the "Adjustment Fraction"), the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event. In lieu of such adjustment in the number of Rights
associated with one share of Common Stock, the Company may elect to adjust the
number of Fractional Shares of Preferred Stock purchasable upon the exercise of
one Right and the Purchase Price. If the Company makes such election, the number
of Rights associated with one share of Common Stock shall remain unchanged, and
the number of Fractional Shares of Preferred Stock purchasable upon exercise of
one Right and the Purchase Price shall be proportionately adjusted so that (i)
the number of Fractional Shares of Preferred Stock purchasable upon exercise of
a Right following such adjustment shall equal the product of the number of
Fractional Shares of Preferred Stock purchasable upon exercise of a Right
immediately prior to such adjustment multiplied by the Adjustment Fraction and
(ii) the Purchase Price following such adjustment shall equal the product of the
Purchase Price immediately prior to such adjustment multiplied by the Adjustment
Fraction.

                  Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate
and (c) mail a brief summary thereof to each registered holder of a Rights
Certificate (or, if prior to the Distribution Date, to each registered holder of
a certificate representing shares of Common Stock) in accordance with Section 26
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained, and shall have no duty with
respect to and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such a certificate.

                                       23
<PAGE>   27

                  Section 13. Consolidation, Merger or Sale or Transfer of
Assets, Cash Flow or Earning Power.

                  (a) In the event that, from and after the time an Acquiring
Person has become such, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person, and the Company
shall not be the continuing or surviving corporation of such consolidation or
merger, (y) any Person shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger, and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of the Company or any other
Person or cash or any other property, or (z) the Company shall sell, lease or
otherwise transfer (or one or more of its Subsidiaries shall sell, lease or
otherwise transfer), in one transaction or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the assets, cash
flow or earning power of the Company and its Subsidiaries (taken as a whole) to
any Person or Persons (other than the Company or any wholly owned Subsidiary of
the Company or any combination thereof in one or more transactions each of which
complies (and all of which together comply) with Section 11(o) hereof), then,
and in each such case (except as may be contemplated by Section 13(d) hereof),
proper provision shall be made so that: (i) the Purchase Price shall be adjusted
to be the Purchase Price immediately prior to the first occurrence of a
Triggering Event multiplied by the number of Fractional Shares of Preferred
Stock for which a Right was exercisable immediately prior to such first
occurrence; (ii) on and after the Distribution Date, each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the Purchase Price in accordance with the
terms of this Agreement, in lieu of shares of Preferred Stock or Common Stock of
the Company, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by dividing the Purchase Price by 50% of the Current Market Price per
share of the Common Stock of such Principal Party on the date of consummation of
such Flip-Over Event; provided that the Purchase Price and the number of shares
of Common Stock of such Principal Party issuable upon exercise of each Right
shall be further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence of a Triggering Event or after
the date of such Flip-Over Event, as applicable; (iii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Flip-Over
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iv) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Flip-Over Event; (v) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (vi) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the occurrence of
any Flip-Over Event.

                                       24
<PAGE>   28

                  (b) "Principal Party" shall mean

                  (i) in the case of any transaction described in clause (x) or
         (y) of the first sentence of Section 13(a), (A) the Person that is the
         issuer of any securities into which shares of Common Stock of the
         Company are converted in such merger or consolidation, or, if there is
         more than one such issuer, the issuer the Common Stock of which has the
         greatest aggregate market value, or (B) if no securities are so issued,
         (x) the Person that survives such consolidation or is the other party
         to the merger and survives such merger, or, if there is more than one
         such Person, the Person the Common Stock of which has the greatest
         aggregate market value or (y) if the Person that is the other party to
         the merger does not survive the merger, the Person that does survive
         the merger (including the Company if it survives); and

                  (ii) in the case of any transaction described in clause (z) of
         the first sentence of Section 13(a), the Person that is the party
         receiving the greatest portion of the assets or earning power
         transferred pursuant to such transaction or transactions, or, if each
         Person that is a party to such transaction or transactions receives the
         same portion of the assets or earning power so transferred, or if the
         Person receiving the greatest portion of the assets or earning power
         cannot be determined, the Person the Common Stock of which has the
         greatest aggregate market value;

provided, however, that in any such case, if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve-month
period registered under Section 12 of the Exchange Act, and if (1) such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; (2) such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value; and (3) such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership having
an interest in such joint venture as if such party were a "Subsidiary" of both
or all of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of such
interests.

                  (c) The Company shall not consummate any Flip-Over Event
unless each Principal Party (or Person that may become a Principal Party as a
result of such Flip-Over Event) shall have a sufficient number of authorized
shares of its Common Stock that have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and each such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of such Flip-Over Event,
the Principal Party at its own expense will

                  (i) prepare and file a registration statement under the
         Securities Act with respect to the Rights and the securities
         purchasable upon exercise of the Rights on an appropriate

                                       25
<PAGE>   29

         form, and will use its best efforts to cause such registration
         statement to (A) become effective as soon as practicable after such
         filing and (B) remain effective (with a prospectus at all times meeting
         the requirements of the Securities Act) until the Expiration Date;

                  (ii) use its best efforts to qualify or register the Rights
         and the securities purchasable upon exercise of the Rights under the
         "blue sky" laws of such jurisdictions as may be necessary or
         appropriate;

                  (iii) use its best efforts, if the Common Stock of the
         Principal Party is or shall become listed on a national securities
         exchange, to list (or continue the listing of) the Rights and the
         securities purchasable upon exercise of the Rights on such securities
         exchange and, if the Common Stock of the Principal Party shall not be
         listed on a national securities exchange, to cause the Rights and the
         securities purchasable upon exercise of the Rights to be reported by
         NASDAQ or such other transaction reporting system then in use; and

                  (iv) deliver to holders of the Rights historical financial
         statements for the Principal Party and each of its Affiliates that
         comply in all respects with the requirements for registration on Form
         10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-Over Event
shall occur at any time after the occurrence of a Flip-In Event, the Rights that
have not theretofore been exercised shall thereafter become exercisable in the
manner described in Section 13(a).

                  (d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Permitted Offer (or a wholly owned subsidiary of any such Person
or Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of Common Stock whose shares were purchased pursuant to such Permitted
Offer, and (iii) the form of consideration being offered to the remaining
holders of shares of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.

                  Section 14. Fractional Rights and Fractional Shares.

                  (a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates or scrip evidencing fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
Closing Price of one Right for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable.

                                       26
<PAGE>   30

                  (b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than, except as provided in Section 7(c)
hereof, fractions that are integral multiples of a Fractional Share of Preferred
Stock) upon exercise of the Rights or to distribute certificates or scrip
evidencing fractional shares of Preferred Stock (other than, except as provided
in Section 7(c) hereof, fractions that are integral multiples of a Fractional
Share of Preferred Stock). Interests in fractions of shares of Preferred Stock
in integral multiples of a Fractional Share of Preferred Stock may, at the
election of the Company in its sole discretion, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it, provided that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as Beneficial Owners of the shares of
Preferred Stock represented by such depositary receipts. In lieu of fractional
shares of Preferred Stock that are not integral multiples of a Fractional Share
of Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of one one-hundredth of the Closing Price of
a share of Preferred Stock for the Trading Day immediately prior to the date of
such exercise.

                  (c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Closing Price of one share of Common Stock for the Trading Day
immediately prior to the date of such exercise.

                   (d) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14. The Rights Agent shall have no duty or obligation with respect to this
Section 14 unless and until it has received specific instructions (and
sufficient cash, if required) from the Company with respect to its duties and
obligations under such Sections.

                  Section 15. Rights of Action. All rights of action in respect
of this Agreement, other than rights of action vested in the Rights Agent
pursuant to Section 18 hereof, are vested in the respective registered holders
of the Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock) and, where applicable, the Company; and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in his or her own behalf and for his or her own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
After a Triggering Event, holders of Rights shall be entitled to recover the
reasonable costs and

                                       27
<PAGE>   31

expenses, including attorneys' fees, incurred by them in any action to enforce
the provisions of this Agreement.

                  Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:

                  (a) prior to the Distribution Date, the Rights will not be
evidenced by Rights Certificates and will be transferable only in connection
with the transfer of Common Stock;

                  (b) after the Distribution Date, the Rights Certificates will
be transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated, pursuant to Section 26,
for such purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the form of assignment set forth on the reverse side thereof
and the certificate contained therein duly completed and fully executed;

                  (c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; and

                  (d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree, judgment or ruling, whether
interlocutory or final, issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree, judgment or ruling lifted or otherwise overturned as soon as possible.

                  Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
Fractional Shares of Preferred Stock or any other securities of the Company that
may at any time be issuable upon the exercise of the Rights represented thereby,
nor shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

                                       28
<PAGE>   32

                  Section 18. Concerning the Rights Agent.

                  (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other reasonable disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, damage, judgement, ruling
(interlocutory or final), fine, penalty, claim, demand, settlement, cost or
expense, incurred without gross negligence, bad faith or willful misconduct (as
finally determined by a court of competent jurisdiction) on the part of the
Rights Agent, for any action taken, suffered or omitted by the Rights Agent in
connection with the preparation, delivery, acceptance, administration, execution
and amendment of this Agreement and the exercise and performance of its duties
hereunder, including, without limitation, the costs and expenses of defending
against any claim of liability in the premises.

                  The indemnity provided herein shall survive the termination of
this Agreement and the termination and the expiration of the Rights. The costs
and expenses incurred in enforcing this right of indemnification shall be paid
by the Company if the Rights Agent is successful in whole or in part on the
merits. Anything in this Agreement to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, punitive, indirect, incidental or
consequential loss or damage of any kind whatsoever (including, but not limited
to, lost profits), even if the Rights Agent has been advised of the possibility
of such loss or damage. Any liability of the Rights Agent under this Agreement
shall be limited to the amount of fees paid by the Company to the Rights Agent
hereunder.

                  (b) The Rights Agent shall be authorized to rely on, shall be
protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with the acceptance and administration
of this Agreement in reliance upon any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by it, after
proper inquiry or examination, to be genuine and to be signed, executed and,
where necessary, guaranteed, verified or acknowledged, by the proper Person or
Persons. The Rights Agent shall not be deemed to have any duty or notice unless
and until the Company has provided the Rights Agent with written notice.

                  Section 19. Merger or Consolidation or Change of Name of
Rights Agent.

                  (a) Any Person into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
shareholder services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency

                                       29
<PAGE>   33

created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

                  (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

                  Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations expressly imposed by this Agreement (and
no implied duties or obligations) upon the following terms and conditions, by
all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:

                  (a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent, and
the Rights Agent shall incur no liability for or in respect of any action taken,
suffered or omitted by it in good faith and in accordance with such advice or
opinion.

                  (b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "Current Market Price") be proved or established by the
Company prior to taking, suffering or omitting any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights Agent, and
the Rights Agent shall incur no liability for or in respect of any action taken,
suffered or omitted in good faith by it under the provisions of this Agreement
in reliance upon such certificate.

                  (c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct (as finally determined by
a court of competent jurisdiction).

                  (d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify

                                       30
<PAGE>   34

the same (except as to its countersignature on such Rights Certificates), but
all such statements and recitals are and shall be deemed to have been made by
the Company only.

                  (e) The Rights Agent shall not have any liability for, nor be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it have any liability for, nor
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible or liable for the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of actual knowledge of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or Common Stock or other securities to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any shares of
Preferred Stock or Common Stock or other securities will, when so issued, be
validly authorized and issued, fully paid and nonassessable.

                  (f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.

                  (g) The Rights Agent is hereby authorized and directed to
accept advice or instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and such advice or instructions shall be full
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in good faith in accordance with the advice or instructions of any such
officer.

                  (h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other Person.

                  (i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, omission, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company or any other
Person resulting from any such act, omission, default, neglect or misconduct
absent gross negligence, bad faith or wilful misconduct in the selection and
continued employment thereof.

                                       31
<PAGE>   35

                  (j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if it believes that repayment of such funds or adequate indemnification
against such risk or liability is not assured to it.

                  (k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

                  Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and the Preferred Stock, by registered or
certified mail, and to the registered holders, if any, of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent (with or without cause) upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and the Preferred Stock, by registered
or certified mail, and to the registered holders of the Rights Certificates, if
any, by first-class mail. If the Rights Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. Notwithstanding the foregoing provisions of this
Section 21, in no event shall the resignation or removal of a Rights Agent be
effective until a successor Rights Agent shall have been appointed and have
accepted such appointment. If the Company shall fail to make such appointment
within a period of 30 days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the registered holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the Rights Agent or the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a Person organized and doing business
under the laws of the United States or of the State of New York (or of any other
state of the United States so long as such corporation is authorized to conduct
business in the State of New York), in good standing, and which has at the time
of its appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of a Person described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock
and the Preferred Stock, and mail a notice thereof in writing to the registered
holders, if any, of the Rights Certificates. Failure to give any notice provided
for in this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.

                                       32
<PAGE>   36

                  Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement granted
or awarded on or prior to the Distribution Date, or upon the exercise,
conversion or exchange of securities issued by the Company on or prior to the
Distribution Date, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

                  Section 23. Redemption and Termination.

                  (a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth day
following the first date of public announcement of the occurrence of a Flip-In
Event (or, if such date shall have occurred prior to the Record Date, the close
of business on the tenth day following the Record Date) and (ii) the Expiration
Date, cause the Company to redeem all but not less than all the then outstanding
Rights at a redemption price of $.01 per Right, as such amount may be
appropriately adjusted, if necessary, to reflect any stock split, stock dividend
or similar transaction occurring after the Rights Dividend Declaration Date
(such redemption price being hereinafter referred to as the "Redemption Price");
provided, however, that the Rights may not be redeemed following any merger to
which the Company is a party that (i) occurs when there is an Acquiring Person
and (ii) was not approved (x) prior to the time such Person became an Acquiring
Person by the Board of Directors and (y) prior to such merger by the
stockholders of the Company at a stockholders' meeting. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Flip-In Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.

                  (b) Immediately upon the effectiveness of the action of the
Board of Directors ordering the redemption of the Rights (the effectiveness of
which action may be conditioned on the occurrence of one or more events or on
the existence of one or more facts or may be effective at some future time), and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly after
the effectiveness of the action of the Board

                                       33
<PAGE>   37

of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the registered holders of the
then outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the Company for the
Common Stock. Any notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption shall state the method by which the payment of the Redemption Price
will be made.

                  Section 24. Exchange.

                  (a) The Board of Directors may, at its option, at any time and
from time to time after the occurrence of a Flip-In Event, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become null and void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock or Common Stock Equivalents or any
combination thereof, at an exchange ratio of one share of Common Stock, or such
number of Common Stock Equivalents or units representing fractions thereof as
would be deemed to have the same value as one share of Common Stock, per Right,
appropriately adjusted, if necessary, to reflect any stock split, stock dividend
or similar transaction occurring after the Rights Dividend Declaration Date
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors may not effect such
exchange at any time after (i) any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person (excluding Affiliates
and Associates that are Exempt Persons), becomes the Beneficial Owner of 50% or
more of the shares of Common Stock then outstanding or (ii) the occurrence of a
Flip-Over Event.

                  (b) Immediately upon the effectiveness of the action of the
Board of Directors ordering the exchange of any Rights pursuant to and in
accordance with subsection (a) of this Section 24 (the effectiveness of which
action may be conditioned on the occurrence of one or more events or on the
existence of one or more facts or may be effective at some future time) and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock and/or Common Stock
Equivalents equal to the number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly give public notice of any such
exchange (with prompt notice thereof to the Rights Agent); provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any such
exchange to the Rights Agent and all of the registered holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock and/or
Common Stock Equivalents for Rights will be effected and, in the event of any
partial exchange, the number of Rights that will be exchanged. Any partial
exchange shall be effected as nearly pro rata as possible based on the number of
Rights (other than Rights that have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.

                                       34
<PAGE>   38

                  (c) In the event that the number of shares of Common Stock
that are authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit an exchange of Rights as contemplated in
accordance with this Section 24, the Company may, at its option, take all such
action as may be necessary to authorize additional shares of Common Stock for
issuance upon exchange of the Rights.

                  (d) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates or scrip evidencing
fractional shares of Common Stock upon exchange of the Rights. In lieu of such
fractional shares of Common Stock, the Company shall pay to the registered
holders of Rights with regard to which such fractional shares of Common Stock
would otherwise be issuable an amount in cash equal to the same fraction of the
value of a whole share of Common Stock. For purposes of this Section 24, the
value of a whole share of Common Stock shall be the Closing Price per share of
Common Stock for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24, and the value of any Common Stock Equivalent shall
be deemed to have the same value as the Common Stock on such date.

                  Section 25. Notice of Certain Events.

                  (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a wholly owned Subsidiary of
the Company in a transaction that complies with Section 11(o) hereof), or to
effect any sale, lease or other transfer of all or substantially all the
Company's assets, cash flow or earning power to any other Person or Persons
(other than a wholly owned Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to the Rights Agent and each holder of record of a Rights
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, lease, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the shares of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock, whichever shall be the earlier.
The failure to give notice required by this Section 25 or any defect therein
shall not affect the legality or validity of the action taken by the Company or
the vote upon any such action.

                                       35
<PAGE>   39

                  (b) In case any Flip-In Event or Flip-Over Event shall occur,
then (i) the Company shall as soon as practicable thereafter give to the Rights
Agent and each registered holder of a Rights Certificate (or if occurring prior
to the Distribution Date, the registered holders of Common Stock), in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) or Section 13(a) hereof, and (ii) all references in the
preceding paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.

                  Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:

                  Lennox International Inc.
                  2140 Lake Park Blvd.
                  Richardson, Texas 75080
                  Attention: Chief Executive Officer

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:

                  ChaseMellon Shareholder Services, L.L.C.
                  85 Challenger Road
                  Ridgefield Park, New Jersey 07660-2108
                  Attention: General Counsel

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.

                  Section 27. Supplements and Amendments. Except as provided in
the last sentence of this Section 27, at any time when the Rights are then
redeemable, the Company may in its sole and absolute discretion and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of Rights or
holders of Common Stock. At any time when the Rights are not redeemable, except
as provided in the last sentence of this Section 27, the Company may and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein that may
be defective or inconsistent with any other provisions herein, (iii) to shorten
or lengthen any time period hereunder or (iv) to change or supplement the
provisions hereunder in any manner that the

                                       36
<PAGE>   40

Company may deem necessary or desirable; provided that no such amendment or
supplement shall materially adversely affect the interests of the Rights Agent
or the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); and further provided that this Agreement may
not be supplemented or amended pursuant to this sentence to lengthen (A) a time
period relating to when the Rights may be redeemed or (B) any other time period
unless the lengthening of such other time period is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than any Acquiring Person and its Affiliates and
Associates). Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment; provided, however, that the Rights Agent may, but
shall not, under any circumstances, be obligated to, enter into any such
supplement or amendment that affects the Rights Agent's rights, duties,
liabilities, obligations or immunities under this Agreement. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made that decreases the Redemption Price.

                  Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.

                  Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding shares
of Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. The Board of Directors (or, as set forth herein, certain specified
members thereof) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights, as such, and all other
Persons, and (y) not subject the Board of Directors to any liability to the
holders of the Rights. The Rights Agent shall always be entitled to assume that
the Company's Board of Directors acted in good faith and shall be fully
protected and incur no liability in reliance thereon.

                  Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders

                                       37
<PAGE>   41

of the Rights Certificates (and, prior to the Distribution Date, registered
holders of the Common Stock).

                  Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, then, unless there has occurred any merger referred to
in the proviso to the first sentence of Section 23(a), the right of redemption
set forth in Section 23 hereof shall be reinstated and shall not expire until
the close of business on the tenth day following the date of such determination
by the Board of Directors or, if earlier, immediately prior to any such merger.
Without limiting the foregoing, if any provision requiring that a determination
be made by less than the entire Board of Directors is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
such determination shall then be made by the entire Board of Directors of the
Company.

                  Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State; provided, however, that all
provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State.

                  Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.

                  Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.

                                       38
<PAGE>   42

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

                                        LENNOX INTERNATIONAL INC.

                                        By /s/ CARL E. EDWARDS JR.
                                          --------------------------------------
                                        Name:  Carl E. Edwards Jr.
                                        Title: Executive Vice President

                                        CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

                                        By /s/ TIM L. REAGAN
                                          --------------------------------------
                                        Name:  Tim L. Reagan
                                        Title: Relationship Manger

<PAGE>   43

                                                                       EXHIBIT A

                                     FORM OF
                           CERTIFICATE OF DESIGNATIONS

                                       of

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                       of

                            LENNOX INTERNATIONAL INC.

             Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware

                  LENNOX INTERNATIONAL INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:

                  That pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the Restated
Certificate of Incorporation of the said Corporation, the said Board of
Directors of this Corporation on July 27, 2000 adopted the following resolution
creating a series of 2,000,000 shares of Preferred Stock designated as "Series A
Junior Participating Preferred Stock":

                  RESOLVED, that pursuant to the authority vested in the Board
         of Directors of this Corporation in accordance with the provisions of
         the Restated Certificate of Incorporation, a series of Preferred Stock,
         par value $.01 per share, of the Corporation be and hereby is created,
         and that the designation and number of shares thereof and the voting
         and other powers, preferences and relative, participating, optional or
         other rights of the shares of such series and the qualifications,
         limitations and restrictions thereof are as follows:

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                  1. Designation and Amount. There shall be a series of
Preferred Stock that shall be designated as "Series A Junior Participating
Preferred Stock," and the number of shares constituting such series shall be
2,000,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors of this Corporation; provided, however, that no decrease
shall reduce the number of shares of Series A Junior Participating Preferred
Stock to less than the number of shares then issued and outstanding plus the
number of shares issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the Corporation.

                                      A-1
<PAGE>   44

                  2. Dividends and Distributions.

                  (A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock, in preference to the holders of shares of any class or series of stock of
the Corporation ranking junior to the Series A Junior Participating Preferred
Stock, shall be entitled to receive, when, as and if declared by the Board of
Directors of this Corporation out of funds legally available for the purpose,
quarterly dividends payable in cash on the 15th day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior Participating Preferred
Stock. The "Adjustment Number" shall initially be 100. In the event the
Corporation shall at any time after July 27, 2000 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

                  (B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.

                  (C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock

                                      A-2
<PAGE>   45

entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Junior Participating Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors of this Corporation may fix a record date
for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

                  3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:

                  (A) Each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal to the
Adjustment Number on all matters submitted to a vote of the stockholders of the
Corporation.

                  (B) Except as otherwise provided herein, in the Restated
Certificate of Incorporation or by law, the holders of shares of Series A Junior
Participating Preferred Stock, the holders of shares of any other class or
series entitled to vote with the Common Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.

                  (C)(i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") that shall extend until
such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Series A Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period, (1) the
number of Directors shall be increased by two, effective as of the time of
election of such Directors as herein provided, and (2) the holders of Preferred
Stock (including holders of the Series A Junior Participating Preferred Stock)
upon which these or like voting rights have been conferred and are exercisable
(the "Voting Preferred Stock") with dividends in arrears in an amount equal to
six quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect such two Directors.

                  (ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that such voting right shall not be exercised
unless the holders of at least one-third in number of the shares of Voting
Preferred Stock outstanding shall be present in person or by proxy. The absence
of a quorum of the holders of Common Stock shall not affect the exercise by the
holders of Voting Preferred Stock of such voting right.

                                      A-3
<PAGE>   46

                  (iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors of this Corporation may order, or any
stockholder or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Voting Preferred Stock outstanding,
irrespective of series, may request, the calling of a special meeting of the
holders of Voting Preferred Stock, which meeting shall thereupon be called by
the Chairman of the Board, the President, a Vice President or the Secretary of
the Corporation. Notice of such meeting and of any annual meeting at which
holders of Voting Preferred Stock are entitled to vote pursuant to this
paragraph (C)(iii) shall be given to each holder of record of Voting Preferred
Stock by mailing a copy of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall be called for a time
not earlier than 20 days and not later than 60 days after such order or request
or, in default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent of the total
number of shares of Voting Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.

                  (iv) In any default period, after the holders of Voting
Preferred Stock shall have exercised their right to elect Directors voting as a
class, (x) the Directors so elected by the holders of Voting Preferred Stock
shall continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy in
the Board of Directors of this Corporation may be filled by vote of a majority
of the remaining Directors theretofore elected by the holders of the class or
classes of stock which elected the Director whose office shall have become
vacant. References in this paragraph (C) to Directors elected by the holders of
a particular class or classes of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing sentence.

                  (v) Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of Voting
Preferred Stock as a class shall terminate and (z) the number of Directors shall
be such number as may be provided for in the Restated Certificate of
Incorporation or By-Laws irrespective of any increase made pursuant to the
provisions of paragraph (C) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in the Restated
Certificate of Incorporation or By-Laws). Any vacancies in the Board of
Directors of this Corporation effected by the provisions of clauses (y) and (z)
in the preceding sentence may be filled by a majority of the remaining
Directors.

                  (D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.

                                      A-4
<PAGE>   47

                  4. Certain Restrictions.

                  (A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not

                           (i) declare or pay dividends on, make any other
         distributions on, or redeem or purchase or otherwise acquire for
         consideration any shares of stock ranking junior (either as to
         dividends or upon liquidation, dissolution or winding up) to the Series
         A Junior Participating Preferred Stock;

                           (ii) declare or pay dividends on or make any other
         distributions on any shares of stock ranking on a parity (either as to
         dividends or upon liquidation, dissolution or winding up) with the
         Series A Junior Participating Preferred Stock, except dividends paid
         ratably on the Series A Junior Participating Preferred Stock and all
         such parity stock on which dividends are payable or in arrears in
         proportion to the total amounts to which the holders of all such shares
         are then entitled; or

                           (iii) redeem or purchase or otherwise acquire for
         consideration any shares of Series A Junior Participating Preferred
         Stock, or any shares of stock ranking on a parity with the Series A
         Junior Participating Preferred Stock, except in accordance with a
         purchase offer made in writing or by publication (as determined by the
         Board of Directors of this Corporation) to all holders of Series A
         Junior Participating Preferred Stock, or to all such holders and the
         holders of any such shares ranking on a parity therewith, upon such
         terms as the Board of Directors of this Corporation, after
         consideration of the respective annual dividend rates and other
         relative rights and preferences of the respective series and classes,
         shall determine in good faith will result in fair and equitable
         treatment among the respective series or classes.

                  (B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.

                  5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors of this Corporation, subject to any conditions and
restrictions on issuance set forth herein.

                  6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the

                                      A-5
<PAGE>   48

holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Junior Participating
Preferred Stock Liquidation Preference"). Following the payment of the full
amount of the Series A Junior Participating Preferred Stock Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Junior Participating Preferred Stock Liquidation Preference by (ii) the
Adjustment Number. Following the payment of the full amount of the Series A
Junior Participating Preferred Stock Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Junior Participating
Preferred Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock shall,
subject to the prior rights of all other series of Preferred Stock, if any,
ranking prior thereto, receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Series A Junior Participating Preferred Stock and Common
Stock, on a per share basis, respectively.

                  (B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Junior Participating
Preferred Stock Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, that rank on a parity with the Series A
Junior Participating Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of such parity shares in proportion to their
respective liquidation preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of Common
Stock.

                  (C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation's assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.

                  7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.

                  8. Redemption. (A) The Corporation, at its option, may redeem
shares of the Series A Junior Participating Preferred Stock in whole at any time
and in part from time to time, at a redemption price equal to the Adjustment
Number times the current per share market price (as such

                                      A-6
<PAGE>   49

term is hereinafter defined) of the Common Stock on the date of the mailing of
the notice of redemption, together with unpaid accumulated dividends to the date
of such redemption. The "current per share market price" on any date shall be
deemed to be the average of the closing price per share of such Common Stock for
the ten consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
current per share market price of the Common Stock is determined during a period
following the announcement of (A) a dividend or distribution on the Common Stock
other than a regular quarterly cash dividend or (B) any subdivision, combination
or reclassification of such Common Stock and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, shall not have occurred prior to the commencement of such
ten Trading Day period, then, and in each such case, the current per share
market price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sales price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange, or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange but sales price information is
reported for such security, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
self-regulatory organization or registered securities information processor (as
such terms are used under the Securities Exchange Act of 1934, as amended) that
then reports information concerning the Common Stock, or, if sales price
information is not so reported, the average of the high bid and low asked prices
in the over-the-counter market on such day, as reported by NASDAQ or such other
entity, or, if on any such date the Common Stock is not quoted by any such
entity, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Corporation. If on any such date no such market maker
is making a market in the Common Stock, the fair value of the Common Stock on
such date as determined in good faith by the Board of Directors of this
Corporation shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if the Common
Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or Friday on
which banking institutions in the State of New York are not authorized or
obligated by law or executive order to close.

                  (B) In the event that fewer than all the outstanding shares of
the Series A Junior Participating Preferred Stock are to be redeemed, the number
of shares to be redeemed shall be determined by the Board of Directors of this
Corporation and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board of Directors of this Corporation or by any
other method that may be determined by the Board of Directors of this
Corporation in its sole discretion to be equitable.

                  (C) Notice of any such redemption shall be given by mailing to
the holders of the shares of Series A Junior Participating Preferred Stock to be
redeemed a notice of such redemption,

                                      A-7
<PAGE>   50

first class postage prepaid, not later than the fifteenth day and not earlier
than the sixtieth day before the date fixed for redemption, at their last
address as the same shall appear upon the books of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the number of shares to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on the close of
business on such redemption date. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the stockholder received such notice, and failure duly to give such notice by
mail, or any defect in such notice, to any holder of Series A Junior
Participating Preferred Stock shall not affect the validity of the proceedings
for the redemption of any other shares of Series A Junior Participating
Preferred Stock that are to be redeemed. On or after the date fixed for
redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price. If fewer than all the
shares represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.

                  (D) The shares of Series A Junior Participating Preferred
Stock shall not be subject to the operation of any purchase, retirement or
sinking fund.

                  9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters.

                  10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.

                  11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.

                                      A-8
<PAGE>   51

                  IN WITNESS WHEREOF, the undersigned has executed this
Certificate and does affirm the foregoing as true this ___ day of _______, 200_.

                                             -----------------------------------
                                             Title:
                                                   -----------------------------

                                      A-9
<PAGE>   52

                                                                       EXHIBIT B

                          [Form of Rights Certificate]

Certificate No. R-                                               ________ Rights

NOT EXERCISABLE AFTER July 27, 2010 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.

                               RIGHTS CERTIFICATE

                            LENNOX INTERNATIONAL INC.

                  This certifies that _____________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of July 27, 2000 as it may from
time to time be supplemented or amended (the "Rights Agreement"), between Lennox
International Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services, L.L.C., a New Jersey limited liability Company (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 p.m.
(New York City time) on July 27, 2010 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, nonassessable share (a "Fractional Share") of
Series A Junior Participating Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of the Company, at a purchase price of $75.00 per one
one-hundredth of a share (the "Purchase Price"), upon presentation and surrender
of this Rights Certificate with the Form of Election to Purchase and related
Certificate set forth on the reverse hereof duly executed. The Purchase Price
may be paid in cash or by certified check, cashier's or official bank check or
bank draft payable to the order of the Company or the Rights Agent. The number
of Rights evidenced by this Rights Certificate (and the number of shares that
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per Fractional Share set forth above, are the number and Purchase Price as of
July 27, 2000, based on the Preferred Stock as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering
Event (as such term is defined in the Rights Agreement) that a number of Rights
be exercised so that only whole shares of Preferred Stock will be issued.

                                      B-1
<PAGE>   53

                  From and after the first occurrence of a Triggering Event (as
such term is defined in the Rights Agreement), if the Rights evidenced by this
Rights Certificate are beneficially owned by or transferred to (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person (as such terms are
defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who, concurrently with or
after such transfer, became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, such Rights shall, with certain exceptions, become null and
void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.

                  As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities or assets
that may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.

                  This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Company.

                  This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of Fractional Shares of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.

                  Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at its option
at a redemption price of $.01 per Right, payable, at the election of the
Company, in cash or shares of Common Stock or such other consideration as the
Board of Directors of the Company may determine, at any time prior to the
earlier of the close of business on (a) the tenth day following the first public
announcement of the occurrence of a Flip-In Event (as such time period may be
extended or shortened pursuant to the Rights Agreement) and (b) the Expiration
Date (as such term is defined in the Rights Agreement) or (ii) may be exchanged
in whole or in part for shares of Common Stock and/or other equity securities of
the Company deemed to have the same value as shares of Common Stock, at any time

                                      B-2
<PAGE>   54

prior to a person's becoming the beneficial owner of 50% or more of the shares
of Common Stock outstanding or the occurrence of a Flip-Over Event.

                  No fractional shares of Preferred Stock are required to be
issued upon the exercise of any Right or Rights evidenced hereby (other than,
except as set forth above, fractions that are integral multiples of a Fractional
Share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment may be
made, as provided in the Rights Agreement.

                  No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
shares of Preferred Stock or of any other securities of the Company that may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

                  This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.

                  WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.

Dated as of  August 7, 2000

ATTEST:                                     LENNOX INTERNATIONAL INC.

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

Countersigned:

CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

By
   -------------------------------------
   Authorized Signature

                                      B-3
<PAGE>   55

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

         (To be executed by the registered holder if such holder desires
          to transfer any Rights evidenced by the Rights Certificate.)

FOR VALUE RECEIVED _______________________________________ hereby sells, assigns

and transfers unto______________________________________________________________

________________________________________________________________________________
                 (Please print name and address of transferee)
_________ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
__________________ Attorney, to transfer the said Rights on the books of the
within-named Company, with full power of substitution.

Dated: _________________, 200__

                                                  ______________________________
                                                  Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                      B-4
<PAGE>   56

                                   CERTIFICATE

                  The undersigned hereby certifies by checking the appropriate
boxes that:

                  (1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being sold, assigned and transferred by or on behalf of a Person who
is or was an Acquiring Person or an Affiliate or Associate of an Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);

                  (2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or who is a direct or
indirect transferee of an Acquiring Person or of an Affiliate or Associate of an
Acquiring Person.

Dated:              , 200
       -------------     --                       ------------------------------
                                                  Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                     NOTICE

                  The signatures to the foregoing Assignment and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.

                                      B-5
<PAGE>   57

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                 Rights represented by the Rights Certificate.)

To:      LENNOX INTERNATIONAL INC.

                  The undersigned hereby irrevocably elects to exercise ________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares (or other
securities) be issued in the name of and delivered to:

Please insert social security
or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

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

                  If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

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

Dated:             , 200
       ------------     --

                                                  ------------------------------
                                                  Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                      B-6
<PAGE>   58

                                   CERTIFICATE

                  The undersigned hereby certifies by checking the appropriate
boxes that:

                  (1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);

                  (2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or who is a direct or indirect
transferee of an Acquiring Person or of an Affiliate or Associate of an
Acquiring Person.

Dated:              , 200
       -------------     --                       ------------------------------
                                                  Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                     NOTICE

                  The signatures to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.

                                      B-7
<PAGE>   59

                                                                       EXHIBIT C

UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT), AND CERTAIN TRANSFEREES THEREOF, WILL BECOME NULL AND
VOID AND WILL NO LONGER BE TRANSFERABLE.

                                SUMMARY OF RIGHTS

                  On July 27, 2000, the Board of Directors of Lennox
International Inc. (the "Company") declared a dividend of one right ("Right")
for each outstanding share of the Company's Common Stock, par value $.01 per
share ("Common Stock"), to stockholders of record at the close of business on
August 7, 2000. Each Right entitles the registered holder to purchase from the
Company a unit consisting of one one-hundredth of a share (a "Fractional Share")
of Series A Junior Participating Preferred Stock, par value $.01 per share (the
"Preferred Stock"), at a purchase price of $75.00 per Fractional Share, subject
to adjustment (the "Purchase Price"). The description and terms of the Rights
are set forth in a Rights Agreement dated as of July 27, 2000 as it may from
time to time be supplemented or amended (the "Rights Agreement") between the
Company and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company, as Rights Agent.

                  Initially, the Rights will be attached to all certificates
representing outstanding shares of Common Stock, and no separate certificates
for the Rights ("Rights Certificates") will be distributed. The Rights will
separate from the Common Stock and a "Distribution Date" will occur, with
certain exceptions, upon the earlier of (i) ten days following a public
announcement that a Person (as defined in the Rights Agreement) or group of
affiliated or associated Persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the date of the announcement being the
"Stock Acquisition Date"), or (ii) ten business days following the commencement
of a tender offer or exchange offer that would result in a Person's becoming an
Acquiring Person. Lineal descendants of D.W. Norris (and their spouses) and
trusts established primarily for the benefit of such lineal descendants (and
their spouses) will not become an Acquiring Person and will not be counted as
affiliates or associates of any other Person in determining whether such Person
is an Acquiring Person, in each case as long as the primary purpose for holding
shares in the Company is not to effect an extraordinary corporate transaction.
In addition, the holders of 1% or more of the Company's Common Stock which are
identified in the prospectus relating to its initial public offering are also
excluded from becoming an Acquiring Person. In certain circumstances, the
Distribution Date may be deferred by the Board of Directors of the Company.
Certain inadvertent acquisitions will not result in a Person's becoming an
Acquiring Person if the Person promptly divests itself of sufficient Common
Stock. Until the Distribution Date, (a) the Rights will be evidenced by the
Common Stock certificates (together with a copy of this Summary of Rights or
bearing the notation referred to below) and will be transferred with and only
with such Common Stock certificates, (b) new Common Stock certificates issued
after August 7, 2000 will contain a notation incorporating the Rights Agreement
by reference and (c) the surrender for transfer of any certificate for Common
Stock (with or without a copy of this Summary of Rights) will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate.

                                      C-1
<PAGE>   60

                  The Rights are not exercisable until the Distribution Date and
will expire at the close of business on July 27, 2010, unless earlier redeemed
or exchanged by the Company as described below.

                  As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Common Stock as of the close
of business on the Distribution Date and, from and after the Distribution Date,
the separate Rights Certificates alone will represent the Rights. All shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
Shares of Common Stock issued after the Distribution Date in connection with
certain employee benefit plans or upon conversion of certain securities will be
issued with Rights. Except as otherwise determined by the Board of Directors of
the Company, no other shares of Common Stock issued after the Distribution Date
will be issued with Rights.

                  In the event (a "Flip-In Event") that a Person becomes an
Acquiring Person (except pursuant to a tender or exchange offer for all
outstanding shares of Common Stock at a price and on terms that a majority of
the independent directors of the Company determines to be fair to and otherwise
in the best interests of the Company and its stockholders (a "Permitted
Offer")), each holder of a Right will thereafter have the right to receive, upon
exercise of such Right, a number of shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a
Current Market Price (as defined in the Rights Agreement) equal to two times the
exercise price of the Right. Notwithstanding the foregoing, following the
occurrence of any Triggering Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by or
transferred to an Acquiring Person (or by certain related parties) will be null
and void in the circumstances set forth in the Rights Agreement. However, Rights
are not exercisable following the occurrence of any Flip-In Event until such
time as the Rights are no longer redeemable by the Company as set forth below.

                  In the event (a "Flip-Over Event") that, at any time from and
after the time an Acquiring Person becomes such, (i) the Company is acquired in
a merger or other business combination transaction (other than certain mergers
that follow a Permitted Offer), or (ii) 50% or more of the Company's assets,
cash flow or earning power is sold or transferred, each holder of a Right
(except Rights that are null and void as set forth above) shall thereafter have
the right to receive, upon exercise, a number of shares of common stock of the
acquiring company having a Current Market Price equal to two times the exercise
price of the Right. Flip-In Events and Flip-Over Events are collectively
referred to as "Triggering Events."

                  The number of outstanding Rights associated with a share of
Common Stock, or the number of Fractional Shares of Preferred Stock issuable
upon exercise of a Right and the Purchase Price, are subject to adjustment in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Stock occurring prior to the Distribution Date.
The Purchase Price payable, and the number of Fractional Shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution in the event of
certain transactions affecting the Preferred Stock.

                                      C-2
<PAGE>   61

                  With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least 1% of the
Purchase Price. No fractional shares of Preferred Stock that are not integral
multiples of a Fractional Share are required to be issued upon exercise of
Rights and, in lieu thereof, an adjustment in cash may be made based on the
market price of the Preferred Stock on the last trading date prior to the date
of exercise. Pursuant to the Rights Agreement, the Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.

                  At any time until ten days following the first date of public
announcement of the occurrence of a Flip-In Event, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable, at the
option of the Company, in cash, shares of Common Stock or such other
consideration as the Board of Directors of the Company may determine.
Immediately upon the effectiveness of the action of the Board of Directors of
the Company ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the $.01 redemption
price.

                  At any time after the occurrence of a Flip-In Event and prior
to a Person's becoming the beneficial owner of 50% or more of the shares of
Common Stock then outstanding or the occurrence of a Flip-Over Event, the
Company may exchange the Rights (other than Rights owned by an Acquiring Person
or an affiliate or an associate of an Acquiring Person, which will have become
null and void), in whole or in part, at an exchange ratio of one share of Common
Stock, and/or other equity securities deemed to have the same value as one share
of Common Stock, per Right, subject to adjustment.

                  Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
should not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for the common stock of the acquiring company as set forth above or
are exchanged as provided in the preceding paragraph.

                  Other than the redemption price, any of the provisions of the
Rights Agreement may be amended by the Board of Directors of the Company as long
as the Rights are redeemable. Thereafter, the provisions of the Rights Agreement
other than the redemption price may be amended by the Board of Directors of the
Company in order to cure any ambiguity, defect or inconsistency, to make changes
that do not materially adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
lengthen the time period governing redemption shall be made at such time as the
Rights are not redeemable.

                  A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an exhibit to a Current Report on Form
8-K. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.

                                      C-3<PAGE>   1

                                CREDIT AGREEMENT

         This Agreement, dated as of July 14, 2000, is among The Shaw Group,
Inc. as the Borrower, Banc One Capital Markets, Inc. as Lead Arranger and Sole
Book Runner the Lenders, and Bank One, NA, as a Lender, as Issuer and as Agent.
The parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         As used in this Agreement:

         "Accounts" has the meaning stated in the Illinois Uniform Commercial
Code.

         "Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires from a third party that is not
a Subsidiary any going concern business or all or substantially all of the
assets of any firm, corporation or limited liability company that is not a
Subsidiary, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires from a third party that is not
a Subsidiary (in one transaction or as the most recent transaction in a series
of transactions) at least a majority (in number of votes) of the securities of a
corporation that is not a Subsidiary which have ordinary voting power for the
election of directors (other than securities having such power only by reason of
the happening of a contingency) or a majority (by percentage or voting power) of
the outstanding ownership interests of a partnership or limited liability
company that is not a Subsidiary.

         "Acquisition Agreement" means that certain Asset Purchase Agreement
between Borrower and Stone & Webster and certain Subsidiaries of Stone & Webster
dated July ____, 2000 pertaining to the acquisition of the Stone & Webster
Assets.

         "Advance" means a borrowing hereunder, (i) in respect of any Loan other
than a Swing Line Loan, (x) made by the Lenders on the same Borrowing Date, or
(y) converted or continued by the Lenders on the same date of conversion or
continuation, consisting, in either case, of the aggregate amount of the several
Loans of the same Type and, in the case of Eurodollar Loans, for the same
Interest Period, and (ii) in respect of a Swing Line Loan, a borrowing made by
the Swing Line Lender.

         "Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

         "Agent" means Bank One, NA in its capacity as contractual
representative of the Lenders pursuant to Article X, and not in its individual
capacity as a Lender, and any successor Agent appointed pursuant to Article X.

<PAGE>   2

         "Aggregate Commitment" means the total of the Revolving Credit
Commitment of all the Lenders (including the Swing Line Lender's Swing Line
Commitment), and the Facility LC Commitment of all of the Lenders, in each case,
as reduced from time to time pursuant to the terms hereof, which amount as of
the date hereof is a maximum of $400,000,000.00.

         "Aggregate Facility LC Commitment" means the sum of all of the Lenders'
Facility LC Commitments, which totals a maximum of $150,000,000 as of the
Closing Date.

         "Aggregate Revolving Credit Commitment" means the sum of all of the
Lenders' Revolving Credit Commitments, which, subject to the limitations of the
Aggregate Commitment, total a maximum of $300,000,000 as of the Closing Date,
reducing from time to time as set forth herein.

         "Aggregate Outstanding Credit Exposure" means, at any time, the
aggregate of the Outstanding Credit Exposure of all the Lenders (including the
Swing Line Lender).

         "Agreement" means this credit agreement, as it may be renewed,
extended, amended, restated or modified and in effect from time to time.

         "Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4.

         "Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.

         "Applicable Fee Rate" means, at any time, the percentage rate per annum
at which Commitment Fees are accruing on the unused portion of the Aggregate
Commitment at such time as set forth in the Pricing Schedule; provided that from
the date hereof until the end of the Borrower's next two fiscal quarters, the
applicable Fee Rate shall be set at Level V as set forth on the Pricing Schedule
(or higher if the Leverage Ratio would otherwise dictate a higher level).

         "Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule; provided
that from the date hereof until the end of the Borrower's next two fiscal
quarters, the applicable Fee Rate shall be set at Level V as set forth on the
Pricing Schedule (or higher if the Leverage Ratio would otherwise dictate a
higher level).

         "Arranger" means Banc One Capital Markets, Inc., a Delaware
corporation, and its successors.

         "Article" means an article of this Agreement unless another document is
specifically referenced.

         "Authorized Officer" means any of the President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer of the Borrower,
Corporate Comptroller, Treasury Operations Manager, General Counsel or Senior
Vice President.

                                      -2-
<PAGE>   3

         "Available Aggregate Commitment" means, at any time, the Aggregate
Commitment then in effect minus the Aggregate Outstanding Credit Exposure at
such time.

         "Bank One" means Bank One, NA, in its individual capacity, and its
successors and assigns.

         "Borrower" means The Shaw Group Inc., a Louisiana corporation, and its
successors and assigns.

         "Borrowing Date" means a date on which a Credit Extension is made
hereunder.

         "Borrowing Notice" is defined in Section 2.8.

         "Business Day" means a day (other than a Saturday or Sunday) on which
banks generally are open in Chicago, Illinois for the conduct of substantially
all of their commercial lending activities and on which dealings in United
States dollars are carried on in the London interbank market.

         "Calculation Period" means a four quarter period ending on the date of
the Borrower's fiscal quarter end or fiscal year end for which the relevant
calculation is being made.

         "Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with Agreement Accounting Principles.

         "Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.

         "Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

         "Cash Equivalent Investments" means (i) short-term obligations of, or
fully guaranteed by, the United States of America, (ii) commercial paper rated
A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts
maintained in the ordinary course of business, (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital and surplus in excess of $100,000,000, (v) investments in
Eurodollars not in excess of $5,000,000 in the aggregate at any one time
outstanding, issued by any bank or trust company having capital, surplus and
undivided profits aggregating at least $100,000,000 and whose long term
certificates of deposit are, at the time of acquisition thereof by Borrower or
any Subsidiary, rated A-1 or better by Standard & Poor's Ratings Group or P-1 or
better by Moody's Investor Service, Inc., and (vi) investments by Foreign
Subsidiaries in short term investments, in connection with the cash management
programs of such Foreign Subsidiaries, provided the total of such investments
does not exceed $10,000,000 at any one time outstanding; provided in each case
that the same provides for payment of both principal and interest (and not

                                      -3-
<PAGE>   4

principal alone or interest alone) and is not subject to any contingency
regarding the payment of principal or interest.

         "Change" has the meaning specified in Section 3.2.

         "Change in Control" means an event or series of events by which (a) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act
as in effect on the date hereof related persons constituting a "group" (as such
term is used in Rule 13d-5 under the Exchange Act in effect on the date hereof)
is or becomes or has the absolute, unconditional right to become the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, as in effect
on the date hereof), directly or indirectly, of 25% or more of the total voting
power of the voting stock of the Borrower; (b) the Borrower consolidates with or
merges into another Person or conveys, transfers or leases all or substantially
all of its assets to any Person, or any Person consolidates with, or merges
into, the Borrower in a transaction not otherwise permitted hereunder; (c) the
Borrower conveys, transfers or leases all or substantially all of its assets to
any Person; (d) the stockholders of the Borrower approve any plan of liquidation
or dissolution of the Borrower; or (e) during any period of twelve consecutive
months, individuals who, at the beginning of such period, constituted the board
of directors of the Borrower (together with any new director whose election by
the Borrower's board of directors or whose nomination for election by the
Borrower's stockholders was approved by a vote of at least a majority 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 (other than due to death or disability) to
constitute a majority of the board of directors of the Borrower then in office.

         "Closing Date" means the date of this Agreement.

         "Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.

         "Collateral" means the accounts, inventory, intellectual property,
contracts, general intangibles, stock and all other items described as
collateral in any of the Collateral Documents, plus all proceeds thereof.

         "Collateral Documents" means, collectively, any and all documents
executed as security for the Obligations including without limitation the
following documents: (i) security and pledge agreement executed by Borrower and
the Guarantors creating (A) a first and prior lien in favor of the Agent for the
ratable benefit of the Lenders on all of such Persons' Accounts, Inventory,
General Intangibles, the proceeds and products thereof and all other personal
property, including, without limitation, all inter-company notes and receivables
and (B) a first and prior lien in favor of the Agent for the ratable benefit of
the Lenders on, among other collateral, all of the issued and outstanding shares
of the Borrower's or such Guarantor's Domestic Subsidiaries and 66% of the
issued and outstanding shares of the Borrower's or such Guarantor's foreign
Subsidiaries that are owned by Borrower or a Domestic Subsidiary, together with
any security and pledge agreement to be executed by the Borrower or any
Guarantor and delivered to the Agent pursuant to Section 6.24 hereof, (ii) the
Guaranty, (iii) Uniform Commercial Code financing statements executed by the
Borrower and the Guarantors relating to the above described security and pledge

                                      -4-
<PAGE>   5

agreements, (iv) stock powers executed in blank by the Borrower and any
Guarantor, as applicable, relating to the shares of stock of its Subsidiaries
pledged by the above described security and pledge agreements, and (v) stock
certificates for all of Borrowers' and its Subsidiaries' shares of stock pledged
by the above described security and pledge agreements.

         "Collateral Shortfall Amount" has the meaning specified in Section 8.1.

         "Commitment" means, for each Lender, the Revolving Credit Commitment
and the Facility LC Commitment for such Lender.

         "Consolidated Interest Expense" means, for any Person, with reference
to any period, the actual interest expense of such Person and its Subsidiaries
calculated on a consolidated basis for such period.

         "Consolidated Net Income" means, for any Person, with reference to any
period, the net income (or loss) of such Person and its Subsidiaries calculated
according to Agreement Accounting Principles on a consolidated basis for such
period, excluding any such net income attributable to any Investment in any
Person that is not a Subsidiary except to the extent of cash distributions from
such Person to the Borrower or its Subsidiaries.

         "Consolidated Net Worth" means at any time the consolidated
stockholders' equity of the Borrower and its Subsidiaries calculated on a
consolidated basis as of such time plus any preferred stock of the Borrower and
its Subsidiaries to the extent it has not been redeemed for indebtedness, as
determined in accordance with Agreement Accounting Principles.

         "Consolidated Total Debt" means at any time, all Indebtedness, and all
Contingent Obligations that are interest bearing or to which interest is
attributable or to which interest accrues, including guarantees and Financial
Letters of Credit.

         "Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any limited recourse or recourse
note or other obligation, comfort letter, operating agreement, take-or-pay
contract or the obligations of any such Person as general partner of a
partnership with respect to the liabilities of the partnership.

         "Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Code.

         "Conversion/Continuation Notice" has the meaning specified in Section
2.9.

         "Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by the Agent from time to time, changing when
and as said corporate base rate changes.

                                      -5-
<PAGE>   6

         "Credit Extension" means the making of an Advance or the issuance of a
Facility LC hereunder.

         "Credit Extension Date" means the Borrowing Date for an Advance or the
issuance date for a Facility LC.

         "Default" means an event described in Article VII.

         "Domestic Subsidiary" means every Subsidiary of Borrower that is formed
under the laws of the United States of America or any state.

         "EBITDA" means, for any Person for any period, the consolidated Net
Income of such Person for that period plus, to the extent deducted from revenues
in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii)
expense for taxes paid or accrued, (iii) depreciation, (iv) amortization and (v)
extraordinary non-recurring losses, minus, to the extent included in
Consolidated Net Income, extraordinary non-recurring gains, all calculated on a
consolidated basis.

         "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.

         "Eurodollar Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the applicable Eurodollar Rate.

         "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the rate determined by the Agent to be the rate at
which the Agent offers to place deposits in U.S. dollars appearing on Reuters
Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, in the approximate amount of the Agent's relevant
Eurodollar Loan and having a maturity equal to such Interest Period.

         "Eurodollar Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.

         "Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin; provided, that in no event shall the Eurodollar Rate
exceed the Highest Lawful Rate. The Eurodollar Rate shall be rounded to the next
higher multiple of 1/16 of 1% if the rate is not such a multiple.

                                      -6-
<PAGE>   7

         "Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Agent, taxes imposed on its overall net income, and
franchise taxes imposed on it, by (i) the jurisdiction under the laws of which
such Lender or the Agent is incorporated or organized or (ii) the jurisdiction
in which the Agent's or such Lender's principal executive office or such
Lender's applicable Lending Installation is located.

         "Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.

         "Existing Facility" means that certain Credit Agreement dated May 15,
1998 among the Borrower, Mercantile Business Credit Inc., in its capacity as
agent, and the banks party thereto, pursuant to which such banks agreed to make
revolving credit loans to the Borrower not to exceed $100,000,000, as said
Credit Agreement may have been amended, amended and restated or otherwise
modified from time to time.

         "Facility LC" has the meaning specified in Section 2.19.1.

         "Facility LC Application" has the meaning specified in Section 2.19.3.

         "Facility LC Collateral Account" has the meaning specified in Section
2.19.11.

         "Facility LC Commitment" means the Commitment of each Lender to
participate in Facility LCs issued by the Issuer in the amount not exceeding
that set forth opposite its signature below or as set forth in any assignment
executed pursuant to Section 12.3.1, as modified from time to time pursuant to
the terms hereof.

         "Facility Termination Date" means July 14, 2003 or any earlier date on
which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.

         "Federal Funds Effective Rate" means, for any day, an interest rate per
annum 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 for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.

         "Financial Contract" of a Person means (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, (ii) any agreements, devices or
arrangements providing for payments related to fluctuations of interest rates,
exchange rates, forward rates or commodity prices, including, but not limited
to, interest rate swap or exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, or (iii) any other similar contract.

         "Financial Letter of Credit" means a Letter of Credit qualifying as a
"financial guarantee-type letter of credit" under 12 CFR Part 3, Appendix A,
Section 3(b)(1)(i) or any successor U.S.

                                      -7-
<PAGE>   8

Comptroller of the Currency regulation and issued by an Issuing Bank under the
terms of this Agreement.

         "Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes; provided, that in no event
shall the Floating Rate exceed the Highest Lawful Rate.

         "Floating Rate Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.

         "Floating Rate Loan" means a Loan which, except as otherwise provided
in Section 2.11, bears interest at the Floating Rate.

         "Foreign Subsidiary" means any Subsidiary of Borrower that is organized
under the laws of any jurisdiction other than the United States of America or a
state thereof.

         "General Intangibles" has the meaning stated in the Illinois Uniform
Commercial Code in effect from time to time including, without limitation, all
contract rights, rights to receive payments of money, chooses in action, causes
of action, judgments, tax refunds and tax refund claims, patents, trademarks,
trade names, copyrights, licenses, franchises, computer programs, software,
goodwill, customer and supplier contracts, interests in general or limited
partnerships, joint ventures or limited liability companies, reversionary
interests in pension and profit sharing plans and reversionary, beneficial and
residual interests in trusts, leasehold interests in real or personal property,
rights to receive rentals of real or personal property and guarantee and
indemnity claims.

         "Guarantors" means collectively all of the Borrower's Domestic
Subsidiaries as of the date of this Agreement and any other Domestic Subsidiary
of Borrower that shall become a guarantor hereunder pursuant to Section 6.23.

         "Guaranty" means that certain Guaranty dated as of the date hereof
executed by the Guarantors in favor of the Agent, for the ratable benefit of the
Lenders, and each guaranty executed pursuant to Section 6.23 hereof, as each of
such may be amended or modified and in effect from time to time.

         "Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.

         "Indebtedness" of a Person means, without duplication, such Person's
(i) obligations for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade in the applicable jurisdiction), (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
Property now or

                                      -8-
<PAGE>   9

hereafter owned or acquired by such Person, (iv) obligations which are evidenced
by notes, acceptances, or other instruments, (v) obligations of such Person to
purchase or repurchase securities, accounts or other Property arising out of or
in connection with the sale of the same or substantially similar securities or
Property, (vi) Capitalized Lease Obligations, (vii) liabilities under other
financings or so-called "synthetic" lease transactions, (viii) net, mark to
market obligations owing under any swaps, hedging agreements, puts, calls,
collars, or similar derivative instruments or agreements, (ix) reimbursement
obligations in respect of Financial Letters of Credit and (x) any other
obligation for borrowed money which in accordance with Agreement Accounting
Principles would be shown as a liability on the consolidated balance sheet of
such Person.

         "Insurance Company Notes" has the meaning specified in the definition
of "Note Purchase Agreement".

         "Interest Period" means, with respect to a Eurodollar Advance, a period
of seven (7) days, or one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or six
months thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day. Notwithstanding the foregoing, the
Eurodollar Rate for Interest Periods longer than seven (7) days will not be made
available until the earlier of (i) Agent's determination that syndication of the
Aggregate Commitment is complete or (ii) ninety (90) days following the date
hereof, unless Agent in its sole discretion determines otherwise.

         "Inventory" has the meaning stated in the Illinois Uniform Commercial
Code in effect from time to time, including, without limitation, all goods held
for sale or lease, or furnished or to be furnished under contracts of service,
or consumed in the applicable party's business, raw materials, intermediates,
work in process, packaging materials, finished goods, semi-finished inventory,
scrap inventory, manufacturing supplies and spare parts (to the extent not
covered by purchase money liens of manufacturers), all such goods that have been
returned to or repossessed by or on behalf of the Borrower, and all such goods
released to the Borrower or to third parties under trust receipts or similar
documents.

         "Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than Accounts arising
in the ordinary course of business on terms customary in the trade in the
applicable jurisdiction) or contribution of capital by such Person; stocks,
bonds, mutual funds, partnership interests, notes, debentures or other
securities owned by such Person; any deposit accounts and certificate of deposit
owned by such Person; and structured notes, derivative financial instruments and
other similar instruments or contracts owned by such Person.

                                      -9-
<PAGE>   10

         "Issuer" means Bank One or any Lender (or any subsidiary or affiliate
designated by Bank One) in its capacity as issuer of Facility LCs hereunder.

         "LC Fee" is defined in Section 2.19.4.

         "LC Obligations" means, at any time, the sum, without duplication, of
(i) the aggregate undrawn stated amount under all Facility LCs outstanding at
such time, plus (ii) the aggregate unpaid amount at such time of all
Reimbursement Obligations.

         "LC Payment Date" has the meaning specified in Section 2.19.5.

         "Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.

         "Lending Installation" means, with respect to a Lender or the Agent,
the office, branch, subsidiary or affiliate of such Lender or the Agent listed
on the signature pages hereof or on a Schedule or otherwise selected by such
Lender or the Agent pursuant to Section 2.17.

         "Letter of Credit" of a Person means a letter of credit which is issued
upon the application of such Person or upon which such Person is an account
party or for which such Person is in any way liable.

         "Leverage Ratio" means the ratio of Consolidated Total Debt to EBITDA,
calculated pursuant to Section 6.22.1.

         "Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).

         "Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).

         "Loan Documents" means this Agreement, the Facility LC Applications and
any Notes issued pursuant to Section 2.13 and all other documents required under
Article IV.

         "Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents to
which it is a party, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Agent, the LC Issuer or the Lenders
thereunder.

         "Material Indebtedness" has the meaning specified in Section 7.5.

         "Material Subsidiary" shall mean a Subsidiary of Borrower having: (i)
assets of $500,000 or more or (ii) annual cash flow of $500,000 or more.

                                      -10-
<PAGE>   11

         "Modify" and "Modification" have the meaning specified in Section
2.19.1.

         "Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.

         "Non-U.S. Lender" has the meaning specified in Section 3.5(iv).

         "Nordic" means Nordic Refrigerated Services, Inc., a North Carolina
corporation.

         "Note" means any promissory note issued at the request of a Lender
pursuant to Section 2.13(iv) in the form of Exhibit 2.13(iv).

         "Noteholders" has the meaning specified in the definition of "Note
Purchase Agreement".

         "Note Purchase Agreement" means, as amended or supplemented from time
to time, each of the Note Purchase Agreements dated as of May 21, 1998,
respectively, made by the Borrower with Nationwide Life Insurance Company,
Connecticut General Life Insurance Company, Insurance Company of North America,
Connecticut General Life Insurance Company on Behalf of One or More Separate
Accounts, Life Insurance Company of North America, Northern Life Insurance
Company, Reliastar Life Insurance Company of New York, Reliastar United Services
Life Insurance Company, Washington Square Advisers Private Placement Trust Fund
and Security Connecticut Life Insurance Company (collectively, together with
their respective successors and assigns, the "Noteholders"), which provide,
among other things, for the issuance and sale by the Borrower of $20,000,000
aggregate principal amount of its 6.44% Series A Senior Secured Notes due 2005
(the "Series A Notes") and $40,000,000 aggregate principal amount of the
Borrower's 6.93% Series B Senior Secured Notes due 2008 (the "Series B Notes"
and together with the Series A Notes, the "Insurance Company Notes").

         "Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, Swing Line Loans, all Reimbursement Obligations, Rate
Hedging Obligations all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent, the Issuer or any indemnified party arising under
the Loan Documents.

         "Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.

         "Outstanding Credit Exposure" means (i) as to any Lender at any time,
the sum of (x) the aggregate principal amount of its Loans outstanding at such
time, plus (y) an amount equal to its Pro Rata Share of the LC Obligations at
such time, and (ii) as to the Swing Line Lender only, at any time, the aggregate
principal amount of outstanding Swing Line Loans at such time.

         "Other Taxes" has the meaning specified in Section 3.5(ii).

         "Participants" has the meaning specified in Section 12.2.1.

                                      -11-
<PAGE>   12

         "Payment Date" means the last Business Day of each month of March,
June, September and December from and including the date of this Agreement
through and including the Facility Termination Date.

         "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.

         "Performance Letter of Credit" means a Letter of Credit qualifying as a
"performance-based standby letter of credit" under 12 CFR Part 3, Appendix A,
Section 3(b)(2)(i) or any successor U.S. Comptroller of the Currency regulation
and issued by an Issuing Bank under the terms of this Agreement.

         "Permitted Business" means the businesses of Borrower and its
Subsidiaries carried on as of the Closing Date and any businesses, services or
activities incident or related thereto.

         "Permitted Business Investments" means:

                  (i)      loans and other extensions of credit to officers,
                           directors and employees of Borrower or any Subsidiary
                           for travel, entertainment, moving and similar
                           expenses or advances made in direct furtherance and
                           in the ordinary course of the business of Borrower or
                           the Subsidiaries, provided that the aggregate
                           principal amount of loans and other extensions of
                           credit made pursuant to this clause (a) does not
                           exceed $1,500,000 at any one time outstanding;

                  (ii)     loans to employees for signing bonuses in the
                           ordinary course of business of Borrower and its
                           Subsidiaries;

                  (iii)    Investments in joint ventures operating a Permitted
                           Business not to exceed 5% of Borrower's Consolidated
                           Net Worth unless such Investment could reasonably be
                           expected to have a Material Adverse Effect;

                  (iv)     Loans and other extensions of credit to an officer of
                           employee of Borrower or a Subsidiary extended in
                           connection with hiring that Person that is the
                           functional equivalent of a signing bonus and is to be
                           forgiven over time if said Person continues his or
                           her employment;

                  (v)      Investments by Foreign Subsidiaries in other Foreign
                           Subsidiaries;

                  (vi)     Investments by Borrower in Domestic Subsidiaries and
                           Investments by Domestic Subsidiaries in Borrower; and

                  (vii)    Investments by Borrower in Foreign Subsidiaries,
                           which Investments are effected after the date hereof,
                           such Investments not to exceed $10,000,000 in the
                           aggregate outstanding at any one time, and to be
                           evidenced by a promissory note or other similar
                           document that is pledged to the Agent as Collateral;
                           and

                  (viii)   Investments by Subsidiaries in Borrower.

                                      -12-
<PAGE>   13

         "Permitted Financial Investments" means the following kinds of
instruments:

                  (i)      receivables arising from the sale of goods and
                           services in the ordinary course of business of
                           Borrower or any Subsidiaries;

                  (ii)     currency or commodity price hedging agreements, using
                           customary ISDA swap documentation or comparable
                           documentation, entered into with a Lender for the
                           purpose of hedging actual exposure on the currency or
                           commodity price risks of its business and not
                           speculation;

                  (iii)    Capital Stock or obligations or securities received
                           in settlement of debts (created in the ordinary
                           course of business) owing to Borrower or any
                           Subsidiary; and

                  (iv)     Investments in Capital Stock of publicly traded
                           companies provided the aggregate Investment therein
                           does not ever exceed $250,000.

         "Permitted Indebtedness" shall mean without duplication (i) deferred
taxes and other expenses incurred in the ordinary course of business; (ii)
Indebtedness of a Domestic Subsidiary to Borrower or another Domestic
Subsidiary; (iii) Indebtedness of a Foreign Subsidiary to a Foreign Subsidiary;
(iv) Indebtedness of Borrower to a Domestic Subsidiary or a Foreign Subsidiary,
so long as such Indebtedness is subordinated to all of Borrower's or its
Subsidiaries' Indebtedness to Lenders pursuant to the Subordination Agreement;
and (v) Indebtedness constituting the net obligations of a Person as of the date
of a required calculation under currency or commodity hedging agreements entered
into with one of the Lenders in the ordinary course of business and not for the
purposes of speculation.

         "Permitted Liens" means any of the following:

                  (i)      Liens for taxes, assessments or governmental charges
                           or levies on its Property if the same shall not at
                           the time be delinquent or thereafter can be paid
                           without penalty, or are being contested in good faith
                           and by appropriate proceedings and for which adequate
                           reserves in accordance with Agreement Accounting
                           Principles shall have been set aside on its books;

                  (ii)     Liens imposed by law, such as carriers',
                           warehousemen's and mechanics' liens and other similar
                           liens arising in the ordinary course of business
                           which secure payment of obligations not more than 60
                           days past due or which are being contested in good
                           faith by appropriate proceedings and for which
                           adequate reserves shall have been set aside on its
                           books;

                  (iii)    Liens arising out of pledges or deposits under
                           worker's compensation laws, unemployment insurance,
                           old age pensions, or other social security or
                           retirement benefits, or similar legislation;

                  (iv)     deposits to secure the performance of bids, trade
                           contracts, leases, statutory obligations, surety and
                           appeal bonds, performance bonds and

                                      -13-
<PAGE>   14

                           other obligations of a like nature, in each case in
                           the ordinary course of business;

                  (v)      utility easements, building and zoning restrictions,
                           minor defects or irregularities in title and such
                           other encumbrances or charges against real property
                           as are of a nature generally existing with respect to
                           properties of a similar character and which do not in
                           any material way adversely affect the marketability
                           of the same or interfere with the use thereof in the
                           business of the Borrower or its Subsidiaries;

                  (vi)     judgment and attachment liens not giving rise to an
                           Event of Default or liens created by or existing from
                           any litigation or legal proceeding that are being
                           contested in good faith by appropriate proceedings,
                           promptly instituted and diligently conducted, and for
                           which adequate reserves have been made to the extent
                           required by Agreement Accounting Principles in
                           respect of a claim not to exceed $500,000;

                  (vii)    liens in favor of collecting or payor banks having a
                           right of setoff, revocation, refund or chargeback in
                           favor of collecting or payor banks with respect to
                           money or instruments of the Borrower or any of its
                           Subsidiaries on deposit with or in possession of such
                           bank; and

                  (viii)   customary set off rights and related financial
                           settlement procedures under Rate Hedging Obligations
                           entered into for the purpose of hedging and not for
                           speculation;

provided, that the term "Permitted Liens" shall not include any Lien securing
Indebtedness.

         "Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.

         "Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.

         "Pricing Schedule" means the Schedule attached hereto identified as
such.

         "Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.

         "Pro Rata Share" means, with respect to a Lender, a portion equal to a
fraction the numerator of which is such Lender's Commitment and the denominator
of which is the Aggregate Commitment.

         "Purchasers" has the meaning specified in Section 12.3.1.

                                      -14-
<PAGE>   15

         "Qualified Stock" means, with respect to any Person, any common stock
of such Person or a Subsidiary of such Person.

         "Rate Hedging Agreement" means an agreement, device or arrangement
entered into with any Lender providing for payments which are related to
fluctuations of interest rates, exchange rates or forward rates, including, but
not limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts and
warrants.

         "Rate Hedging Obligation" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Hedging Agreements, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.

         "Refunded Swing Line Loans" has the meaning specified in Section
2.1.2(ii).

         "Regulations U, T and X" means the corresponding regulation of the
Board of Governors of the Federal Reserve System as from time to time in effect
and any successor or other regulation or official interpretation of said Board
of Governors, and all official rulings and interpretations thereunder or
thereof.

         "Reimbursement Obligations" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.19 to reimburse the
Issuer for amounts paid by the Issuer in respect of any one or more drawings
under Facility LCs.

         "Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

         "Reports" has the meaning specified in Section 9.6.

         "Required Lenders" means Lenders in the aggregate having at least 51%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the aggregate Outstanding
Credit Exposure.

         "Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.

         "Revolving Credit Commitment" means, for each Lender, the obligation of
such Lender to make Revolving Credit Loans, other than Swing Line Loans, to
Borrower in an amount not exceeding the amount set forth opposite its signature
below or as set forth in any assignment executed pursuant to Section 12.3.1, as
modified from time to time pursuant to the terms hereof.

                                      -15-
<PAGE>   16

         "Revolving Credit Loan" means a loan made under Section 2.1 or 2.2 but
shall not include a participation in a Facility LC.

         "Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.

         "Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

         "Shaw EBITDA" means, for any period, EBITDA for the Borrower and its
Subsidiaries, minus EBITDA attributable to the Stone & Webster Assets, plus
Stone & Webster EBITDA. For purposes of calculating the Leverage Ratio only, in
calculation of Shaw EBITDA, (i) for any Acquisition permitted hereunder by
Borrower or a Subsidiary of any Person or assets during a Calculation Period for
which EBITDA is calculated (a) the EBITDA of said Person or assets for the
trailing twelve (12) months immediately preceding the Acquisition shall be
included in the first such calculation with respect to said Person or assets and
(b) in any subsequent calculation, to the extent such Person or asset's EBITDA
is not consolidated with Borrower's under Agreement Accounting Principles for a
full Calculation Period, the actual EBITDA of such Person or assets for the most
recent period prior to the time it was acquired by Borrower or a Subsidiary
shall be added to the EBITDA of Borrower to reach a total of a full Calculation
Period's EBITDA for such Person or assets being a part of the calculation of
Borrower's EBITDA; and (ii) Shaw EBITDA shall be reduced by EBITDA attributable
to any assets sold during the applicable Calculation Period.

         "Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.

         "Standby Facility LC" means Facility LC which is issued as a standby
letter of credit.

         "Stone & Webster" means Stone & Webster, Incorporated, a Delaware
corporation.

         "Stone & Webster Acquisition" means the acquisition of the Stone &
Webster Assets pursuant to the Acquisition Agreement.

         "Stone & Webster Assets" means the assets of Stone & Webster to be
acquired by Borrower or one of its Subsidiaries pursuant to the Acquisition
Agreement.

         "Stone & Webster EBITDA" means EBITDA attributable to the Stone &
Webster Assets and the Subsidiary or Subsidiaries of Borrower that own the Stone
& Webster Assets after the Stone & Webster Acquisition. For any Calculation
Period that ends prior to the date that is four (4) full calendar quarters
following the Stone & Webster Acquisition, such EBITDA shall be calculated by
annualizing such EBITDA for the period beginning with the Stone & Webster
Acquisition and ending at the end of such Calculation Period. For purposes of
calculating the Leverage Ratio only, Stone & Webster EBITDA shall be reduced by
EBITDA attributable to any Stone & Webster Assets sold during the applicable
Calculation Period.

                                      -16-
<PAGE>   17

         "Subordination Agreement" means the Intercompany Subordination among
the Borrower, all Foreign Subsidiaries and Domestic Subsidiaries and the Agent
dated as of the Closing Date.

         "Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.

         "Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 10% of
the consolidated assets of the Borrower and its Subsidiaries as would be shown
in the consolidated financial statements of the Borrower and its Subsidiaries as
at the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.

         "Swing Line Commitment" means the Swing Line Lender's obligation to
make Swing Line Loans pursuant to Section 2.1.2.

         "Swing Line Lender" means Bank One in its capacity as provider of the
Swing Line Loans.

         "Swing Line Loan" or "Swing Line Loans" has the meaning specified in
Section 2.1.2.

         "Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes.

         "Transferee" has the meaning specified in Section 12.4.

         "Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurodollar Advance.

         "Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.

         "Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.

                                      -17-
<PAGE>   18

         "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.

         The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.

                                   ARTICLE II

                                   THE CREDITS

         2.1. Commitments.

                  2.1.1. Loan Commitment. From and including the date of this
         Agreement and prior to the Facility Termination Date, each Lender
         severally agrees, on the terms and conditions set forth in this
         Agreement, to (a) make Loans to the Borrower and (b) participate in
         Facility LCs issued upon the request of the Borrower, provided that,
         after giving effect to the making of each such Loan and the issuance of
         each such Facility LC, (i) such Lender's Outstanding Credit Exposure
         shall not exceed the sum of its Revolving Credit Commitment and its
         Facility LC Commitment; (ii) the total Facility LCs outstanding shall
         not exceed the Aggregate Facility LC Commitment; (iii) the total
         Revolving Credit Loan outstanding shall not exceed the Aggregate
         Revolving Credit Commitment; and (iv) the Aggregate Outstanding Credit
         Exposure shall not exceed the Aggregate Commitment. Subject to the
         terms of this Agreement, the Borrower may borrow, repay and reborrow at
         any time prior to the Facility Termination Date. All Commitments shall
         expire on the Facility Termination Date. The Issuer will issue Facility
         LCs hereunder on the terms and conditions set forth in Section 2.19.

                  2.1.2. Swing Line Commitment. (i) Subject to the terms and
         conditions hereof, the Swing Line Lender agrees at any time and from
         time to time on and after the date of this Agreement and prior to the
         Facility Termination Date, to make Swing Line loans (each a "Swing Line
         Loan" and collectively, the "Swing Line Loans") to the Borrower in an
         aggregate principal amount at any one time outstanding not to exceed
         $10,000,000, which Swing Line Loans (x) shall be made and maintained
         pursuant to one or more Advances comprised of Floating Rate Advances
         and which shall not be entitled to be converted into Eurodollar
         Advances, (y) shall be made in the minimum amount of $100,000 (or if
         less, in the aggregate amount of the remaining unused portion of the
         Aggregate Revolving Credit Commitment), and (z) may be repaid and, so
         long as no Default or Event of Default exists hereunder, reborrowed, at
         the option of the Borrower, in accordance with the provisions hereof.
         Swing Line Loans shall constitute "Loans" for all purposes hereunder,
         except they shall be held by the Swing Line Lender (subject to
         sub-clause (ii) below) and, only for purposes of calculating the
         commitment fee under Section 2.5, shall not be considered a utilization
         of the Commitment of any Lender

                                      -18-
<PAGE>   19

         hereunder. Notwithstanding the foregoing, the Aggregate Outstanding
         Credit Exposure shall not exceed the Aggregate Commitment.

                           (ii) If any Swing Line Loan is not repaid when due,
                  the Swing Line Lender shall give notice to the Agent to
                  request each Lender, including the Swing Line Lender, to make
                  a Loan as a Floating Rate Advance in an amount equal to the
                  product of such Lender's Pro Rata Share times the outstanding
                  principal balance of such Swing Line Loan (the "Refunded Swing
                  Line Loan") outstanding on the date such notice is given;
                  provided that the provision of this subsection shall not
                  affect the obligation of the Borrower to prepay Swing Line
                  Loans in accordance with Section 2.2. Unless the Commitments
                  shall have expired or terminated, each Lender shall make the
                  proceeds of such Loan available to the Agent for the account
                  of the Swing Line Lender on the next Business Day following
                  such request, in immediately available funds. The proceeds of
                  such Loans shall be immediately applied to repay the Refunded
                  Swing Line Loan.

                           (iii) At any time before or after a Default or Event
                  of Default, if the Commitments shall have expired or be
                  terminated while any Swing Line Loan is outstanding, each
                  Lender, at the sole option of the Swing Line Lender shall
                  either (A) notwithstanding the expiration or termination of
                  the Commitments, make a Loan as a Floating Rate Advance, which
                  such Loan shall be deemed a "Loan" for all purposes of this
                  Agreement and the other Loan Documents, or (B) be deemed,
                  without further action by any Person, to have purchased from
                  the Swing Line Lender a participation in such Swing Line Loan,
                  in either case in an amount equal to the product of such
                  Lender's Pro Rata Share times the outstanding principal
                  balance of such Swing Line Loan. The Agent shall notify each
                  such Lender of the amount of such Loan or participation, and
                  such Lender will transfer to the Agent for the account of the
                  Swing Line Lender on the next Business Day following such
                  notice, in immediately available funds, the amount of such
                  Loan or participation.

                           (iv) If any such Lender shall not have so made its
                  Loan or its percentage participation available to the Agent
                  pursuant to this Section 2.1.2, such Lender agrees to pay
                  interest thereon for each day from such date until the date
                  such amount is paid at the lesser of (x) the Federal Funds
                  Effective Rate for such day for the first three days and
                  thereafter the interest rate applicable to the Loan, and (y)
                  the Highest Lawful Rate. Whenever, at any time after the Agent
                  has received from any Lender such Lender's Loan or
                  participating interest in a Swing Line Loan, the Agent
                  receives any payment on account thereof, the Agent will pay to
                  such Lender its participating interest in such amount
                  (appropriately adjusted, in the case of interest payments, to
                  reflect the period of time during which such Lender's Loan or
                  participating interest was outstanding and funded), which
                  payment shall be subject to repayment by such Lender if such
                  payment received by the Agent is required to be returned. Each
                  Revolving Credit Lender's obligation to make the Loans or
                  purchase such participating interests pursuant to this Section
                  2.1.2 shall be absolute and unconditional and shall not be
                  affected by any circumstance, including, without limitation,
                  (A) any set-off, counterclaim,

                                      -19-
<PAGE>   20

                  recoupment, defense or other right which such Lender or any
                  other Person may have against the Swing Line Lender, the Agent
                  or any other Person for any reason whatsoever; (B) the
                  occurrence or continuance of a Default or an Unmatured Default
                  or the termination of the Commitments; (C) the occurrence of
                  any Material Adverse Effect; (D) any breach of this Agreement
                  by the Borrower or any other Lender; or (E) any other
                  circumstance, happening or event whatsoever, whether or not
                  similar to any of the foregoing. Each Swing Line Loan, once so
                  participated by any Lender, shall cease to be a Swing Line
                  Loan with respect to that amount for purposes of this
                  Agreement, but shall continue to be a Loan.

         2.2. Required Payments, Termination. The Borrower shall make the
following mandatory payments:

                  (i) The Aggregate Outstanding Credit Exposure and all other
         unpaid Obligations shall be paid in full by the Borrower on the
         Facility Termination Date;

                  (ii) Each Swing Line Loan shall be paid in full on the fifth
         Business Day from the date such Swing Line Loan was made by the Swing
         Line Lender;

                  (iii) Notwithstanding anything to the contrary contained in
         this Agreement or in any other Loan Document, the Aggregate Outstanding
         Credit Exposure shall not exceed the Aggregate Commitment. The Lenders
         shall never be required to make any Advance or issue or participate in
         any Facility LC, and the Swing Line Lender shall never be required to
         make any Swing Line Loan, that would cause the Aggregate Outstanding
         Credit Exposure to exceed the Aggregate Commitment, and no Lender shall
         be required to make any Advance or issue or participate in any Facility
         LC that would cause such Lender's Outstanding Credit Exposure to exceed
         its individual, total Commitment. If the Aggregate Outstanding Credit
         Exposure exceeds the Aggregate Commitment, the Borrower shall
         immediately repay the principal of the Revolving Credit Loans in an
         amount equal to such excess. If after giving effect to any such
         principal repayment there shall be in existence a Collateral Shortfall
         Amount, Borrower shall immediately pay to the Agent such Collateral
         Shortfall Amount in immediately available funds, which funds shall be
         held in the Facility LC Collateral Shortfall Account.

                  (iv) Upon the sale of Nordic or substantially all the assets
         thereof, Borrower shall repay the principal amount outstanding under
         the Revolving Credit Loans in the amount of 100% of the net proceeds
         received from such sale or such lesser amount as may then be
         outstanding, the Aggregate Revolving Credit Commitment shall be
         automatically and permanently reduced by $50,000,000 and the Revolving
         Credit Commitment of each Lender shall automatically reduce by its Pro
         Rata Share thereof, provided, there shall be no reduction of the
         Aggregate Commitment;

                  (v) Upon the sale of any other asset, including stock in any
         of Borrower's Subsidiaries allowed under Section 6.13, for $5,000,000
         or more in cash proceeds, the entire amount of the net cash proceeds
         resulting therefrom shall be applied to reduce the outstanding
         principal balance under the Revolving Credit Loans, and the Aggregate
         Revolving Credit Commitment and the Aggregate Commitment shall both be

                                      -20-
<PAGE>   21

         automatically and permanently reduced by such amount and the Revolving
         Credit Commitment of each Lender shall automatically reduce by its Pro
         Rata Share thereof, provided if, at the time of such sale, the Leverage
         Ratio, after giving effect to such sale and paydown, is less than 2.5
         to 1.0, there shall be no such reduction of the Aggregate Commitment or
         the Aggregate Revolving Credit Commitment. Any non-cash proceeds
         received from such sale shall be pledged as additional Collateral.

         2.3. Ratable Loans. Each Advance hereunder, other than Advance of Swing
Line Loans, shall consist of Loans made from the several Lenders ratably
according to their Pro Rata Shares.

         2.4. Types of Advances. The Advances (other than Advances made in
respect of a Swing Line Loan which must be Floating Rate Advances) may be
Floating Rate Advances or Eurodollar Advances, or a combination thereof,
selected by the Borrower in accordance with Sections 2.8 and 2.9.

         2.5. Commitment Fee, Reductions in Aggregate Commitment. (i) The
Borrower agrees to pay to the Agent for the account of each Lender according to
its Pro Rata Share a commitment fee at a per annum rate equal to the Applicable
Fee Rate on the average daily Available Aggregate Commitment from the date
hereof to and including the Facility Termination Date, payable in arrears on
each Payment Date hereafter and on the Facility Termination Date. The Borrower
may permanently reduce the Aggregate Commitment in whole, or in part by reducing
either the Aggregate Revolving Credit Commitment or the Aggregate Facility LC
Commitment ratably among the Lenders in integral multiples of $10,000,000, upon
at least three Business Day's written notice to the Agent, which notice shall
specify the amount of any such reduction and which of the Aggregate Revolving
Credit Commitment or the Aggregate Facility LC Commitment is being reduced,
provided, however, that (i) the amount of the Aggregate Commitment may not be
reduced below the Aggregate Outstanding Credit Exposure; (ii) the amount of the
Aggregate Revolving Credit Commitment shall not be reduced below the amount of
outstanding Revolving Credit Loans, and, (iii) the Aggregate Facility LC
Agreement shall not be reduced below the amount of the LC Obligations. All
accrued commitment fees shall be payable on the effective date of any
termination of the obligations of the Lenders to make Credit Extensions
hereunder.

                  (ii) The Aggregate Commitment, the Aggregate Revolving Credit
         Commitment, and the corresponding Commitments of each Lender shall be
         automatically and permanently reduced to the extent and in the manner
         set forth in Sections 2.2(iv) and (v).

         2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be
in the minimum amount of $10,000,000 (and in multiples of $500,000 if in excess
thereof), and each Floating Rate Advance other than those constituting Swing
Line Loans, shall be in the minimum amount of $5,000,000 (and in multiples of
$500,000 if in excess thereof), provided, however, that any Floating Rate
Advance may be in the amount of the remaining unused portion of the Aggregate
Revolving Credit Commitment.

                                      -21-
<PAGE>   22

         2.7. Optional Principal Payments. The Borrower may from time to time
pay or prepay, without penalty or premium, all outstanding Floating Rate
Advances, or, in a minimum aggregate amount of $1,000,000 or any integral
multiple of $100,000 in excess thereof, any portion of the outstanding Floating
Rate Advances upon one Business Day's prior notice to the Agent. The Borrower
may from time to time pay or prepay, subject to the payment of any funding
indemnification amounts required by Section 3.4 but without penalty or premium,
all outstanding Eurodollar Advances, or, in a minimum aggregate amount of
$5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion
of the outstanding Eurodollar Advances upon three Business Days' prior notice to
the Agent.

         2.8. Method of Selecting Types and Interest Periods for New Advances.

                  2.8.1. Loans. The Borrower shall select the Type of Advance
         and, in the case of each Eurodollar Advance, the Interest Period
         applicable thereto from time to time. The Borrower shall give the Agent
         irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m.
         Chicago time at least one Business Day before the Borrowing Date of
         each Floating Rate Advance and three Business Days before the Borrowing
         Date for each Eurodollar Advance, specifying:

                           (i) the Borrowing Date, which shall be a Business
                  Day, of such Advance,

                           (ii) the aggregate amount of such Advance,

                           (iii) the Type of Advance selected, and

                           (iv) in the case of each Eurodollar Advance, the
                  Interest Period applicable thereto.

         The Agent shall promptly notify each Lender of the receipt of a
         Borrowing Notice. Not later than noon Chicago time on each Borrowing
         Date, each Lender shall make available its Loan or Loans in funds
         immediately available in Chicago to the Agent at its address specified
         pursuant to Article XIII. The Agent will make the funds so received
         from the Lenders available to the Borrower at the Agent's aforesaid
         address. The Borrower shall be entitled to have a maximum of five
         separate Eurodollar Advances hereunder for all Loans outstanding at any
         one time.

                  2.8.2. Swing Line Loans. Whenever the Borrower requires an
         Advance under the Swing Line Loans, it shall give written notice
         thereof (or telephonic notice promptly confirmed in writing) to the
         Swing Line Lender not later than 11:00 a.m. Chicago, Illinois time on
         the date of such Advance. Each notice shall be irrevocable and shall
         specify the aggregate principal amount of such Advance and the
         Borrowing Date of such Advance (which shall be a Business Day). No
         later than 2:00 p.m. Chicago, Illinois time on the requested Date, the
         Swing Line Lender shall make available to the Borrower in immediately
         available funds the amount of such Advance at the Borrower's general
         deposit account maintained with the Swing Line Bank, or as otherwise
         directed by the Borrower.

                                      -22-
<PAGE>   23
         2.9. Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances pursuant to this Section
2.9 or are repaid in accordance with Sections 2.2 or 2.7. Each Eurodollar
Advance shall continue as a Eurodollar Advance until the end of the then
applicable Interest Period therefor, at which time such Eurodollar Advance shall
be automatically converted into a Floating Rate Advance unless (x) such
Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the
Borrower shall have given the Agent a Conversion/Continuation Notice (as defined
below) requesting that, at the end of such Interest Period, such Eurodollar
Advance continue as a Eurodollar Advance for the same or another Interest
Period. Subject to the terms of Section 2.6, the Borrower may elect from time to
time to convert all or any part of a Floating Rate Advance into a Eurodollar
Advance. The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Floating Rate Advance
into a Eurodollar Advance or continuation of a Eurodollar Advance not later than
10:00 a.m. Chicago time at least three Business Days prior to the date of the
requested conversion or continuation, specifying:

                  (i) the requested date, which shall be a Business Day, of such
         conversion or continuation,

                  (ii) the aggregate amount and Type of the Advance which is to
         be converted or continued, and

                  (iii) the amount of such Advance which is to be converted into
         or continued as a Eurodollar Advance and the duration of the Interest
         Period applicable thereto.

Advances under the Swing Line Loan shall at all times remain Floating Rate
Advances, and may not be converted into Eurodollar Advances.

         2.10. Change in Interest Rate, etc. Each Floating Rate Advance shall
bear interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but
excluding the date it is paid or is converted into a Eurodollar Advance (and on
which date, if a conversion has occurred, the Eurodollar Rate is charged), at a
rate per annum equal to the Floating Rate for such day. Changes in the rate of
interest on that portion of any Advance maintained as a Floating Rate Advance
will take effect simultaneously with each change in the Alternate Base Rate or
Applicable Margin, as applicable. Each Eurodollar Advance shall bear interest on
the outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to the last day of such Interest Period at
the interest rate determined by the Agent as applicable to such Eurodollar
Advance based upon the Borrower's selections under Sections 2.8 and 2.9 and
otherwise in accordance with the terms hereof. Changes in the rate of interest
on that portion of any Advance maintained as a Eurodollar Advance will take
effect simultaneously with each change in the Applicable Margin regardless of
whether such date falls during an existing Interest Period. No Interest Period
may end after the Facility Termination Date.

         2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured Default the

                                      -23-
<PAGE>   24

Required Lenders may, at their option, by notice to the Borrower (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates), declare that no Advance may be made as, converted into or
continued as a Eurodollar Advance. During the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrower (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates), declare that (i) each Eurodollar Advance shall bear interest
for the remainder of the applicable Interest Period at the lesser of (x) the
Eurodollar Rate calculated by adding the Applicable Margin for Level VI (as set
forth on the Pricing Schedule) plus 2% per annum and (y) the Highest Lawful
Rate, (ii) each Floating Rate Advance shall bear interest at a rate per annum
equal to the lesser of (x) the Floating Rate calculated by adding the Applicable
Margin for Level VI plus 2% per annum and (y) the Highest Lawful Rate and (iii)
the LC Fee shall be calculated by using the Applicable Margin for Level VI
increased by 2% per annum, provided that, during the continuance of a Default
under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii)
above and the increase in the LC Fee set forth in clause (iii) above shall be
applicable to all Credit Extensions without any election or action on the part
of the Agent or any Lender.

         2.12. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the following address: Bank One, NA, One Banc
One Plaza, 11th Floor, Chicago, Illinois 60670 (or by wire transfer to the Agent
in accordance with Agent's written instructions), or at any other Lending
Installation of the Agent specified in writing by the Agent to the Borrower, by
noon (local time) on the date when due and shall (except in the case of
Reimbursement Obligations for which the Issuer has not been fully indemnified by
the Lenders, or as otherwise specifically required hereunder) be applied ratably
by the Agent among the Lenders. Each payment delivered to the Agent for the
account of any Lender shall be delivered promptly by the Agent to such Lender in
the same type of funds that the Agent received at its address specified pursuant
to Article XIII or at any Lending Installation specified in a notice received by
the Agent from such Lender. The Agent is hereby authorized to charge the account
of the Borrower maintained with Bank One for each payment of principal,
interest, Reimbursement Obligations and fees as it becomes due hereunder. Each
reference to the Agent in this Section 2.12 shall also be deemed to refer, and
shall apply equally, to the Issuer, in the case of payments required to be made
by the Borrower to the Issuer pursuant to Section 2.19.6.

         2.13. Noteless Agreement, Evidence of Indebtedness. (i) Each Lender
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each
Loan made by such Lender from time to time, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

                  (ii) The Agent shall also maintain accounts in which it will
         record (a) the amount of each Loan made hereunder, the Type thereof and
         the Interest Period with respect thereto, (b) the amount of any
         principal or interest due and payable or to become due and payable from
         the Borrower to each Lender hereunder, (c) the original stated amount
         of each Facility LC and the amount of LC Obligations outstanding at any
         time,

                                      -24-
<PAGE>   25

         and (d) the amount of any sum received by the Agent hereunder from the
         Borrower and each Lender's share thereof.

                  (iii) The entries maintained in the accounts maintained
         pursuant to paragraphs (i) and (ii) above shall be prima facie evidence
         of the existence and amounts of the Obligations therein recorded,
         provided, however, that the failure of the Agent or any Lender to
         maintain such accounts or any error therein shall not in any manner
         affect the obligation of the Borrower to repay the Obligations in
         accordance with their terms.

                  (iv) Any Lender may request that its Loans be evidenced by a
         promissory note (a "Note"). In such event, the Borrower shall prepare,
         execute and deliver to such Lender a Note payable to the order of such
         Lender in the form of Exhibit 2.13(iv) attached hereto. Thereafter, the
         Loans evidenced by such Note and interest thereon shall at all times
         (including after any assignment pursuant to Section 12.3) be
         represented by one or more Notes payable to the order of the payee
         named therein or any assignee pursuant to Section 12.3, except to the
         extent that any such Lender or assignee subsequently returns any such
         Note for cancellation and requests that such Loans once again be
         evidenced as described in paragraphs (i) and (ii) above.

         2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders
and the Agent to extend, convert or continue Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by any
person or persons the Agent or any Lender in good faith believes to be acting on
behalf of the Borrower, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically. The Borrower agrees to deliver promptly to
the Agent a written confirmation, if such confirmation is requested by the Agent
or any Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders shall govern
absent manifest error.

         2.15. Interest Payment Dates, Interest and Fee Basis. Interest accrued
on each Floating Rate Advance shall be payable on the last day of each calendar
month, commencing with the first such date to occur after the date hereof, on
any date on which the Floating Rate Advance is prepaid, whether due to
acceleration or otherwise, and at maturity. Interest accrued on that portion of
the outstanding principal amount of any Floating Rate Advance converted into a
Eurodollar Advance on a day other than the last day of any calendar month shall
be payable on the date of conversion. Interest accrued on each Eurodollar
Advance shall be payable on the last day of its applicable Interest Period, on
any date on which the Eurodollar Advance is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Eurodollar Advance having
an Interest Period longer than three months shall also be payable on the last
day of each three-month interval during such Interest Period. Interest on
Floating Rate Advances shall be calculated for actual days elapsed on the basis
of a 365/366-day year. Interest on Eurodollar Advances, commitment fees and LC
Fees shall be calculated for actual days elapsed on the basis of a 360-day year.
Interest shall be payable for the day an Advance is made but not for the day of
any payment on the amount paid if payment is received prior to noon (local time)
at the place of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding

                                      -25-
<PAGE>   26

Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
Notwithstanding the foregoing, the Borrower will pay to the Agent, for the
account of each Lender, interest at the applicable rate in accordance with
Section 2.11.

         2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. Promptly after notice from the Issuer, the Agent will notify
each Lender of the contents of each request for issuance of a Facility LC
hereunder. The Agent will notify each Lender of the interest rate applicable to
each Eurodollar Advance promptly upon determination of such interest rate and
will give each Lender prompt notice of each change in the Alternate Base Rate.

         2.17. Lending Installations. Each Lender may book its Loans and its
participation in any LC Obligations and the Issuer may book the Facility LCs at
any Lending Installation selected by such Lender or the Issuer, as the case may
be, and may change its Lending Installation from time to time. All terms of this
Agreement shall apply to any such Lending Installation and the Loans, Facility
LCs, participations in LC Obligations and any Notes issued hereunder shall be
deemed held by each Lender or the Issuer, as the case may be, for the benefit of
any such Lending Installation. Each Lender and the Issuer may, by written notice
to the Agent and the Borrower in accordance with Article XIII, designate
replacement or additional Lending Installations through which Loans will be made
by it or Facility LCs will be issued by it and for whose account Loan payments
or payments with respect to Facility LCs are to be made.

         2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the case
of payment by the Borrower, the interest rate applicable to the relevant Loan.

         2.19. Facility LCs.

                  2.19.1. Issuance. The Issuer hereby agrees, on the terms and
         conditions set forth in this Agreement, to issue commercial and standby
         (both payment and performance) letters of credit (each, a "Facility
         LC") and to renew, extend, increase, decrease or otherwise modify each
         Facility LC ("Modify," and each such action a "Modification"), from
         time to time from and including the date of this Agreement and prior to
         the Facility

                                      -26-
<PAGE>   27

         Termination Date upon the request of the Borrower; provided that
         immediately after each such Facility LC is issued or Modified, (i) the
         aggregate amount of the outstanding LC Obligations shall not exceed the
         Aggregate Facility LC Commitment and (ii) the Aggregate Outstanding
         Credit Exposure shall not exceed the Aggregate Commitment. No Facility
         LC issued on or after the initial Credit Extension Date shall have an
         expiry date later than the earlier of (x) the fifth Business Day prior
         to the Facility Termination Date and (y) one year after its issuance;
         provided that any Facility LC may provide for the renewal thereof for
         additional one-year periods (which shall in no event extend beyond the
         fifth Business Day prior to the Facility Termination Date).

                  2.19.2. Participations. Upon the issuance or Modification by
         the Issuer of a Facility LC in accordance with this Section 2.19, the
         Issuer shall be deemed, without further action by any party hereto, to
         have unconditionally and irrevocably sold to each Lender, and each
         Lender shall be deemed, without further action by any party hereto, to
         have unconditionally and irrevocably purchased from the Issuer, a
         participation in such Facility LC (and each Modification thereof and
         the related LC Obligations in proportion to its Pro Rata Share).

                  2.19.3. Notice. Subject to Section 2.19.1, the Borrower shall
         give the Issuer notice prior to 10:00 a.m. (Chicago time) at least five
         Business Days prior to the proposed date of issuance or Modification of
         each Facility LC, specifying the beneficiary, the proposed date of
         issuance (or Modification) and the expiry date of such Facility LC, and
         describing the proposed terms of such Facility LC and the nature of the
         transactions proposed to be supported thereby, including whether such
         shall be a Standby Facility LC. Upon receipt of such notice, the Issuer
         shall promptly notify the Agent, and the Agent shall promptly notify
         each Lender, of the contents thereof and of the amount of such Lender's
         participation in such proposed Facility LC. The issuance or
         Modification by the Issuer of any Facility LC shall, in addition to the
         conditions precedent set forth in Article IV (the satisfaction of which
         the Issuer shall have no duty to ascertain), be subject to the
         conditions precedent that such Facility LC shall be satisfactory to the
         Issuer and that the Borrower shall have executed and delivered such
         application agreement and/or such other instruments and agreements
         relating to such Facility LC as the Issuer shall have reasonably
         requested (each, a "Facility LC Application"). In the event of any
         conflict between the terms of this Agreement and the terms of any
         Facility LC Application, the terms of this Agreement shall control.

                  2.19.4. LC Fees. (a) The Borrower shall pay to the Agent, for
         the account of the Lenders ratably in accordance with their respective
         Pro Rata Shares, a fee on each Standby Facility LC at a per annum rate
         equal to the Applicable Fee Rate in effect from time to time multiplied
         times the face amount of such Standby Facility LC, such fee to be
         payable in arrears on each Payment Date (such fee an "LC Fee"). The
         Borrower shall also pay to the Issuer for its own account (x) at the
         time of issuance of each Standby Facility LC, a fronting fee (the
         "Fronting Fee") equal to .125% per annum multiplied times the amount of
         such Standby Facility LC remaining undrawn, and (y) documentary and
         processing charges in connection with the issuance or Modification of
         and draws under Facility LCs in accordance with the Issuer's standard
         schedule for such charges as in effect from time to time.

                                      -27-
<PAGE>   28

                  (b) The Borrower shall pay to the Agent, for the account of
         the Lenders, ratably in accordance with their respective Pro Rata
         Shares, a fee on each Commercial Facility LC, such fees to be the usual
         and customary fees charged by Issuer.

                  2.19.5. Administration, Reimbursement by Lenders. Upon receipt
         from the beneficiary of any Facility LC of any demand for payment under
         such Facility LC, the Issuer shall notify the Agent and the Agent shall
         promptly notify the Borrower and each other Lender as to the amount to
         be paid by the Issuer as a result of such demand and the proposed
         payment date (the "LC Payment Date"). The responsibility of the Issuer
         to the Borrower and each Lender shall be only to determine that the
         documents (including each demand for payment) delivered under each
         Facility LC in connection with such presentment shall be in conformity
         in all material respects with such Facility LC. The Issuer shall
         endeavor to exercise the same care in the issuance and administration
         of the Facility LCs as it does with respect to letters of credit in
         which no participations are granted, it being understood that in the
         absence of any gross negligence or willful misconduct by the Issuer,
         each Lender shall be unconditionally and irrevocably liable without
         regard to the occurrence of any Default or any condition precedent
         whatsoever, to reimburse the Issuer on demand for (i) such Lender's Pro
         Rata Share of the amount of each payment made by the Issuer under each
         Facility LC to the extent such amount is not reimbursed by the Borrower
         pursuant to Section 2.19.6 below, plus (ii) interest on the foregoing
         amount to be reimbursed by such Lender, for each day from the date of
         the Issuer's demand for such reimbursement (or, if such demand is made
         after 11:00 a.m. (Chicago time) on such date, from the next succeeding
         Business Day) to the date on which such Lender pays the amount to be
         reimbursed by it, at a rate of interest per annum equal to the Federal
         Funds Effective Rate for the first three days and, thereafter, at a
         rate of interest equal to the rate applicable to Floating Rate
         Advances.

                  2.19.6. Reimbursement by Borrower. The Borrower shall be
         irrevocably and unconditionally obligated to reimburse the Issuer on or
         before the applicable LC Payment Date for any amounts to be paid by the
         Issuer upon any drawing under any Facility LC, without presentment,
         demand, protest or other formalities of any kind; provided that neither
         the Borrower nor any Lender shall hereby be precluded from asserting
         any claim for direct (but not consequential) damages suffered by the
         Borrower or such Lender to the extent, but only to the extent, caused
         by (i) the willful misconduct or gross negligence of the Issuer in
         determining whether a request presented under any Facility LC issued by
         it complied with the terms of such Facility LC or (ii) the Issuer's
         failure to pay under any Facility LC issued by it after the
         presentation to it of a request strictly complying with the terms and
         conditions of such Facility LC. All Reimbursement Obligations shall
         bear interest, payable on demand, for each day until paid at a rate per
         annum equal to (x) the rate applicable to Floating Rate Advances for
         such day if such day falls on or before the applicable LC Payment Date
         and (y) the sum of 2% plus the rate applicable to Floating Rate
         Advances for such day if such day falls after such LC Payment Date. The
         Issuer will pay to each Lender ratably in accordance with its Pro Rata
         Share all amounts received by it from the Borrower for application in
         payment, in whole or in part, of the Reimbursement Obligation in
         respect of any Facility LC issued by the Issuer, but only to the extent
         such Lender has made payment to the Issuer in respect of such Facility
         LC pursuant to Section 2.19.5. Subject to the terms and conditions of
         this Agreement

                                      -28-
<PAGE>   29

         (including without limitation the submission of a Borrowing Notice in
         compliance with Section 2.8 and the satisfaction of the applicable
         conditions precedent set forth in Article IV), the Borrower may request
         an Advance hereunder for the purpose of satisfying any Reimbursement
         Obligation.

                  2.19.7. Obligations Absolute. The Borrower's obligations under
         this Section 2.19 shall be absolute and unconditional under any and all
         circumstances and irrespective of any setoff, counterclaim or defense
         to payment which the Borrower may have or have had against the Issuer,
         any Lender or any beneficiary of a Facility LC. The Borrower further
         agrees with the Issuer and the Lenders that the Issuer and the Lenders
         shall not be responsible for, and the Borrower's Reimbursement
         Obligation in respect of any Facility LC shall not be affected by,
         among other things, the validity or genuineness of documents or of any
         endorsements thereon, even if such documents should in fact prove to be
         in any or all respects invalid, fraudulent or forged, or any dispute
         between or among the Borrower, any of its Affiliates, the beneficiary
         of any Facility LC or any financing institution or other party to whom
         any Facility LC may be transferred or any claims or defenses whatsoever
         of the Borrower or of any of its Affiliates against the beneficiary of
         any Facility LC or any such transferee. The Issuer shall not be liable
         for any error, omission, interruption or delay in transmission,
         dispatch or delivery of any message or advice, however transmitted, in
         connection with any Facility LC. The Borrower agrees that any action
         taken or omitted by the Issuer or any Lender under or in connection
         with each Facility LC and the related drafts and documents, if done
         without gross negligence or willful misconduct, shall be binding upon
         the Borrower and shall not put the Issuer or any Lender under any
         liability to the Borrower. Nothing in this Section 2.19.7 is intended
         to limit the right of the Borrower to make a claim against the Issuer
         for damages as contemplated by the proviso to the first sentence of
         Section 2.19.6.

                  2.19.8. Actions of Issuer. The Issuer shall be entitled to
         rely, and shall be fully protected in relying, upon any Facility LC,
         draft, writing, resolution, notice, consent, certificate, affidavit,
         letter, cablegram, telegram, telecopy, telex or teletype message,
         statement, order or other document 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, independent
         accountants and other experts selected by the Issuer. The Issuer shall
         be fully justified in failing or refusing to take any action under this
         Agreement unless it shall first have received such advice or
         concurrence of the Required Lenders as it reasonably deems appropriate
         or it shall first be indemnified to its reasonable satisfaction by the
         Lenders against any and all liability and expense which may be incurred
         by it by reason of taking or continuing to take any such action.
         Notwithstanding any other provision of this Section 2.19, the Issuer
         shall in all cases be fully protected in acting, or in refraining from
         acting, under this Agreement in accordance with a request of the
         Required Lenders, and such request and any action taken or failure to
         act pursuant thereto shall be binding upon the Lenders and any future
         holders of a participation in any Facility LC.

                  2.19.9. Indemnification. The Borrower hereby agrees to
         indemnify and hold harmless each Lender, the Issuer and the Agent, and
         their respective directors, officers, agents and employees from and
         against any and all claims and damages, losses,

                                      -29-
<PAGE>   30

         liabilities, costs or expenses which such Lender, the Issuer or the
         Agent may incur (or which may be claimed against such Lender, the
         Issuer or the Agent by any Person whatsoever) by reason of or in
         connection with the issuance, execution and delivery or transfer of or
         payment or failure to pay under any Facility LC or any actual or
         proposed use of any Facility LC, including, without limitation, any
         claims, damages, losses, liabilities, costs or expenses which the
         Issuer may incur by reason of or in connection with (i) the failure of
         any other Lender to fulfill or comply with its obligations to the
         Issuer hereunder (but nothing herein contained shall affect any rights
         the Borrower may have against any defaulting Lender) or (ii) by reason
         of or on account of the Issuer issuing any Facility LC which specifies
         that the term "Beneficiary" included therein includes any successor by
         operation of law of the named Beneficiary, but which Facility LC does
         not require that any drawing by any such successor Beneficiary be
         accompanied by a copy of a legal document, satisfactory to the Issuer,
         evidencing the appointment of such successor Beneficiary, provided that
         the Borrower shall not be required to indemnify any Lender, the Issuer
         or the Agent for any claims, damages, losses, liabilities, costs or
         expenses to the extent, but only to the extent, caused by (x) the
         willful misconduct or gross negligence of the Issuer or (y) the
         Issuer's failure to pay under any Facility LC after the presentation to
         it of a request strictly complying with the terms and conditions of
         such Facility LC. Nothing in this Section 2.19.9 is intended to limit
         the obligations of the Borrower under any other provision of this
         Agreement.

                  2.19.10. Lenders' Indemnification. Each Lender shall, ratably
         in accordance with its Pro Rata Share, indemnify the Issuer, its
         affiliates and their respective directors, officers, agents and
         employees (to the extent not reimbursed by the Borrower) against any
         cost, expense (including reasonable counsel fees and disbursements),
         claim, demand, action, loss or liability (except such as result from
         such indemnitees' gross negligence or willful misconduct or the
         Issuer's failure to pay under any Facility LC after the presentation to
         it of a request strictly complying with the terms and conditions of the
         Facility LC) that such indemnitees may suffer or incur in connection
         with this Section 2.19 or any action taken or omitted by such
         indemnitees hereunder.

                  2.19.11. Facility LC Collateral Account. The Borrower agrees
         that it will, upon the request of the Agent or the Required Lenders and
         until the final expiration date of any Facility LC and thereafter as
         long as any amount is payable to the Issuer or the Lenders in respect
         of any Facility LC, maintain a special collateral account pursuant to
         arrangements satisfactory to the Agent (the "Facility LC Collateral
         Account") at the Agent's office at the address specified pursuant to
         Article XIII, in the name of the Borrower but under the sole dominion
         and control of the Agent, for the benefit of the Lenders and in which
         such Borrower shall have no interest other than as set forth in Section
         8.1. The Borrower hereby pledges, assigns and grants to the Agent, on
         behalf of and for the ratable benefit of the Lenders and the Issuer, a
         security interest in all of the Borrower's right, title and interest in
         and to all funds which may from time to time be on deposit in the
         Facility LC Collateral Account to secure the prompt and complete
         payment and performance of the Obligations. The Agent will invest any
         funds on deposit from time to time in the Facility LC Collateral
         Account in certificates of deposit of Bank One having a maturity not
         exceeding 30 days. Nothing in this Section 2.19.11 shall either
         obligate the Agent to require the Borrower to deposit any funds in the
         Facility LC Collateral Account or limit the

                                      -30-
<PAGE>   31

         right of the Agent to release any funds held in the Facility LC
         Collateral Account in each case other than as required by Section 8.1.

                  2.19.12. Rights as a Lender. In its capacity as a Lender, the
         Issuer shall have the same rights and obligations as any other Lender.

         2.20. Replacement of Lender. If the Borrower is required pursuant to
Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any
Lender's obligation to make or continue, or to convert Floating Rate Advances
into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender
so affected an "Affected Lender"), the Borrower may elect, if such amounts
continue to be charged or such suspension is still effective, to replace such
Affected Lender as a Lender party to this Agreement, provided that no Default or
Unmatured Default shall have occurred and be continuing at the time of such
replacement, and provided further that, concurrently with such replacement, (i)
another bank or other entity which is reasonably satisfactory to the Borrower
and the Agent shall agree, as of such date, to purchase for cash the Advances
and other Obligations due to the Affected Lender pursuant to an assignment
substantially in the form of Exhibit 12.3.1 and to become a Lender for all
purposes under this Agreement and to assume all obligations of the Affected
Lender to be terminated as of such date and to comply with the requirements of
Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such
Affected Lender in same day funds on the day of such replacement all interest,
fees and other amounts then accrued but unpaid to such Affected Lender by the
Borrower hereunder to and including the date of termination, including without
limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5.

                                  ARTICLE III

                             YIELD PROTECTION; TAXES

         3.1. Yield Protection. (a) If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any interpretation or administration thereof by
any governmental or quasi-governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender or applicable Lending Installation with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency:

                  (i) subjects any Lender or any applicable Lending Installation
         or the Issuer to any Taxes, or changes the basis of taxation of
         payments (other than with respect to Excluded Taxes) to any Lender or
         the Issuer in respect of its Eurodollar Loans, Facility LCs or
         participations therein, or

                  (ii) imposes or increases or deems applicable any reserve,
         assessment, insurance charge, special deposit or similar requirement
         against assets of, deposits with or for the account of, or credit
         extended by, any Lender or any applicable Lending Installation or the
         Issuer (other than reserves and assessments taken into account in
         determining the interest rate applicable to Eurodollar Advances), or

                                      -31-
<PAGE>   32

                  (iii) imposes any other condition the result of which is to
         increase the cost to any Lender or any applicable Lending Installation
         or the Issuer of making, funding or maintaining its Eurodollar Loans,
         or of issuing or participating in Facility LCs, or reduces any amount
         receivable by any Lender or any applicable Lending Installation or the
         Issuer in connection with its Eurodollar Loans, Facility LCs or
         participations therein, or requires any Lender or any applicable
         Lending Installation or the Issuer to make any payment calculated by
         reference to the amount of Eurodollar Loans, Facility LCs or
         participations therein held or interest or LC Fees received by it, by
         an amount deemed material by such Lender or the Issuer as the case may
         be,

and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation or the Issuer, as the case may be, of making or
maintaining its Eurodollar Loans, Commitment or Swing Line Commitment, or of
issuing or participating in Facility LCs or to reduce the return received by
such Lender or applicable Lending Installation or the Issuer, as the case may
be, in connection with such Eurodollar Loans, Commitment, Facility LCs or
participations therein, then, within 3 days of demand by such Lender or the
Issuer, as the case may be, the Borrower shall pay such Lender or the Issuer, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuer, as the case may be, for such increased cost or reduction
in amount received. A Lender claiming compensation under this section shall
notify the Borrower in writing of such claim, and shall only be entitled to
compensation under this Section 3.1 for increased costs occurring (i) from and
after the date of such notice until the events giving rise to such claim have
ceased to exist, and (ii) during the one hundred twenty (120) day period
preceding the date the Borrower receives notice from Agent or such Lender
setting forth the described claim for compensation.

         (b) Borrower may, if obligated to make a payment under this Section
3.1, require the Lender(s) collecting such payment to (i) change its Lending
Installation to a different location so as to minimize such payment obligation
or (ii) sell its interests herein to a Lender or other Person reasonably
satisfactory to Agent.

         3.2. Changes in Capital Adequacy Regulations. (a) If a Lender or the
Issuer determines the amount of capital required or expected to be maintained by
such Lender or the Issuer, any Lending Installation of such Lender or the
Issuer, or any corporation controlling such Lender or the Issuer is increased as
a result of a Change, then, within 3 days of demand by such Lender or the
Issuer, the Borrower shall pay such Lender or the Issuer the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender or the Issuer determines is attributable to
this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans
and issue or participate in Facility LCs, as the case may be, hereunder (after
taking into account such Lender's or the Issuer's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Lender or the Issuer or any Lending Installation or any
corporation controlling any Lender or the Issuer. "Risk-Based Capital
Guidelines" means (i) the risk-based capital guidelines in effect in the United
States on the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by

                                      -32-
<PAGE>   33

regulatory authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory Practices
Entitled "International Convergence of Capital Measurements and Capital
Standards," including transition rules, and any amendments to such regulations
adopted prior to the date of this Agreement. A Lender claiming compensation
under this section shall notify the Borrower in writing of such claim, and shall
only be entitled to compensation under this Section 3.2 for increased costs as a
result of a Change occurring (i) from and after the date of such notice until
the events giving rise to such claim have ceased to exist, and (ii) during the
one hundred twenty (120) day period preceding the date the Borrower receives
notice from Agent or such Lender setting forth the described claim for
compensation resulting from such Change.

         (b) Borrower may, if obligated to make a payment under this Section
3.2, require the Lender(s) collecting such payment to (i) change its Lending
Installation to a different location so as to minimize such payment obligation
or (ii) sell its interests herein to a Lender or other Person reasonably
satisfactory to Agent.

         3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining Eurodollar Advances, then
the Agent shall suspend the availability of Eurodollar Advances and require any
affected Eurodollar Advances to be repaid or converted to Floating Rate
Advances, subject to the payment of any funding indemnification amounts required
by Section 3.4.

         3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.

         3.5. Taxes. (i) All payments by the Borrower to or for the account of
any Lender, the Issuer or the Agent hereunder or under any Note or Facility LC
Application shall be made free and clear of and without deduction for any and
all Taxes. If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Lender, the Issuer or the Agent,
(a) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.5) such Lender, the Issuer or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (b) the Borrower shall make such deductions, (c) the
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (d) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.

                                      -33-
<PAGE>   34

                  (ii) In addition, the Borrower hereby agrees to pay any
         present or future stamp or documentary taxes and any other excise or
         property taxes, charges or similar levies which arise from any payment
         made hereunder or under any Note or Facility LC Application or from the
         execution or delivery of, or otherwise with respect to, this Agreement
         or any Note or Facility LC Application ("Other Taxes").

                  (iii) The Borrower hereby agrees to indemnify the Agent, the
         Issuer and each Lender for the full amount of Taxes or Other Taxes
         (including, without limitation, any Taxes or Other Taxes imposed on
         amounts payable under this Section 3.5) paid by the Agent, the Issuer
         or such Lender and any liability (including penalties, interest and
         expenses) arising therefrom or with respect thereto. Payments due under
         this indemnification shall be made within 30 days of the date the Agent
         or such Lender makes demand therefor pursuant to Section 3.6.

                  (iv) Each Lender that is not incorporated under the laws of
         the United States of America or a state thereof (each a "Non-U.S.
         Lender") agrees that it will, not less than ten Business Days after the
         date it becomes a Lender, (i) deliver to each of the Borrower and the
         Agent two duly completed copies of United States Internal Revenue
         Service Form 1001 or 4224 or replacement or successor forms as the case
         may be, certifying in either case that such Lender is entitled to
         receive payments under this Agreement without deduction or withholding
         of any United States federal income taxes, and (ii) deliver to each of
         the Borrower and the Agent a United States Internal Revenue Form W-8 or
         W-9 when it becomes a Lender, as the case may be, and certify that it
         is entitled to an exemption from United States backup withholding tax.
         Each Non-U.S. Lender further undertakes to deliver to each of the
         Borrower and the Agent (x) renewals or additional copies of such form
         (or any successor form) on or before the date that such form expires or
         becomes obsolete, and (y) after the occurrence of any event requiring a
         change in the most recent forms so delivered by it, such additional
         forms or amendments thereto as may be reasonably requested by the
         Borrower or the Agent. All forms or amendments described in the
         preceding sentence shall certify that such Lender is entitled to
         receive payments under this Agreement without deduction or withholding
         of any United States federal income taxes, unless an event (including
         without limitation any change in treaty, law or regulation) has
         occurred prior to the date on which any such delivery would otherwise
         be required which renders all such forms inapplicable or which would
         prevent such Lender from duly completing and delivering any such form
         or amendment with respect to it and such Lender advises the Borrower
         and the Agent that it is not capable of receiving payments without any
         deduction or withholding of United States federal income tax.

                  (v) For any period during which a Non-U.S. Lender has failed
         to provide the Borrower with an appropriate form pursuant to clause
         (iv), above (unless such failure is due to a change in treaty, law or
         regulation, or any change in the interpretation or administration
         thereof by any governmental authority, occurring subsequent to the date
         on which a form originally was required to be provided), such Non-U.S.
         Lender shall not be entitled to indemnification under this Section 3.5
         with respect to Taxes imposed by the United States; provided that,
         should a Non-U.S. Lender which is otherwise exempt from or subject to a
         reduced rate of withholding tax become subject to Taxes because of its

                                      -34-
<PAGE>   35

         failure to deliver a form required under clause (iv), above, the
         Borrower shall take such steps as such Non-U.S. Lender shall reasonably
         request to assist such Non-U.S. Lender to recover such Taxes.

                  (vi) Any Lender that is entitled to an exemption from or
         reduction of withholding tax with respect to payments under this
         Agreement or any Note pursuant to the law of any relevant jurisdiction
         or any treaty shall deliver to the Borrower (with a copy to the Agent),
         at the time or times prescribed by applicable law, such properly
         completed and executed documentation prescribed by applicable law as
         will permit such payments to be made without withholding or at a
         reduced rate.

                  (vii) If the U.S. Internal Revenue Service or any other
         governmental authority of the United States or any other country or any
         political subdivision thereof asserts a claim that the Agent did not
         properly withhold tax from amounts paid to or for the account of any
         Lender (because the appropriate form was not delivered or properly
         completed, because such Lender failed to notify the Agent of a change
         in circumstances which rendered its exemption from withholding
         ineffective, or for any other reason), such Lender shall indemnify the
         Agent fully for all amounts paid, directly or indirectly, by the Agent
         as tax, withholding therefor, or otherwise, including penalties and
         interest, and including taxes imposed by any jurisdiction on amounts
         payable to the Agent under this subsection, together with all costs and
         expenses related thereto (including attorneys fees and time charges of
         attorneys for the Agent, which attorneys may be employees of the
         Agent). The obligations of the Lenders under this Section 3.5(vii)
         shall survive the payment of the Obligations and termination of this
         Agreement.

                  (viii) In the event that Borrower reimburses any Lender or the
         Agent for any Taxes or pays any Taxes on any Lender's or the Agent's
         behalf pursuant to this Section 3.5 and such Lender or Agent thereafter
         receives any refund or credit of such Taxes, such Lender or Agent shall
         promptly pay Borrower the amount of any such refund or credit.

         3.6. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such designation is not, in
the judgment of such Lender, disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such
written statement shall set forth in reasonable detail the calculations upon
which such Lender determined such amount and shall be presumed correct in the
absence of manifest error. Determination of amounts payable under such Sections
in connection with a Eurodollar Loan shall be calculated as though each Lender
funded its Eurodollar Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement of any Lender shall be payable on demand after receipt by the Borrower
of such written statement. The obligations of the Borrower under Sections 3.1,
3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of
this Agreement.

                                      -35-
<PAGE>   36

         3.7. Effect of Yield Protection. The provisions of Sections 3.1, 3.2,
3.3, 3.4, 3.5 and 3.6 shall be interpreted in the broadest possible terms to
include any increased costs, payments or reduced income for any reason,
including but specifically not by way of limitation, due to taxes, capital
adequacy provisions, reserve requirements, withholding obligations, costs due to
the payment of any sums on a date other than the regularly scheduled date or for
any other reason. The Borrower does hereby indemnify and hold harmless the Agent
and each Lender for all such costs and does hereby agree to pay same or cover
the Agent's or any Lender's expenses or losses in regard to same. The Borrower
shall pay such sums to the Agent or to any Lender as are necessary to mitigate
all such items. This obligation is in addition to all other Obligations of the
Borrower hereunder.

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

         4.1. Initial Credit Extension. The Lenders shall not be required to
make the initial Credit Extension hereunder unless the following conditions
precedent have been satisfied or, as applicable, unless the Borrower has
furnished the following to the Agent each in form and substance satisfactory to
the Agent and with sufficient copies for the Lenders, where appropriate,
executed by the relevant Person and notarized except, in each case, as such
shall be listed on Schedule 6.26:

                  (i) Copies of the articles or certificate of incorporation or
         organization, as applicable, of the Borrower and its Domestic
         Subsidiaries that are Material Subsidiaries, together with all
         amendments, certified by the appropriate governmental officer in such
         Person's jurisdiction of organization or at Borrower's option, by an
         appropriate officer of Borrower or the relevant Subsidiary, along with
         certificates of good standing and existence or authority to do business
         as a foreign entity, as applicable.

                  (ii) Copies, certified by the Secretary or Assistant Secretary
         of the Borrower and its Domestic Subsidiaries that are Material
         Subsidiaries, as applicable, of their respective by-laws, operating or
         other management agreement and of resolutions of their respective
         boards of directors or members and of any other body authorizing the
         execution of the Loan Documents to which such Person is a party.

                  (iii) Incumbency certificates, executed by the Secretary or
         Assistant Secretary of the Borrower and its Domestic Subsidiaries that
         are Material Subsidiaries, as applicable, which shall identify by name
         and title and bear the signatures of the Authorized Officers and any
         other officers or managers of the Borrower and its Domestic
         Subsidiaries authorized to sign the Loan Documents to which such Person
         is a party, upon which certificates the Agent and the Lenders shall be
         entitled to rely until informed of any change in writing by the
         Borrower.

                  (iv) A certificate, signed by the chief financial officer of
         each Guarantor that is a Material Subsidiary certifying that on the
         initial Credit Extension Date such Guarantor is solvent, which
         certificate shall be, substantially in the form of Exhibit 4.1(iv)
         hereto.

                                      -36-
<PAGE>   37

                  (v) Both (a) a written opinion or opinions of the Borrower's
         counsel, addressed to the Lenders and covering such matters as may be
         required by Agent, in form and substance reasonably satisfactory to the
         Agent, and (b) an enforceability opinion with respect to the
         Acquisition Agreement.

                  (vi) Any Notes requested by a Lender pursuant to Section 2.13
         payable to the order of each such requesting Lender.

                  (vii) Written money transfer instructions, in substantially
         the form of Exhibit 4.1(vii), addressed to the Agent and signed by an
         Authorized Officer, together with such other related money transfer
         authorizations as the Agent may have reasonably requested.

                  (viii) The payment to the Agent and the Lenders of all (A)
         fees and expenses agreed upon by such Person and the Borrower
         (including those agreed to in that certain Agent and Fee Letter dated
         July 3, 2000).

                  (ix) This Agreement.

                  (x) The Collateral Documents.

                  (xi) The Subordination Agreement.

                  (xii) There shall not have occurred, in the Agent's sole
         discretion, a Material Adverse Effect in respect of the Borrower and
         its Subsidiaries on a consolidated basis since August 31, 1999 or in
         respect of the Stone & Webster Assets from the pro forma financial
         statements dated July 1, 2000.

                  (xiii) There shall not have occurred, in the Agent's sole
         discretion, any material adverse change in primary and secondary loan
         syndication markets or capital markets generally that would impair
         syndication of the Loans.

                  (xiv) The insurance certificate described in Section 5.21.

                  (xv) Lien searches on the Borrower and each Guarantor in the
         jurisdictions requested by the Agent, together with waivers from the
         holders of any Liens (other than Permitted Liens) as deemed necessary
         by the Lenders.

                  (xvi) Evidence satisfactory to the Agent that all of the
         Borrower's Obligations (as defined in the Existing Facility) shall,
         simultaneously with the effectiveness of this Agreement, be paid in
         full with the proceeds of the Indebtedness incurred under this
         Agreement and the liens and security interests granted in connection
         therewith shall be terminated and released.

                  (xvii) Evidence satisfactory to the Agent that all of the
         outstanding obligations under the Note Purchase Agreement shall,
         simultaneously with the effectiveness of this Agreement, be paid in
         full with the proceeds of the indebtedness incurred under this
         Agreement and the liens and security interests granted in connection
         therewith shall be terminated and released.

                                      -37-
<PAGE>   38

                  (xviii) Evidence satisfactory to the Agent that the respective
         directors of the Borrower or its Subsidiary or Subsidiaries acquiring
         the Stone & Webster Assets have approved the Stone & Webster
         Acquisition and that all regulatory and legal approvals for the Stone &
         Webster Acquisition have been obtained.

                  (xix) Evidence satisfactory to Agent that the Acquisition
         Agreement has been approved by the judge presiding in the Stone &
         Webster bankruptcy proceeding in the form of an order reasonably
         satisfactory to Agent authorizing the Stone & Webster Acquisition and
         ordering the same to be made free and clear of all liens, claims and
         encumbrances with respect to the Stone & Webster Assets, except for
         minor encumbrances provided for in the Acquisition Agreement or the
         documents evidencing the conveyance of the Stone & Webster Assets that
         are approved by Borrower and Agent.

                  (xx) Receipt and approval by Agent of all material terms
         relating to the Stone & Webster Acquisition.

                  (xxi) The representations and warranties contained in the
         Acquisition Agreement shall be accurate and all material conditions
         contained therein shall have been satisfied (other than the fact that
         the order approving the Stone & Webster Acquisition has not yet become
         final).

                  (xxii) Evidence satisfactory to the Agent of the payment of
         all Indebtedness owing by Stone & Webster, except as shown on Schedule
         4.1(xxii), a copy of all documents evidencing or securing said
         Indebtedness and an agreement with the issuers of any Letters of Credit
         issued for the account of Stone & Webster as to the continuation
         thereof and release of all collateral securing such Letters of Credit.

                  (xxiii) Agent shall have received copies of any fairness
         opinion available to Borrower related to the Stone & Webster
         Acquisition.

                  (xxiv) No litigation shall be pending that (i) has resulted in
         or requests an injunction or restraining order prohibiting the Stone &
         Webster Acquisition or the Loan, or (ii) could reasonably be expected,
         if adversely decided, to result in a Material Adverse Effect on
         Borrower or have a material adverse effect on the Stone & Webster
         Assets as a whole.

                  (xxv) The calculation shown on Schedule 4.1(xxv) shall be true
         and correct, Borrower shall be in pro forma and historical compliance
         with all covenants contained in Article VI hereof, including
         specifically, without limitation, those contained in Section 6.22 (but
         excluding the covenant contained in Section 6.22.2).

                  (xxvi) A listing of all Investments in excess of $1,000,000 by
         the Borrower or a Domestic Subsidiary in any Foreign Subsidiary.

                  (xxvii) Such other documents as any Lender or its counsel may
         have reasonably requested.

                                      -38-
<PAGE>   39

         4.2. Each Credit Extension. In addition to the above, the Lenders shall
not be required to make any Credit Extension unless on the applicable Credit
Extension Date:

                  (i) There exists no Default or Unmatured Default.

                  (ii) The representations and warranties contained in Article V
         are true and correct as of such Credit Extension Date except to the
         extent any such representation or warranty is stated to relate solely
         to an earlier date, in which case such representation or warranty shall
         have been true and correct on and as of such earlier date.

                  (iii) Agent has received a Borrowing Request.

                  (iv) All legal matters incidental to the making of such Credit
         Extension shall be satisfactory to the Lenders and their counsel.

         4.3. Reaffirmations of Warranties. Each Borrowing Notice or request for
issuance of a Facility LC with respect to each such Credit Extension shall
constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may
require a duly completed compliance certificate in substantially the form of
Exhibit 6.1(iv) as a condition to making a Credit Extension.

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         The Borrower for itself and each of its Domestic Subsidiaries
represents and warrants to the Lenders that:

         5.1. Existence and Standing. Each of the Borrower and its Subsidiaries
is a corporation, partnership (in the case of Subsidiaries only) or limited
liability company duly and properly incorporated or organized, as the case may
be, validly existing and (to the extent such concept applies to such entity) in
good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted, except where the failure to so
qualify would not have a Material Adverse Effect.

         5.2. Authorization and Validity. The Borrower and each of its
Subsidiaries has the requisite power and authority and legal right to execute
and deliver the Loan Documents to which it is a party and to perform its
obligations thereunder. The execution and delivery by the Borrower and each of
its Subsidiaries of the Loan Documents to which it is a party and the
performance of its respective obligations thereunder have been duly authorized
by proper corporate proceedings, and the Loan Documents to which the Borrower
and each of its Subsidiaries is a party constitute legal, valid and binding
obligations of such Person enforceable against such Person in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally.

         5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower or any of its Domestic Subsidiaries of any of the Loan
Documents to which it is a

                                      -39-
<PAGE>   40

party, nor the consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate (i) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on the
Borrower or any of its Material Subsidiaries, except for such violations or
defaults as would not have a Material Adverse Effect or (ii) the Borrower's or
any Subsidiary's articles or certificate of incorporation, partnership
agreement, certificate of partnership, articles or certificate of organization,
by-laws, or operating or other management agreement, as the case may be, or
(iii) the provisions of any indenture, instrument or agreement to which the
Borrower or any of its Subsidiaries is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of the Borrower or any Subsidiary pursuant to the terms of any such
indenture, instrument or agreement, except for such conflicts, violations or
defaults as would not have a Material Adverse Effect. No order, consent,
adjudication, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, or other action in respect of
any governmental or public body or authority, or any subdivision thereof, which
has not been obtained by the Borrower or any of its Domestic Subsidiaries, is
required to be obtained by the Borrower or any of its Subsidiaries in connection
with the execution and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Borrower of the Obligations, the
performance by any Material Subsidiary of its obligations under its Guaranty or
the legality, validity, binding effect or enforceability of any of the Loan
Documents.

         5.4. Financial Statements. The August 31, 1999 consolidated financial
statements of the Borrower and its Subsidiaries heretofore delivered to the
Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present, in all material respects, the consolidated financial condition and
operations of the Borrower and its Subsidiaries at such date and the
consolidated results of their operations for the period then ended.

         5.5. Material Adverse Change. Since August 31, 1999 there has been no
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries taken as a whole
which could reasonably be expected to have a Material Adverse Effect.

         5.6. Taxes. The Borrower and each of its Domestic Subsidiaries have
filed all United States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any of its Subsidiaries,
except (i) such taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided in accordance with Agreement
Accounting Principles and as to which no Lien exists, and (ii) for such failures
to file or failures to pay as could not have a Material Adverse Effect. No tax
liens have been filed with respect to any such taxes. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate in all material respects in
accordance with Agreement Accounting Principles.

         5.7. Litigation and Contingent Obligations. Except as disclosed on
Schedule 5.7, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their executive
officers, threatened against or affecting the Borrower or any

                                      -40-
<PAGE>   41

of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect or which seeks to prevent, enjoin or delay the making of any
Credit Extensions. Except as disclosed on Schedule 5.7, other than any liability
incident to any litigation, arbitration or proceeding which could not reasonably
be expected to have a Material Adverse Effect, the Borrower has no material
contingent obligations not provided for or disclosed in the financial statements
referred to in Section 5.4 which should be disclosed under Agreement Accounting
Principles.

         5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all
Subsidiaries of the Borrower as of the date of this Agreement, setting forth for
each Subsidiary (a) such Subsidiary's jurisdiction of incorporation or
organization, (b) the percentage of such Subsidiary's capital stock or other
ownership interests owned by the Borrower or any other Subsidiary, (c) the
principal places of business and the chief executive offices of such Subsidiary,
(d) the locations of any inventory or equipment owned by such Subsidiary and (e)
any past names or d/b/a's used by such Subsidiary during the two (2) years prior
to the date hereof and whether each of such Subsidiaries is a Material
Subsidiary. All of the issued and outstanding shares of capital stock or other
ownership interests of such Subsidiaries have been (to the extent such concepts
are relevant with respect to such ownership interests) duly authorized and
issued and are fully paid and non-assessable.

         5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do
not in the aggregate exceed $2,000,000. Neither the Borrower nor any other
member of the Controlled Group has incurred, or is reasonably expected to incur,
any withdrawal liability to Multiemployer Plans in excess of $2,000,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan that could have a Material Adverse Effect, neither the
Borrower nor any other member of the Controlled Group has withdrawn from any
Multiemployer Plan or initiated steps to do so, and no steps have been taken to
reorganize or terminate any Plan.

         5.10. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.

         5.11. Regulation U, T and X. The Loans and other transactions
contemplated hereunder will not violate the provisions of Regulations U, T or X.

         5.12. Material Agreements. Except as disclosed on Schedule 5.12,
neither the Borrower nor any Subsidiary is a party to any loan transaction or
guaranty of the Indebtedness of another Person as of the date hereof. Neither
the Borrower nor any Subsidiary is a party to any agreement or instrument or
subject to any charter or other corporate restriction which could reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any
Subsidiary is in default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in (i) any agreement to which
it is a party, which default could

                                      -41-
<PAGE>   42

reasonably be expected to have a Material Adverse Effect or (ii) any agreement
or instrument evidencing or governing Indebtedness in excess of $2,000,000.

         5.13. Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except where the
failure to so comply could not have a Material Adverse Effect.

         5.14. Ownership of Properties. Except as set forth on Schedule 5.14, on
the date of this Agreement, the Borrower and its Subsidiaries will have good
title, free of all Liens other than those permitted by Section 6.15, to all of
the Property and assets reflected in the Borrower's most recent consolidated
financial statements provided to the Agent as owned by the Borrower and its
Subsidiaries.

         5.15. Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of Section
4975 of the Code), and neither the execution of this Agreement nor the making of
Credit Extensions hereunder gives rise to a prohibited transaction that could
have a Material Adverse Effect within the meaning of Section 406 of ERISA or
Section 4975 of the Code.

         5.16. Environmental Matters. In the ordinary course of its business,
the officers of the Borrower consider the effect of Environmental Laws on the
business of the Borrower and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the Borrower
due to Environmental Laws. On the basis of this consideration, the Borrower has
concluded that any noncompliance, if any, of Borrower or any of its Subsidiaries
with Environmental Laws could not reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice
to the effect that its operations are not in material compliance with any of the
requirements of applicable Environmental Laws or are the subject of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a Material Adverse Effect.

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

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

         5.19. No Default. On the initial Credit Extension Date, no Default or
Unmatured Default will have occurred or be continuing.

                                      -42-
<PAGE>   43

         5.20. Post-Retirement Benefits. The present value of the expected cost
of post-retirement medical and insurance benefits payable by the Borrower and
its Subsidiaries to its employees and former employees, as estimated by the
Borrower in accordance with procedures and assumptions deemed reasonable by the
Required Lenders, does not exceed $2,000,000.

         5.21. Insurance. The certificate signed by the President or Chief
Financial Officer of the Borrower, that attests to the existence and adequacy
of, and summarizes, the property and casualty insurance program carried by the
Borrower with respect to itself and its Subsidiaries and that has been furnished
by the Borrower to the Agent and the Lenders, is complete and accurate in all
material respects. This summary includes the insurer's or insurers' name(s),
policy number(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, exclusion(s), and deductibles. This summary also includes similar
information, and describes any reserves, relating to any self-insurance program
that is in effect.

         5.22. Solvency. (i) Immediately after the consummation of the
transactions to occur on the date hereof and immediately following the making of
each Credit Extension, if any, made on the date hereof and after giving effect
to the application of the proceeds of such Credit Extension, (a) the fair value
of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a
fair valuation, will exceed the debts and liabilities, subordinated, contingent
or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b)
the present fair saleable value of the Property of the Borrower and its
Subsidiaries on a consolidated basis will be greater than the amount that will
be required to pay the probable liability of the Borrower and its Subsidiaries
on a consolidated basis on their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be
able to pay their debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) the Borrower
and its Subsidiaries on a consolidated basis will not have unreasonably small
capital with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.

                  (ii) The Borrower does not intend to, or to permit any of its
         Subsidiaries to, and does not believe that it or any of its
         Subsidiaries will, incur debts beyond its ability to pay such debts as
         they mature, taking into account the timing of and amounts of cash to
         be received by it or any such Subsidiary and the timing of the amounts
         of cash to be payable on or in respect of its Indebtedness or the
         Indebtedness of any such Subsidiary.

         5.23. Bond Obligations. As of the date hereof, neither the Borrower nor
any of its Domestic Subsidiaries have any reimbursement or guaranty obligations
owing to bonding companies except as described on Schedule 5.23 attached hereto.

                                   ARTICLE VI

                                    COVENANTS

         During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:

                                      -43-
<PAGE>   44

         6.1. Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lenders:

                  (i) Within 90 days after the close of each of its fiscal
         years, an unqualified audit report certified by independent certified
         public accountants acceptable to the Lenders, it being understood that
         the Borrower's auditors as of the date hereof are acceptable to the
         Agent and the Lenders, prepared in accordance with Agreement Accounting
         Principles on a consolidated for itself and its Subsidiaries, including
         balance sheets as of the end of such period, related profit and loss
         and reconciliation of surplus statements, and a statement of cash
         flows, accompanied by (a) any management letter prepared by said
         accountants, and (b) a certificate of said accountants that, in the
         course of their examination necessary for their certification of the
         foregoing, they have obtained no knowledge of any Default or Unmatured
         Default under any of the terms, covenants, provisions or conditions of
         Section 6.22 insofar as they relate to accounting matters, or if, in
         the opinion of such accountants, any Default or Unmatured Default shall
         exist, stating the nature and status thereof.

                  (ii) Within 45 days after the close of the first three
         quarterly periods of each of its fiscal years and within 90 days of the
         end of the final fiscal quarter, for itself and its Subsidiaries,
         consolidated and consolidating unaudited balance sheets as at the close
         of each such quarterly period and consolidated and consolidating profit
         and loss and reconciliation of surplus statements and a statement of
         cash flows for the period from the beginning of such fiscal year to the
         end of such quarter, all certified by its Chief Financial Officer.

                  (iii) As soon as available, but in any event prior to the
         beginning of each fiscal year of the Borrower, a copy of the plan and
         forecast (including a projected consolidated balance sheet, income
         statement and funds flow statement) of the Borrower for the upcoming
         fiscal year.

                  (iv) Together with the financial statements required under
         Sections 6.1(i) and (ii), a compliance certificate in substantially the
         form of Exhibit 6.1(iv) signed by its Chief Financial Officer showing
         the calculations necessary to determine compliance with this Agreement
         and stating that no Default or Unmatured Default exists, or if any
         Default or Unmatured Default exists, stating the nature and status
         thereof.

                  (v) Within 270 days after the close of each fiscal year, a
         statement of the Unfunded Liabilities of each Single Employer Plan,
         certified as correct by an actuary enrolled under ERISA.

                  (vi) As soon as possible and in any event within 10 days after
         the Borrower knows that any Reportable Event has occurred with respect
         to any Plan, a statement, signed by the Chief Financial Officer of the
         Borrower, describing said Reportable Event and the action which the
         Borrower proposes to take with respect thereto.

                                      -44-
<PAGE>   45

                  (vii) As soon as possible and in any event within 10 days
         after receipt by the Borrower, a copy of (a) any notice or claim to the
         effect that the Borrower or any of its Subsidiaries is or may be liable
         to any Person as a result of the release by the Borrower, any of its
         Subsidiaries, or any other Person of any toxic or hazardous waste or
         substance into the environment, and (b) any notice alleging any
         violation of any federal, state or local environmental, health or
         safety law or regulation by the Borrower or any of its Subsidiaries.

                  (viii) Promptly upon the furnishing thereof to the
         shareholders of the Borrower, copies of all financial statements,
         reports and proxy statements so furnished.

                  (ix) Promptly upon the filing thereof, copies of all
         registration statements and annual, quarterly, monthly or other regular
         reports, except for those filed on Form S-8, which the Borrower or any
         of its Subsidiaries files with the Securities and Exchange Commission.

                  (x) Promptly upon request by the Agent or the Required
         Lenders, such information as will facilitate an annual on site
         inspection and audit of Borrower's Inventory and equipment (or any
         other collateral the subject of the Collateral Documents).

                  (xi) Such other information (including non-financial
         information) as the Agent or any Lender may from time to time
         reasonably request.

         6.2. Use of Proceeds. The Borrower will use the proceeds of the
Advances and the Letters of Credit solely (i) to refinance Indebtedness of the
Borrower and its Subsidiaries under the Existing Facility and the Note Purchase
Agreement, (ii) for the Borrower's and its Subsidiaries' working capital and
general corporate purposes, including the issuance of the Facility LCs, (iii) to
make Acquisitions permitted hereunder, including the Stone & Webster Acquisition
and (iv) for the concurrent repayment of Indebtedness owing by Stone & Webster
and support for or replacement of Letters of Credit currently outstanding for
the account of Stone & Webster. Such purposes will not violate and are otherwise
consistent with the terms of the Loan Documents and all laws, rules and
regulations, including Regulations T, U and X. The Borrower will not, nor will
it permit any Subsidiary to, use any of the proceeds of the Advances to purchase
or carry any "margin stock" (as defined in Regulation U).

         6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse Effect.

         6.4. Conduct of Business; Books and Records. The Borrower will, and
will cause each Subsidiary to, carry on and conduct its business in
substantially the same manner and in substantially the same fields of enterprise
as it is presently conducted, shall maintain books and records thereof in
accordance with Agreement Accounting Principles and its current practice, and
shall do all things necessary to remain duly incorporated or organized, validly
existing and (to the extent such concept applies to such entity) in good
standing as a domestic corporation,

                                      -45-
<PAGE>   46

partnership or limited liability company in its jurisdiction of incorporation or
organization, as the case may be, and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is conducted
except for (i) mergers and consolidations of Subsidiaries with and into Borrower
or any Domestic Subsidiaries, to the extent permitted under Section 6.12 hereof,
(ii) the dissolution or liquidation of Subsidiaries if the net proceeds from any
such dissolution are paid to Borrower or any Domestic Subsidiary, and (iii) any
failure of a Subsidiary to be in good standing where such failure could not have
a Material Adverse Effect.

         6.5. Taxes. The Borrower will, and will cause each Subsidiary to,
timely file complete and correct United States federal and applicable foreign,
state and local tax returns required by law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in
accordance with Agreement Accounting Principles. At any time that the Borrower
or any of its Subsidiaries is organized as a limited liability company, each
such limited liability company will qualify for partnership tax treatment under
United States federal tax law.

         6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and in each case, (a) with such deductibles and with
such self-insurance provisions as are customarily maintained by similar
businesses, and (b) naming the Agent as loss payee or as an additional insured,
as appropriate, for the benefit of the Lenders and, in any case consistent with
the requirements of the Pledge and Security Agreement. The Borrower will furnish
to any Lender upon request full information as to the insurance carried.

         6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject including,
without limitation, all Environmental Laws and ERISA except for such failures to
comply as could not reasonably be expected to have a Material Adverse Effect.

         6.8. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times, except that the
foregoing shall not apply to Property disposed of by Borrower in accordance with
Section 6.13 hereof.

         6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, books and financial records of the
Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Agent or any Lender may designate.

                                      -46-
<PAGE>   47

         6.10. Dividends. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than stock splits, dividends payable in its own capital
stock) or redeem, repurchase or otherwise acquire or retire any of its capital
stock at any time outstanding, except that any Subsidiary may declare and pay
dividends or make distributions to the Borrower or to any domestic Wholly-Owned
Subsidiary, provided this shall not prohibit purchases of common stock by
Borrower or its Subsidiaries or a trust pursuant to an employee benefit plan or
the cashless exercise of stock options or warrants to purchase common stock of
Borrower by Borrower or a trust that in each case has been approved by the Board
of Directors of Borrower.

         6.11. Indebtedness. The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

                  (i) Indebtedness created hereunder.

                  (ii) Indebtedness, including, without limitation, contingent
         liabilities, existing on the date hereof and described in Schedule
         6.11(ii).

                  (iii) Indebtedness incurred in the ordinary course of business
         in connection with the acquisition of Property by the Borrower, or any
         Subsidiary (excluding Indebtedness assumed on any assets acquired
         pursuant to an Acquisition), provided that such Indebtedness shall not
         exceed the value of the Property so acquired, and in any event, such
         purchase money Indebtedness shall not exceed Ten Million Dollars
         ($10,000,000) in the aggregate.

                  (iv) Secured or unsecured Indebtedness assumed by the Borrower
         or a Subsidiary in connection with an Acquisition permitted hereunder
         and not discharged on the Closing Date which, in the aggregate, shall
         not exceed Twenty Million Dollars ($20,000,000); provided that any Lien
         securing any such secured Indebtedness shall attach only to the
         Property securing such Indebtedness prior to its assumption.

                  (v) Permitted Indebtedness.

                  (vi) Indebtedness of Foreign Subsidiaries to the Borrower or a
         Domestic Subsidiary incurred to facilitate the operations and funding
         of said Foreign Subsidiaries not to exceed the sum of (a) such
         Indebtedness to the extent outstanding on the Closing Date and
         described on Schedule 6.11(ii) plus (b) $10,000,000 in the aggregate
         outstanding at any one time, provided, all such Indebtedness is
         evidenced by promissory notes that become part of the Collateral in a
         manner reasonably satisfactory to the Agent.

                  (vii) Indebtedness of Foreign Subsidiaries to non-Affiliates
         of Borrower in an amount not to exceed $10,000,000.

                  (viii) Indebtedness that constitutes a renewal, refinancing or
         extension of any Indebtedness referred to in this Section 6.11;
         provided, that (A) no Lien existing at the time of such renewal,
         refinancing or extension shall be extended to cover any property not
         already subject to such Lien, and (B) the principal amount of any
         Indebtedness

                                      -47-
<PAGE>   48

         renewed, refinanced or extended shall not exceed the amount of such
         Indebtedness outstanding immediately prior to such renewal, refinancing
         or extension.

         6.12. Merger. The Borrower will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except that if at the
time thereof and immediately after giving effect thereto no Default or Unmatured
Default shall have occurred and be continuing, (i) any Subsidiary may merge into
or be consolidated with the Borrower in a transaction in which the Borrower is
the surviving Person, (ii) any Subsidiary may merge into or be consolidated with
any Domestic Subsidiary in a transaction in which the surviving entity is a
Domestic Subsidiary, (iii) any foreign Subsidiary may merge into or be
consolidated with any foreign Subsidiary and (iv) mergers and consolidations
constituting Acquisitions permitted under Section 6.24.

         6.13. Sale of Assets. The Borrower will not, nor will it permit any
Material Subsidiary to, lease, sell or otherwise dispose of (in one transaction
or in a series of transactions) its Property to any other Person, except:

                  (i) Sales of Inventory in the ordinary course of business.

                  (ii) The sale of the stock or assets of Nordic in accordance
         with the provisions of Section 2.2(iv).

                  (iii) The sale of the ethylene process engineering business,
         all related assets and related office building located in Harris
         County, Texas to an unrelated third party in an arms-length
         transaction.

                  (iv) Sales, leases or other dispositions by Borrower or any
         Subsidiary of obsolete, underutilized, damaged or defective Property or
         equipment that is no longer used or useful in the business of Borrower
         or its Subsidiaries.

                  (v) Any sale, lease or other disposition by or among the
         Borrower and its Domestic Subsidiaries, or among the Domestic
         Subsidiaries, or from one Foreign Subsidiary to another Foreign
         Subsidiary.

                  (vi) Licenses by Borrower or any Subsidiary of patents,
         trademarks, copyrights, know-how, or other intellectual property to any
         other Person in the ordinary course of business.

                  (vii) The sale of other assets not to exceed 10% of Borrower's
         tangible net worth, calculated pursuant to Agreement Accounting
         Principles, per annum.

         6.14. Investments and Acquisitions. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including
without limitation, loans and advances to, and other Investments in, Foreign
Subsidiaries), or commitments therefor, or to create any Subsidiary (except in
accordance with Sections 6.23 and 6.24) or to become or remain a partner in any
partnership or joint venture, or to make any Acquisition of any Person, except:

                  (i) Cash Equivalent Investments.

                                      -48-
<PAGE>   49

                  (ii) Existing Investments in existence on the date hereof and
         described in Schedule 6.14(ii) in an amount not greater than the amount
         thereof on the Closing Date.

                  (iii) Acquisitions permitted under Sections 6.24 or 6.25.

                  (iv) Investments in the proposed Entergy Joint Venture with
         Entergy Wholesale Operation, not to exceed $10,000,000 in the aggregate
         for project related financing, which Investments are nonrecourse to the
         Borrower and to each Subsidiary.

                  (v) Investments in corporate debt obligations rated AA- or
         better by Standard & Poor's or Aa3 or better by Moody's Investment
         Service and maturing not more than twelve (12) months from the date of
         acquisition thereof.

                  (vi) Repurchase agreements, which shall be collateralized for
         at least 100% of face value, issued by any of the Banks or any other
         bank or trust company organized under the laws of the United States or
         any state thereof, which bank or trust company (other than the Banks to
         which such restrictions shall not apply) is a member of both the
         Federal Deposit Insurance Corporation and the Federal Reserve System
         and is rated B or better by Thompson Bank Watch Service (all of which
         must mature within twelve (12) months from the time of acquisition
         thereof).

                  (vii) Settlement accounts between the Borrower and its
         Domestic Subsidiaries or its Domestic Subsidiaries and other Domestic
         Subsidiaries.

                  (viii) Property and buildings necessary to the operations of
         the Borrower and its Subsidiaries.

                  (ix) Permitted Business Investments.

                  (x) Permitted Financial Investments.

                  (xi) Investments by Borrower or any Subsidiary thereof in any
         Person to the extent the consideration paid consists solely of
         Qualified Stock of Borrower, unless the nature of such Investment could
         reasonably be expected to cause a Material Adverse Effect.

                  (xii) Investments not otherwise permitted above, provided that
         the aggregate amount (at original cost) of all such Investments of the
         Borrower and all of its Subsidiaries at any time outstanding shall not
         exceed $2,500,000.

         6.15. Liens. The Borrower will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the Property of the
Borrower or any of its Subsidiaries, nor will it covenant with any other Person
not to grant such a Lien to the Agent, except:

                  (i) Permitted Liens.

                  (ii) Liens in favor of the Agent, for the benefit of the
         Lenders, granted pursuant to any Collateral Document.

                                      -49-
<PAGE>   50

                  (iii) Liens existing on the date hereof and described in
         Schedule 6.15(iii).

                  (iv) Liens incurred in connection with any Acquisition
         permitted under Section 6.24.

                  (v) Liens securing Indebtedness permitted under Sections
         6.11(iii) or (iv).

                  (vi) Any renewal, extension or replacement of any Lien
         referred to in subparagraphs (iii) and (iv) above; provided, that no
         Lien arising or existing as a result of such extension, renewal or
         replacement shall be extended to cover any property not theretofore
         subject to the Lien being extended, renewed or replaced and provided
         further that the principal amount of the Indebtedness secured thereby
         shall not exceed the principal amount of the Indebtedness so secured at
         the time of such extension, renewal or replacement.

         6.16. Affiliates. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction, provided, this Section 6.16 shall not
prohibit inter-company transfers not otherwise restricted hereunder.

         6.17. Prepayment of Other Indebtedness. The Borrower will not, and will
not permit any Subsidiary to make voluntary prepayments of principal or interest
on any other of the Borrower's or such Subsidiary's Indebtedness except as
expressly provided herein or amend or obtain or grant a waiver of any term of
any of such Indebtedness, without the prior written consent of the Required
Lenders other than in respect of inter-company transfers or inter-company
Indebtedness not otherwise prohibited hereunder.

         6.18. Sale of Accounts. The Borrower will not, nor will it permit any
Subsidiary to, sell or otherwise dispose of any notes receivable or Accounts,
with or without recourse; provided that the foregoing shall not limit or
restrict compromises of doubtful or disputed accounts in the ordinary course of
business of Borrower and the Subsidiaries.

         6.19. Contingent Obligations. The Borrower will not, nor will it permit
any Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary), except for:

                  (i) endorsement of instruments for deposit or collection in
         the ordinary course of business,

                  (ii) Reimbursement Obligations,

                  (iii) the Guaranty,

                                      -50-
<PAGE>   51

                  (iv) the guaranty by the Borrower of the obligations of Word
         Industries Fabricators, Inc. under the Asset Purchase Agreement
         executed in connection with Borrower's prior acquisition of Word
         Industries Fabricators, Inc.,

                  (v) guaranties and other Contingent Obligations listed on
         Schedule 6.19(v) attached hereto,

                  (vi) guaranties by Borrower or any of its Subsidiaries made in
         the ordinary course of business of any payment to a vendor of goods or
         services to the Borrower or its Subsidiaries or guaranties by Borrower
         of any obligations of the Domestic Subsidiaries owed to any customer of
         Borrower or a Domestic Subsidiary made with respect to the performance
         by Borrower or such Domestic Subsidiary of a contract for the sale of
         goods or the delivery of services to such customer,

                  (vii) such Contingent Obligations as would be permitted to be
         incurred if such Contingent Obligations were incurred as Indebtedness
         by such Borrower under Section 6.11, and

                  (viii) reimbursement or guaranty obligations owing to bonding
         companies issuing bonds on behalf of the Company or any of its Domestic
         Subsidiaries incurred in the ordinary course of the Company's business.

         6.20. Letters of Credit. The Borrower will not, nor will it permit any
Subsidiary to, apply for or become liable upon or in respect of any Letter of
Credit other than Facility LCs.

         6.21. Financial Contracts. The Borrower will not, nor will it permit
any Subsidiary to, enter into or remain liable upon any Financial Contract,
except Rate Hedging Agreements made for nonspeculative purposes.

         6.22. Financial Covenants.

                  6.22.1. Leverage Ratio. Commencing with the first full fiscal
         quarter following the Closing Date, and for each fiscal quarter
         thereafter, the Borrower will not at any time permit the ratio of (i)
         Consolidated Total Debt, to (ii) Shaw EBITDA, for the then
         most-recently ended four fiscal quarters, to be greater than that shown
         on the following grid for the periods indicated:

<TABLE>
<S>                                             <C>   <C>                          <C>          <C>
                 Closing Date                   -     February 27, 2001             -           3.50 to 1.0
                 February 28, 2001              -     May 30, 2001                  -           3.25 to 1.0
                 May 31, 2001                   -     August 30, 2001               -           3.00 to 1.0
                 August 31, 2001                -     November 29, 2001             -           2.75 to 1.0
                 November 30, 2001 and thereafter                                   -           2.50 to 1.0
</TABLE>

                  6.22.2. Fixed Charge Coverage Ratio. Commencing with the first
         full fiscal quarter following the Closing Date, and for each fiscal
         quarter thereafter, the Borrower will not, at any time, permit the
         ratio, for the then most-recently ended four fiscal quarters, except
         that for the first fiscal year after the Closing Date the ratio will be
         calculated from the beginning of the fiscal year to the end of the most
         recent fiscal

                                      -51-
<PAGE>   52

         quarter, of (i) Shaw EBITDA, minus Capital Expenditures for said
         periods, to (ii) Consolidated Interest Expense, plus principal payments
         actually paid (or scheduled to be paid) during said periods on any
         Indebtedness and cash taxes actually paid during said periods to be
         less than 1.50 to 1.0.

                  6.22.3. Minimum Consolidated Net Worth. The Borrower will at
         all times maintain Consolidated Net Worth of not less than the sum of
         (i) $313,000,000, plus (ii) 75% of Consolidated Net Income (if
         positive) earned in each fiscal quarter ending subsequent to the
         Closing Date, plus (iii) 90% of any amount recorded on the consolidated
         balance sheet of the Borrower from the issuance of any equity.

                  6.22.4. Capital Expenditures. The Borrower will not, nor will
         it permit its Subsidiaries, in the aggregate to, expend, or be
         committed to expend, in excess of $30,000,000 for Capital Expenditures
         including all Capitalized Leases, during any one fiscal year on a
         non-cumulative basis in the aggregate for the Borrower and its
         Subsidiaries exclusive of acquisitions otherwise permitted under this
         Agreement.

6.23. Subsidiaries. The Borrower will, and will cause each of its Domestic
Subsidiaries to, cause any Person (whether now existing or hereafter created)
becoming a Material Subsidiary that is or becomes a Domestic Subsidiary of the
Borrower (i) to execute, in form and substance satisfactory to the Agent, a
guaranty in favor of the Agent for the benefit of the Lenders sufficient to
obligate such Subsidiary for repayment of all or a portion of the Obligations
and (ii) to execute, in form and substance satisfactory to the Agent, a security
agreement and/or other security instruments in favor of the Agent for the
benefit of the Lenders sufficient to pledge all or a portion of such
Subsidiary's assets as would constitute Collateral as security for the
Obligations. The Borrower and each Subsidiary shall have pledged at all times to
the Agent for the benefit of the Secured Creditors 100% of a Domestic
Subsidiary's ownership interest in any Domestic Subsidiary that is a Material
Subsidiary and 66% of a Domestic Subsidiary's ownership interest in any Foreign
Subsidiary pursuant to a pledge agreement in form and substance satisfactory to
the Agent.

         6.24. Acquisitions. The Borrower will not, and will not permit any
Subsidiary to, make any Acquisition without the prior written consent of the
Required Lenders if the aggregate cash consideration aforesaid (defined as total
net cash to be paid, plus Indebtedness and Contingent Obligations to be assumed
in connection with any Acquisition), plus the Acquisition costs associated with
such Acquisition exceeds $10,000,000, provided Acquisitions contemplated by the
Acquisition Agreement shall be permitted by this Section 6.24. For Acquisitions
for which the aggregate cash consideration is less than $10,000,000, no such
consent shall be required so long as (i) the acquisition target is in the same
or similar line of business as Borrower and its subsidiaries; (ii) the Borrower
or a Domestic Subsidiary is the surviving entity holding one hundred percent
(100%) of the capital stock or membership interests in the Acquisition target;
(iii) no Default or Unmatured Default shall exist before or after any
Acquisition; (iv) all Acquisitions shall be completed in accordance with
applicable laws; (v) Agent shall be provided with satisfactory opinions with
regard to any acquisition as it may request; and (vi) the terms of Section 6.23
are satisfied.

                                      -52-
<PAGE>   53

         6.25. Limitation on Leases. The Borrower will not, and will not allow
its Subsidiaries to incur, on a consolidated basis, operating leases requiring
total payments of more than $16,000,000 per annum excluding (i) operating leases
recorded in the Borrower's financial statements as cost of sales and fully
reimbursable to the Borrower by non-affiliated third parties on arm's length
terms and (ii) lease obligations related to Stone & Webster's office space at
245 Summer St., Boston, Massachusetts.

         6.26. Post Closing Obligations. Borrower shall complete the post
closing document delivery and other obligations and performance requirements set
forth on Schedule 6.26 in accordance with the due dates for such performance as
set forth on such Schedule.

                                  ARTICLE VII

                                    DEFAULTS

         The occurrence of any one or more of the following events shall
constitute a Default:

         7.1. Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or
in connection with this Agreement, any Credit Extension, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made.

         7.2. Nonpayment of (i) principal when due, (ii) interest within three
(3) days of when due on any Loan, (iii) nonpayment of any Reimbursement
Obligation, or (iv) nonpayment of any commitment fee, LC Fee or other
obligations under any of the Loan Documents after the same becomes due.

         7.3. The breach by the Borrower of any of the terms or provisions of
Sections 6.2, 6.3, or 6.10 through 6.25.

         7.4. The breach by the Borrower (other than a breach which constitutes
a Default under another Section of this Article VII) of any of the terms or
provisions of this Agreement which is not remedied within fifteen (15) days.

         7.5. Failure of the Borrower or any of its Subsidiaries or any
Subsidiary to pay when due any Indebtedness aggregating in excess of $2,000,000
("Material Indebtedness"); or the default by the Borrower or any of its
Subsidiaries in the performance (beyond the applicable grace period with respect
thereto, if any) of any term, provision or condition contained in any agreement
under which any such Material Indebtedness was created or is governed, or any
other event shall occur or condition exist, the effect of which default or event
is to cause, or to permit the holder or holders of such Material Indebtedness to
cause, such Material Indebtedness to become due prior to its stated maturity; or
any Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof; or
the Borrower or any of its Subsidiaries shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.

                                      -53-
<PAGE>   54

         7.6. The Borrower or any of its Subsidiaries shall (i) have an order
for relief entered with respect to it under the Federal bankruptcy laws as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any Substantial Portion of its Property, (iv) institute any proceeding seeking
an order for relief under the Federal bankruptcy laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate or partnership action to authorize or effect any of the
foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good
faith any appointment or proceeding described in Section 7.7.

         7.7. Without the application, approval or consent of the Borrower or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 30 consecutive days.

         7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of the Borrower or any Guarantor which, when taken together with
all other Property of the Borrower or such Guarantor so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such action occurs, constitutes a Substantial
Portion.

         7.9. The Borrower or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge one or more (i) judgments or orders for the
payment of money in excess of $2,000,000 (or the equivalent thereof in
currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately contested in good
faith.

         7.10. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $2,000,000 or any Reportable Event shall occur in
connection with any Plan.

         7.11. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $2,000,000 or requires
payments exceeding $500,000 per annum.

         7.12. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of

                                      -54-
<PAGE>   55

such reorganization or termination the aggregate annual contributions of the
Borrower and the other members of the Controlled Group (taken as a whole) to all
Multiemployer Plans which are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan years of each such Multiemployer Plan immediately
preceding the plan year in which the reorganization or termination occurs by an
amount exceeding $2,000,000.

         7.13. The Borrower or any of its Subsidiaries shall (i) be the subject
of any proceeding or investigation pertaining to the release by the Borrower,
any of its Subsidiaries or any other Person of any toxic or hazardous waste or
substance into the environment, or (ii) violate any Environmental Law, which, in
the case of an event described in clause (i) or clause (ii), could reasonably be
expected to have a Material Adverse Effect.

         7.14. Any Change in Control shall occur.

         7.15. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement) or the breach of any of the terms or provisions of
any Loan Document (other than this Agreement), which default or breach continues
beyond any period of grace therein provided.

         7.16. Any Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply with any
of the terms or provisions of any Guaranty to which it is a party, or any
Guarantor shall deny that it has any further liability under any Guaranty to
which it is a party, or shall give notice to such effect.

         7.17. Except with respect to the items noted on Schedule 6.26, any
Collateral Document shall for any reason fail to create a valid and perfected
first priority security interest in any collateral purported to be covered
thereby, except as permitted by the terms of any Collateral Document, or any
Collateral Document shall fail to remain in full force or effect or any action
shall be taken to discontinue or to assert the invalidity or unenforceability of
any Collateral Document, or the Borrower shall fail to comply with any of the
terms or provisions of any Collateral Document.

         7.18. The representations and warranties set forth in Section 5.15
(Plan Assets; Prohibited Transactions) shall at any time not be true and
correct.

         7.19. The Borrower or any Subsidiary shall fail to pay when under any
Operating Lease, any obligation with respect to a Letter of Credit, or any
Contingent Obligation.

         7.20. Nonpayment by the Borrower of any Rate Hedging Obligation when
due or the breach by the Borrower of any term, provision or condition contained
in any Rate Hedging Agreement.

                                      -55-
<PAGE>   56

                                  ARTICLE VIII

                 ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

         8.1. Acceleration; Facility LC Collateral Account. (i) If any Default
described in Section 7.6 or 7.7 occurs, the obligations of the Lenders to make
Credit Extensions hereunder and the obligation and power of the Issuer to issue
Facility LCs shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the Agent,
the Issuer or any Lender and the Borrower will be and become thereby
unconditionally obligated, without any further notice, act or demand, to pay to
the Agent an amount in immediately available funds, which funds shall be held in
the Facility LC Collateral Account, equal to the difference of (x) the amount of
LC Obligations at such time, less (y) the amount on deposit in the Facility LC
Collateral Account at such time which is free and clear of all rights and claims
of third parties and has not been applied against the Obligations (such
difference, the "Collateral Shortfall Amount"). If any other Default occurs, the
Required Lenders (or the Agent with the consent of the Required Lenders) may (a)
terminate or suspend the obligations of the Lenders to make Credit Extensions
hereunder and the obligation and power of the Issuer to issue Facility LCs, or
declare the Obligations and any affected Lender may declare the Rate Hedging
Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrower hereby expressly waives, and (b)
upon notice to the Borrower and in addition to the continuing right to demand
payment of all amounts payable under this Agreement, make demand on the Borrower
to pay, and the Borrower will, forthwith upon such demand and without any
further notice or act, pay to the Agent the Collateral Shortfall Amount, which
funds shall be deposited in the Facility LC Collateral Account.

                  (ii) If at any time while any Default is continuing, the Agent
         determines that the Collateral Shortfall Amount at such time is greater
         than zero, the Agent may make demand on the Borrower to pay, and the
         Borrower will, forthwith upon such demand and without any further
         notice or act, pay to the Agent the Collateral Shortfall Amount, which
         funds shall be deposited in the Facility LC Collateral Account.

                  (iii) The Agent may at any time or from time to time after
         funds are deposited in the Facility LC Collateral Account, apply such
         funds to the payment of the Obligations and any other amounts as shall
         from time to time have become due and payable by the Borrower to the
         Lenders or the Issuer under the Loan Documents.

                  (iv) At any time while any Default is continuing, neither the
         Borrower nor any Person claiming on behalf or of through the Borrower
         shall have any right to withdraw any of the funds held in the Facility
         LC Collateral Account. After all of the Obligations have been
         indefeasibly paid in full and the Aggregate Commitment has been
         terminated, any funds remaining, in the Facility LC Collateral Account
         shall be returned by the Agent to the Borrower or paid to whomever may
         be legally entitled thereto at such time.

                  (v) If, within 30 days after acceleration of the maturity of
         the Obligations or termination of the obligations of the Lenders to
         make Credit Extensions and the obligation and power of the Issuer to
         issue Facility LCs hereunder as a result of any

                                      -56-
<PAGE>   57

         Default (other than any Default as described in Section 7.6 or 7.7 with
         respect to the Borrower) and before any judgment or decree for the
         payment of the Obligations due shall have been obtained or entered, the
         Required Lenders (in their sole discretion) shall so direct, the Agent
         shall, by notice to the Borrower, rescind and annul such acceleration
         and/or termination.

         8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of all of the Lenders:

                  (i) Extend the final maturity of any Loan, or extend the
         expiry date of any Facility LC to a date after the Facility Termination
         Date or postpone any regularly scheduled payment of principal of any
         Loan or forgive all or any portion of the principal amount thereof or
         any Reimbursement Obligation related thereto, or reduce the rate or
         extend the time of payment of interest or fees on any Loan or any
         Reimbursement Obligations related thereto.

                  (ii) Reduce the percentage specified in the definition of
         Required Lenders.

                  (iii) Extend the Facility Termination Date or reduce the
         amount or extend the payment date for, the mandatory payments required
         under Section 2.2, or increase the amount of the Aggregate Commitment,
         the Revolving Credit Commitment or the Facility LC Commitment or permit
         the Borrower to assign its rights under this Agreement.

                  (iv) Amend this Section 8.2.

                  (v) Release any Guarantor of any Credit Extension or, except
         as provided in the Collateral Documents, release all or substantially
         all of the Collateral.

No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent, and no amendment of any
provision relating to the Issuer shall be effective without the written consent
of the Issuer. The Agent may waive payment of the fee required under Section
12.3.2 without obtaining the consent of any other party to this Agreement.

         8.3. Preservation of Rights. No delay or omission of the Lenders, the
Issuer or the Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Credit Extension notwithstanding the existence of a
Default or the inability of the Borrower to satisfy the conditions precedent to
such Credit Extension shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law

                                      -57-
<PAGE>   58

afforded shall be cumulative and all shall be available to the Agent, the Issuer
and the Lenders until the Obligations have been paid in full.

                                   ARTICLE IX

                               GENERAL PROVISIONS

         9.1. Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive the making of the Credit
Extensions herein contemplated.

         9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, neither the Issuer nor any Lender shall be
obligated to extend credit to the Borrower in violation of any limitation or
prohibition provided by any applicable statute or regulation.

         9.3. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.

         9.4. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrower, the Agent, the Issuer and the Lenders and
supersede all prior agreements and understandings among the Borrower, the Agent,
the Issuer and the Lenders relating to the subject matter thereof other than the
fee letter described in Section 10.13. In the event of any conflict between the
terms of this Agreement and those of any other Loan Document, the terms of this
Agreement shall control, subject to the provisions of Section 9.16.

         9.5. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.

         9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the
Agent and the Arranger for any costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys for the Agent,
which attorneys may be employees of the Agent) paid or incurred by the Agent or
the Arranger in connection with the preparation, negotiation, execution,
delivery, syndication, review, amendment, modification, and administration of
the Loan Documents. The Borrower also agrees to reimburse the Agent, the
Arranger, the Issuer and the Lenders for any costs, internal charges and
out-of-pocket expenses (including attorneys' fees and time charges of attorneys
for the Agent, the Arranger, the Issuer and the Lenders, which attorneys may be
employees of the Agent, the Arranger, the Issuer or the Lenders) paid or

                                      -58-
<PAGE>   59

incurred by the Agent, the Arranger, the Issuer or any Lender in connection with
the collection and enforcement of the Loan Documents. Expenses being reimbursed
by the Borrower under this Section include, without limitation, the cost and
expense of an annual on site inspection and audit of Borrower's Inventory (or
any other collateral the subject of the Collateral Documents) and costs and
expenses incurred in connection with the Reports described in the following
sentence. The Borrower acknowledges that from time to time the Agent may prepare
and may distribute to the Lenders (but shall have no obligation or duty to
prepare or to distribute to the Lenders) certain audit reports (the "Reports")
pertaining to the Borrower's assets for internal use by the Agent from
information furnished to it by or on behalf of the Borrower, after the Agent has
exercised its rights of inspection pursuant to this Agreement.

                  (ii) The Borrower hereby further agrees to indemnify the
         Agent, the Arranger, the Issuer and each Lender, its directors,
         officers and employees against all losses, claims, damages, penalties,
         judgments, liabilities and expenses (including, without limitation, all
         expenses of litigation or preparation therefor whether or not the
         Agent, the Arranger, the Issuer or any Lender is a party thereto) which
         any of them may pay or incur arising out of or relating to this
         Agreement, the other Loan Documents, the transactions contemplated
         hereby or the direct or indirect application or proposed application of
         the proceeds of any Credit Extension hereunder, INCLUDING ANY OF SUCH
         ARISING FROM ANY OF SAID INDEMNIFIED PARTIES' OWN NEGLIGENCE OR UNDER
         ANY DOCTRINE OF STRICT LIABILITY, except to the extent that they are
         determined in a final non-appealable judgment by a court of competent
         jurisdiction to have resulted from the gross negligence or willful
         misconduct of the party seeking indemnification. The obligations of the
         Borrower under this Section 9.6 shall survive the termination of this
         Agreement.

         9.7. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.

         9.8. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles, except that any calculation or determination which is to be made on
a consolidated basis shall be made for the Borrower and all its Subsidiaries,
including those Subsidiaries, if any, which are unconsolidated on the Borrower's
audited financial statements.

         9.9. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.

         9.10. Nonliability of Lenders. The relationship between the Borrower on
the one hand and the Lenders, the Issuer and the Agent on the other hand shall
be solely that of borrower and lender. Neither the Agent, the Arranger, the
Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower.
Neither the Agent, the Arranger, the Issuer nor any Lender undertakes any
responsibility to the Borrower to review or inform the Borrower of any matter in

                                      -59-
<PAGE>   60

connection with any phase of the Borrower's business or operations. The Borrower
agrees that neither the Agent, the Arranger, the Issuer nor any Lender shall
have liability to the Borrower (whether sounding in tort, contract or otherwise)
for losses suffered by the Borrower in connection with, arising out of, or in
any way related to, the transactions contemplated and the relationship
established by the Loan Documents, or any act, omission or event occurring in
connection therewith, unless it is determined in a final non-appealable judgment
by a court of competent jurisdiction that such losses resulted from the gross
negligence or willful misconduct of the party from which recovery is sought.
Neither the Agent, the Arranger, the Issuer nor any Lender shall have any
liability with respect to, and the Borrower hereby waives, releases and agrees
not to sue for, any special, indirect or consequential damages suffered by the
Borrower in connection with, arising out of, or in any way related to the Loan
Documents or the transactions contemplated thereby.

         9.11. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as required by law, regulation, or legal process,
(v) to any Person in connection with any legal proceeding to which such Lender
is a party, (vi) to such Lender's direct or indirect contractual counterparties
in swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, and (vii) permitted by Section 12.4.

         9.12. Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Credit
Extensions provided for herein.

         9.13. Disclosure. Each party hereto (i) acknowledges and agrees that
the Agent, Issuer or any Lender and/or their respective Affiliates from time to
time may hold other investments in, make other loans to or have other
relationships with the Borrower and its Subsidiaries, and (ii) waive any
liability of any such party to any other party hereto, respectively, arising out
of or resulting from such investments, loans or relationships other than
liabilities arising out of the gross negligence or willful misconduct of the
party holding such investment, making such other loan or having such other
relationship with the Borrower and its Subsidiaries.

         9.14. Interest. Each provision in this Agreement and each other Loan
Document is expressly limited so that in no event whatsoever shall the amount
paid, or otherwise agreed to be paid, to the Agent or any Lender, or charged,
contracted for, reserved, taken or received by the Agent or any Lender, for the
use, forbearance or detention of the money to be loaned under this Agreement or
any Loan Document or otherwise (including any sums paid as required by any
covenant or obligation contained herein or in any other Loan Document which is
for the use, forbearance or detention of such money), exceed that amount of
money which would cause the effective rate of interest to exceed the Highest
Lawful Rate, and all amounts owed under this Agreement and each other Loan
Document shall be held to be subject to reduction to the effect that such
amounts so paid or agreed to be paid, charged, contracted for, reserved, taken
or received which are for the use, forbearance or detention of money under this
Agreement or such Loan Document shall in no event exceed that amount of money
which would cause the effective rate of interest to exceed the Highest Lawful
Rate. Anything herein or in any Note or any other

                                      -60-
<PAGE>   61

Loan Document to the contrary notwithstanding, the Borrower shall not be
required to pay unearned interest and the Borrower shall not be required to pay
interest on the Obligations at a rate in excess of the Highest Lawful Rate, and
if the effective rate of interest which would otherwise be payable hereunder,
under such Note or such Loan Documents would exceed the Highest Lawful Rate, or
if any Lender or the holder of such Note shall receive any unearned interest or
shall receive monies that are deemed to constitute interest which would increase
the effective rate of interest payable by the Borrower hereunder or under such
Note or other Loan Documents to a rate in excess of the Highest Lawful Rate,
then (a) the amount of interest which would otherwise be payable by the Borrower
shall be reduced to the amount allowed under applicable law and (b) any unearned
interest paid by the Borrower or any interest paid by the Borrower in excess of
the Highest Lawful Rate shall in the first instance be credited on the principal
of the Obligations of the Borrower (or if all such Obligations shall have been
paid in full, refunded to the Borrower). It is further agreed that, without
limitation of the foregoing, all calculations of the rate of interest contracted
for, reserved, taken, charged or received by any Lender under the Notes and the
Obligations and under the other Loan Documents are made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate, and shall be
made, to the extent permitted by usury laws applicable to such Lender, by
amortizing, prorating and spreading in equal parts during the period of the full
stated term of the Notes and this Agreement all interest at any time contracted
for, charged or received by such Lender in connection therewith. Furthermore, in
the event that the maturity of any Obligation is accelerated or in the event of
any required or permitted prepayment, then such consideration that constitutes
interest under applicable law may never include more than the maximum amount
allowed by applicable law and excess interest, if any, provided for in this
Agreement, any Note or otherwise shall be canceled automatically as of the date
of such acceleration or prepayment and, if theretofore paid, shall be refunded
to the Borrower.

         9.15. Excess Share Certificates. The Agent and the Lenders acknowledge
that circumstances have required that the Borrower deliver to Agent such stock
certificates of Foreign Subsidiaries as were available at the Closing Date, and
in some cases, while the Borrower has agreed to pledge to the Agent and the
Lenders only 66% of the Capital Stock of first tier Foreign Subsidiaries, the
Borrower has in fact delivered to Agent stock certificates representing, in some
cases, 100% of the Capital Stock of certain Foreign Subsidiaries. Lender and
Agent acknowledge and agree that in no event shall Agent or any Lender be deemed
to have (and they each hereby disclaim and deny) any Lien upon, security
interest in or claim upon any shares of Capital Stock in excess of 66% thereof,
and the Agent and the Lenders agree to surrender such stock certificates as may
evidence more than 66% of the Capital Stock of any Foreign Subsidiary to the
Borrower upon request of Borrower, in exchange for a stock certificate
representing 66% of the Capital Stock of any such Foreign Subsidiary.

         9.16. Survival of Prior Agreements. The rights and privileges afforded
the Agent and the Arranger in that certain Commitment Letter and that certain
Fee Letter, both dated July 3, 2000 among said parties and Borrower shall
survive the execution of this Agreement and the Closing Date and Agent and
Arranger shall continue to be entitled to the benefits thereof.

                                      -61-
<PAGE>   62

                                   ARTICLE X

                                   THE AGENT

         10.1. Appointment; Nature of Relationship. Bank One is hereby appointed
by each of the Lenders as its contractual representative (herein referred to as
the "Agent") hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
X. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a "representative" of the Lenders within
the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting
as an independent contractor, the rights and duties of which are limited to
those expressly set forth in this Agreement and the other Loan Documents. Each
of the Lenders hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all of
which claims each Lender hereby waives.

         10.2. Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.

         10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.

         10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Agent; (d) the existence
or possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Borrower or any
guarantor of any of the Obligations or of any of the Borrower's or any such

                                      -62-
<PAGE>   63

guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to
the Lenders information that is not required to be furnished by the Borrower to
the Agent at such time, but is voluntarily furnished by the Borrower to the
Agent (either in its capacity as Agent or in its individual capacity).

         10.5. Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any and
all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.

         10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.

         10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.

         10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders) and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Agent in connection with any dispute
between the Agent and any Lender or between two or more of the Lenders), or the
enforcement of any of the terms of the Loan Documents or of any such other

                                      -63-
<PAGE>   64

documents, INCLUDING ANY OF SUCH ARISING FROM THE AGENT'S OWN NEGLIGENCE OR
UNDER ANY DOCTRINE OF STRICT LIABILITY, provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Agent and (ii)
any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding
the provisions of this Section 10.8, be paid by the relevant Lender in
accordance with the provisions thereof. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Obligations and termination of
this Agreement.

         10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement describing such Default or Unmatured
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.

         10.10. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Credit Extensions as any Lender
and may exercise the same as though it were not the Agent, and the term "Lender"
or "Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person. The Agent, in its
individual capacity, is not obligated to remain a Lender.

         10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger 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
Agreement and the other Loan Documents.

         10.12. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice received by the Agent from the Required Lenders, such removal
to be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders within thirty days after
the resigning Agent's giving notice of its intention to resign, then the
resigning Agent may appoint, on behalf of the Borrower and the Lenders, a
successor Agent. Notwithstanding the previous sentence, the Agent may at any
time without the consent of the Borrower or any Lender, appoint any of its
Affiliates which is a

                                      -64-
<PAGE>   65

commercial bank as a successor Agent hereunder. If the Agent has resigned or
been removed and no successor Agent has been appointed, the Lenders may perform
all the duties of the Agent hereunder and the Borrower shall make all payments
in respect of the Obligations to the applicable Lender and for all other
purposes shall deal directly with the Lenders. No successor Agent shall be
deemed to be appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank having capital
and retained earnings of at least $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning or removed Agent. Upon the effectiveness of the
resignation or removal of the Agent, the resigning or removed Agent shall be
discharged from its duties and obligations hereunder and under the Loan
Documents. After the effectiveness of the resignation or removal of an Agent,
the provisions of this Article X shall continue in effect for the benefit of
such Agent in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent hereunder and under the other Loan Documents. In the
event that there is a successor to the Agent by merger, or the Agent assigns its
duties and obligations to an Affiliate pursuant to this Section 10.12, then the
term "Corporate Base Rate" as used in this Agreement shall mean the prime rate,
base rate or other analogous rate of the new Agent.

         10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its
own account, the fees agreed to by the Borrower and the Agent pursuant to those
certain letter agreements between inter alia, the Agent and the Borrower, each
dated July 3, 2000, or as otherwise agreed from time to time.

         10.14. Delegation to Affiliates. The Borrower and the Lenders agree
that the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.

         10.15. Execution of Collateral Documents. The Lenders hereby empower
and authorize the Agent to execute and deliver to the Borrower on their behalf
the Collateral Documents and all related financing statements and any financing
statements, agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the Collateral Documents.

         10.16. Collateral Releases. The Lenders hereby empower and authorize
the Agent to execute and deliver to the Borrower on their behalf any agreements,
documents or instruments as shall be necessary or appropriate to effect any
releases of Collateral which shall be permitted by the terms hereof or of any
other Loan Document or which shall otherwise have been approved by the Required
Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in
writing.

                                      -65-
<PAGE>   66

                                   ARTICLE XI

                            SETOFF; RATABLE PAYMENTS

         11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.

         11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Outstanding Credit Exposure (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than
that received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Aggregate Outstanding Credit Exposure held by the
other Lenders so that after such purchase each Lender will hold its Pro Rata
Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their respective Pro Rata Shares of the
Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.

                                  ARTICLE XII

                BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

         12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and any Note to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Agent may
treat the Person which made any Credit Extension or which holds any Note as the
owner thereof for all purposes hereof unless and until such Person complies with
Section 12.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Agent. Any assignee
or transferee of the rights to any Credit Extension or any Note agrees by
acceptance of such transfer or assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Credit Extension (whether or not a
Note has been issued in evidence thereof), shall be conclusive and binding on
any subsequent holder, transferee or assignee of the rights to such Credit
Extension.

                                      -66-
<PAGE>   67

         12.2. Participations.

                  12.2.1. Permitted Participants; Effect. Any Lender may, in the
         ordinary course of its business and in accordance with applicable law,
         at any time sell to one or more banks or other entities
         ("Participants") participating interests in any Outstanding Credit
         Exposure of such Lender, any Note held by such Lender, any Commitment
         of such Lender or any other interest of such Lender under the Loan
         Documents. In the event of any such sale by a Lender of participating
         interests to a Participant, such Lender's obligations under the Loan
         Documents shall remain unchanged, such Lender shall remain solely
         responsible to the other parties hereto for the performance of such
         obligations, such Lender shall remain the owner of its Outstanding
         Credit Exposure and the holder of any Note issued to it in evidence
         thereof for all purposes under the Loan Documents, all amounts payable
         by the Borrower under this Agreement shall be determined as if such
         Lender had not sold such participating interests, and the Borrower and
         the Agent shall continue to deal solely and directly with such Lender
         in connection with such Lender's rights and obligations under the Loan
         Documents.

                  12.2.2. Voting Rights. Each Lender shall retain the sole right
         to approve, without the consent of any Participant, any amendment,
         modification or waiver of any provision of the Loan Documents other
         than any amendment, modification or waiver with respect to any Credit
         Extension or Commitment in which such Participant has an interest which
         forgives principal, interest, or any Reimbursement Obligation or
         reduces the interest rate or fees payable with respect to any such
         Credit Extension or Commitment, extends the Facility Termination Date,
         postpones any date fixed for any regularly-scheduled payment of
         principal of or interest on any Loan in which such Participant has an
         interest, or any regularly-scheduled payment of fees on any such Credit
         Extension or Commitment, releases any guarantor of any such Credit
         Extension or releases any collateral held in the Facility LC Collateral
         Account (except in accordance with the terms hereof) or all or
         substantially all of any other collateral, if any, securing any such
         Credit Extension.

                  12.2.3. Benefit of Setoff. The Borrower agrees that each
         Participant shall be deemed to have the right of setoff provided in
         Section 11.1 in respect of its participating interest in amounts owing
         under the Loan Documents to the same extent as if the amount of its
         participating interest were owing directly to it as a Lender under the
         Loan Documents, provided that each Lender shall retain the right of
         setoff provided in Section 11.1 with respect to the amount of
         participating interests sold to each Participant. The Lenders agree to
         share with each Participant, and each Participant, by exercising the
         right of setoff provided in Section 11.1, agrees to share with each
         Lender, any amount received pursuant to the exercise of its right of
         setoff, such amounts to be shared in accordance with Section 11.2 as if
         each Participant were a Lender.

         12.3. Assignments.

                  12.3.1. Permitted Assignments. Any Lender may, in the ordinary
         course of its business and in accordance with applicable law, at any
         time assign to one or more banks or other entities ("Purchasers") all
         or any part of its rights and obligations under the Loan Documents,
         provided, any such assignment must be of a Pro Rata Share of both the

                                      -67-
<PAGE>   68

         Revolving Credit Commitment and the Facility LC Commitment of such
         assignor. Such assignment shall be substantially in the form of Exhibit
         12.3.1 or in such other form as may be agreed to by the parties
         thereto. The consent of the Borrower, the Issuer and the Agent shall be
         required prior to an assignment becoming effective with respect to a
         Purchaser which is not a Lender or an Affiliate thereof; provided, if a
         Default has occurred and is continuing, the consent of the Borrower
         shall not be required. Such consent shall not be unreasonably withheld
         or delayed; provided, however, that in the event that the prospective
         assignee is unable or unwilling to deliver to the Borrower Forms 1001
         or 4224 (or successor forms, as applicable) demonstrating such
         assignee's exemption from United States Taxes with respect to all
         interest payments to be made to such assignee hereunder, then such
         inability or unwillingness shall constitute a reasonable basis for
         refusing to consent to such transfer. Each such assignment with respect
         to a Purchaser which is not a Lender or an Affiliate thereof shall
         (unless each of the Borrower and the Agent otherwise consents) be in an
         amount not less than the lesser of (i) $5,000,000 or (ii) the remaining
         amount of the assigning Lender's Commitment (calculated as at the date
         of such assignment) or outstanding Credit Extensions (if the applicable
         Commitment has been terminated).

                  12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
         of an assignment, together with any consents required by Section
         12.3.1, and (ii) payment of a $4,000 fee to the Agent for processing
         such assignment (unless such fee is waived by the Agent), such
         assignment shall become effective on the effective date specified in
         such assignment. The assignment shall contain a representation by the
         Purchaser to the effect that none of the consideration used to make the
         purchase of the Commitment and Outstanding Credit Exposure under the
         applicable assignment agreement constitutes "plan assets" as defined
         under ERISA and that the rights and interests of the Purchaser in and
         under the Loan Documents will not be "plan assets" under ERISA. On and
         after the effective date of such assignment, such Purchaser shall for
         all purposes be a Lender party to this Agreement and any other Loan
         Document executed by or on behalf of the Lenders and shall have all the
         rights and obligations of a Lender under the Loan Documents, to the
         same extent as if it were an original party hereto, and no further
         consent or action by the Borrower, the Lenders or the Agent shall be
         required to release the transferor Lender with respect to the
         percentage of the Aggregate Commitment and Outstanding Credit Exposure
         assigned to such Purchaser. Upon the consummation of any assignment to
         a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the
         Agent and the Borrower shall, if the transferor Lender or the Purchaser
         desires that its Loans be evidenced by Notes, make appropriate
         arrangements so that new Notes or, as appropriate, replacement Notes
         are issued to such transferor Lender and new Notes or, as appropriate,
         replacement Notes, are issued to such Purchaser, in each case in
         principal amounts reflecting their respective Commitments, as adjusted
         pursuant to such assignment.

         12.4. Dissemination of Information. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries, including
without limitation any information contained in any Reports; provided

                                      -68-
<PAGE>   69

that each Transferee and prospective Transferee agrees to be bound by Section
9.11 of this Agreement.

         12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 3.5(iv).

                                  ARTICLE XIII

                                     NOTICES

         13.1. Notices. Except as otherwise permitted by Section 2.14 with
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address or facsimile number set
forth on the signature pages hereof, (y) in the case of any Lender, at its
address or facsimile number set forth on its signature page hereof or (z) in the
case of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower in
accordance with the provisions of this Section 13.1. Each such notice, request
or other communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered
(or, in the case of electronic transmission, received) at the address specified
in this Section; provided that notices to the Agent under Article II shall not
be effective until received.

         13.2. Change of Address. The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.

                                  ARTICLE XIV

                                  COUNTERPARTS

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent, the Issuer and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.

                                   ARTICLE XV

          CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

         15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
STATE OF

                                      -69-
<PAGE>   70

ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
WITHOUT LIMITATION OF THE FOREGOING, NOTHING IN THIS AGREEMENT, OR IN THE NOTES
OR IN ANY OTHER LOAN DOCUMENT SHALL BE DEEMED TO CONSTITUTE A WAIVER OF ANY
RIGHTS WHICH ANY LENDER MAY HAVE UNDER APPLICABLE FEDERAL LEGISLATION RELATING
TO THE AMOUNT OF INTEREST WHICH SUCH LENDER MAY CONTRACT FOR, TAKE, RECEIVE OR
CHARGE IN RESPECT OF THE LOAN AND THE LOAN DOCUMENTS, INCLUDING ANY RIGHT TO
TAKE, RECEIVE, RESERVE AND CHARGE INTEREST AT THE RATE ALLOWED BY THE LAW OF THE
STATE WHERE ANY LENDER IS LOCATED.

         15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT, THE ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST
THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE BORROWER AGAINST THE AGENT, THE ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE
AGENT, THE ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

         15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE ISSUER AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

                                      -70-
<PAGE>   71

         IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.

                                        THE SHAW GROUP INC.

                                        By:
                                            ------------------------------------
                                        Name:  Robert L. Belk
                                        Title: Executive Vice President and
                                               Chief Financial Officer

                                        Address: 11100 Mead Road
                                                 Baton Rouge, Louisiana 70816
                                                 Attention:  Robert L. Belk
                                                 Telephone: 225-932-2567
                                                 Telecopy: 225-932-9146
                                                 E-Mail: bob.belk@shawgrp.com

<PAGE>   72

                               BANC ONE CAPITAL MARKETS, INC.

                               By:
                                   --------------------------------------------
                               Name:  William V. Clifford
                               Title: Managing Director

                               Address:   1717 Main Street
                                          4th Floor
                                          Dallas, Texas 75201
                               Attention: William V. Clifford
                               Telephone: (214) 290-3125
                               Telecopy:  (214) 290-2336
                               Email:     william_v_clifford@mail.bankone.com

<PAGE>   73

Revolving Credit Commitment:        BANK ONE, NA,
$300,000,000 Facility LC            as Agent, as a Lender and as Issuer
Commitment:  $150,000,000

Maximum Commitment and              By:
                                        ----------------------------------------
Maximum Outstanding Credit          Name:  Michael A. Hoskins
Exposure:  $400,000,000             Title: Managing Director

                                    Address:   c/o Bank One Center, 910 Travis
                                               7th Floor
                                               Houston, Texas 77002
                                    Attention: Michael A. Hoskins
                                    Telephone: 713-751-6304
                                    Telecopy:  713-751-6777
                                    E-Mail:    michael_hoskins@mail.bankone.com

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