Document:

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                                                                   EXHIBIT 10.14

================================================================================

                                   $90,000,000

                                CREDIT AGREEMENT

                                      among

                          GABRIEL COMMUNICATIONS, INC.,

                     GABRIEL COMMUNICATIONS FINANCE COMPANY,
                                  as Borrower,

                               The Several Lenders
                        from Time to Time Parties Hereto,

                                       and

                       CANADIAN IMPERIAL BANK OF COMMERCE,
                             as Administrative Agent

                          Dated as of October 28, 1999

================================================================================

                            CIBC WORLD MARKETS CORP.
                                BARCLAYS CAPITAL
                      GENERAL ELECTRIC CAPITAL CORPORATION
                                       and
                        CAPITAL SYNDICATION CORPORATION,
                  an affiliate of Newcourt Credit Group, Inc.,
                                  as Arrangers

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                                TABLE OF CONTENTS

                                                                            Page

SECTION 1.  DEFINITIONS........................................................1
         1.1   Defined Terms...................................................1
         1.2   Other Definitional Provisions..................................24

SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS...................................24
         2.1   Term Commitments...............................................24
         2.2   Procedure for Term Loan Borrowing..............................24
         2.3   Repayment of Term Loans........................................25
         2.4   Revolving Commitments..........................................25
         2.5   Procedure for Revolving Loan Borrowing.........................26
         2.6   Commitment Fees, etc. .........................................26
         2.7   Termination and Reduction of Commitments.......................27
         2.8   Optional Prepayments...........................................27
         2.9   Mandatory Prepayments and Commitment Reductions................27
         2.10  Conversion and Continuation Options............................29
         2.11  Limitations on Eurodollar Tranches.............................29
         2.12  Interest Rates and Payment Dates...............................29
         2.13  Computation of Interest and Fees...............................30
         2.14  Inability to Determine Interest Rate...........................30
         2.15  Pro Rata Treatment and Payments................................31
         2.16  Requirements of Law............................................32
         2.17  Taxes..........................................................33
         2.18  Indemnity......................................................35
         2.19  Change of Lending Office.......................................36
         2.20  Replacement of Lenders.........................................36

SECTION 3.  REPRESENTATIONS AND WARRANTIES....................................36
         3.1   Financial Condition............................................36
         3.2   No Change......................................................37
         3.3   Corporate Existence; Compliance with Law.......................37
         3.4   Corporate Power; Authorization; Enforceable Obligations........37
         3.5   No Legal Bar; Regulatory Authorizations........................38
         3.6   Litigation.....................................................38
         3.7   No Default.....................................................39
         3.8   Ownership of Property; Liens...................................39
         3.9   Intellectual Property..........................................39
         3.10  Taxes..........................................................39
         3.11  Federal Regulations............................................39
         3.12  Labor Matters..................................................39
         3.13  ERISA..........................................................40

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         3.14  Investment Company Act.........................................40
         3.15  Subsidiaries...................................................40
         3.16  Use of Proceeds................................................40
         3.17  Environmental Matters..........................................41
         3.18  Accuracy of Information, etc...................................42
         3.19  Security Documents.............................................42
         3.20  Solvency.......................................................42
         3.21  Year 2000 Matters..............................................43
         3.22  Regulation H...................................................43
         3.23  Certain Documents..............................................43
         3.24  Venture Investors..............................................43

SECTION 4.  CONDITIONS PRECEDENT..............................................43
         4.1   Conditions to Effectiveness....................................43
         4.2   Conditions to Each Loan........................................46

SECTION 5.  AFFIRMATIVE COVENANTS.............................................47
         5.1   Financial Statements...........................................47
         5.2   Certificates; Other Information................................48
         5.3   Payment of Obligations.........................................50
         5.4   Maintenance of Existence; Compliance...........................50
         5.5   Maintenance of Property; Insurance.............................50
         5.6   Inspection of Property; Books and Records; Discussions.........50
         5.7   Notices........................................................51
         5.8   Environmental Laws.............................................51
         5.9   Interest Rate Protection.......................................52
         5.10  Additional Collateral, etc.....................................52
         5.11  24-Market Reporting Requirement................................53

SECTION 6.  NEGATIVE COVENANTS OF THE BORROWER................................53
         6.1   Financial Condition Covenants..................................53
         6.2   Indebtedness...................................................56
         6.3   Liens..........................................................56
         6.4   Fundamental Changes............................................57
         6.5   Disposition of Property........................................57
         6.6   Restricted Payments............................................58
         6.7   Capital Expenditures...........................................59
         6.8   Investments....................................................60
         6.9   Optional Payments Under and Modifications of Certain
                Agreements. ..................................................60
         6.10  Transactions with Affiliates...................................61
         6.11  Sales and Leasebacks...........................................61
         6.12  Changes in Fiscal Periods......................................61
         6.13  Negative Pledge Clauses........................................61
         6.14  Clauses Restricting Subsidiary Distributions...................62
         6.15  Lines of Business..............................................62

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         6.16  Entry Into Additional Markets..................................62

SECTION 6A.  NEGATIVE COVENANTS OF THE PARENT.................................62
         6A.1. Financial Condition Covenants..................................62
         6A.2. Indebtedness...................................................63
         6A.3. Lines of Business..............................................63
         6A.4. Negative Pledge Clauses........................................63
         6A.5. Changes in Fiscal Periods......................................64
         6A.6. No Expenditures of Unfunded 24-Market Amount...................64

SECTION 7.  EVENTS OF DEFAULT.................................................64

SECTION 8.  THE ADMINISTRATIVE AGENT..........................................68
         8.1   Appointment....................................................68
         8.2   Delegation of Duties...........................................68
         8.3   Exculpatory Provisions.........................................68
         8.4   Reliance by Administrative Agent...............................69
         8.5   Notice of Default..............................................69
         8.6   Non-Reliance on Administrative Agent and Other Lenders.........69
         8.7   Indemnification................................................70
         8.8   Administrative Agent in Its Individual Capacity................70
         8.9   Successor Administrative Agent.................................71

SECTION 9.  MISCELLANEOUS.....................................................71
         9.1   Amendments and Waivers.........................................71
         9.2   Notices........................................................72
         9.3   No Waiver; Cumulative Remedies.................................73
         9.4   Survival of Representations and Warranties.....................73
         9.5   Payment of Expenses and Taxes..................................73
         9.6   Successors and Assigns; Participations and Assignments.........74
         9.7   Adjustments; Set-off...........................................77
         9.8   Counterparts...................................................77
         9.9   Severability...................................................77
         9.10  Integration....................................................77
         9.11  GOVERNING LAW..................................................78
         9.12  Submission To Jurisdiction; Waivers............................78
         9.13  Acknowledgements...............................................78
         9.14  Releases of Guarantees and Liens...............................79
         9.15  Confidentiality................................................79
         9.16  WAIVERS OF JURY TRIAL..........................................80

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ANNEX:

A           Pricing Grid

SCHEDULES:

1.1A        Commitments
1.1B        Venture Investors
3.4         Consents, Authorizations, Filings and Notices
3.15        Subsidiaries
3.19(a)     UCC Filing Jurisdictions
4.2         Existing  Leased Premises
6.16A       Initial Markets
6.16B       Additional Markets
6A.2(a)     Existing Parent Indebtedness

EXHIBITS:

A           Form of Guarantee and Collateral Agreement
B           Form of Capital Call Agreement
C           Form of Lockbox Agreement
D           Form of Compliance Certificate
E-1         Form of Closing Certificate
E-2         Form of Secretary's Certificate
F           Form of Assignment and Acceptance
G           Form of Exemption Certificate
H           Form of Monthly Summary Market Information
I           Form of Management Agreement
J           Form of Opinion of Bryan Cave LLP
K           Form of Opinion of Morrison & Foerster LLP
L           Form of Note Evidencing Permitted Borrower Subordinated Indebtedness
M           Form of Landlord Waiver and Consent

                                      -vi-
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                  CREDIT AGREEMENT, dated as of October 28, 1999, among
GABRIEL COMMUNICATIONS, INC., a Delaware corporation (the "Parent"), GABRIEL
COMMUNICATIONS FINANCE COMPANY, a Delaware corporation (the "Borrower"), the
several banks and other financial institutions or entities from time to time
parties to this Agreement (the "Lenders"), and CANADIAN IMPERIAL BANK OF
COMMERCE ("CIBC"), as Administrative Agent.

                  The parties hereto hereby agree as follows:

                             SECTION 1. DEFINITIONS

                  1.1 Defined Terms. As used in this Agreement, the terms listed
in this Section 1.1 shall have the respective meanings set forth in this Section
1.1.

                  "ABR": for any day, a rate per annum equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 2 of 1%. For purposes hereof: "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time by CIBC
as its prime rate in effect at its principal office in New York City (the Prime
Rate not being intended to be the lowest rate of interest charged by CIBC in
connection with extensions of credit to debtors). Any change in the ABR due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
as of the opening of business on the effective day of such change in the Prime
Rate or the Federal Funds Effective Rate, respectively.

                  "ABR Loans": Loans the rate of interest applicable to which is
based upon the ABR.

                  "Additional Capital": as defined in Section 6.16.

                  "Adjustment Date":  as defined in the Pricing Grid.

                  "Administrative Agent": CIBC, together with its affiliates, as
the Administrative Agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its successors.

                  "Affiliate": as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person means
the power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

                  "Aggregate Exposure": with respect to any Lender at any time,
an amount equal to the sum of (a) the aggregate undrawn amount of such Lender's
Commitments at such time and (b) the aggregate principal amount of such Lender's
Term Loans and Revolving Loans then outstanding.

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                                                                               2

                  "Aggregate Exposure Percentage": with respect to any Lender at
any time, the ratio (expressed as a percentage) of such Lender's Aggregate
Exposure at such time to the Aggregate Exposure of all Lenders at such time.

                  "Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.

                  "Applicable Margin": (a) until the Borrower shall have
delivered Compliance Certificates pursuant to Section 5.2(b) indicating that the
Consolidated Borrower EBITDA has been greater than zero for a period of two
consecutive fiscal quarters (the "Positive EBITDA Date"), (i) until the Borrower
shall have achieved four Completed Markets (the "Completed Market Target Date"),
(x) 3.25%, in the case of ABR Loans, and (y) 4.25%, in the case of Eurodollar
Loans, and (ii) from and after the Completed Market Target Date, (x) 3.00%, in
the case of ABR Loans, and (y) 4.00%, in the case of Eurodollar Loans, and (b)
from and after the first Adjustment Date occurring after the Positive EBITDA
Date, a percentage determined pursuant to the Pricing Grid.

                  "Approved Fund": with respect to any Lender that is a fund
that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor.

                  "Asset Sale": any Disposition of property or series of related
Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c) or (d) of Section 6.5) that yields gross proceeds to the Borrower
or any of its Subsidiaries (valued at the initial principal amount thereof in
the case of non-cash proceeds consisting of notes or other debt securities and
valued at fair market value in the case of other non-cash proceeds) in excess of
$50,000.

                  "Assignee":  as defined in Section 9.6(c).

                  "Assignment and Acceptance": an Assignment and Acceptance,
substantially in the form of Exhibit F.

                  "Assignor":  as defined in Section 9.6(c).

                  "Available Revolving Commitment": as to any Revolving Lender
at any time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Commitment then in effect over (b) the aggregate principal amount of
such Lender's Revolving Loans then outstanding.

                  "Available Term Commitment": as to any Term Lender at any
time, an amount equal to the excess, if any, of (a) such Lender's Term
Commitment then in effect over (b) the aggregate amount of such Lender's Term
Loans made under such Term Loan Commitment.

                  "Benefitted Lender":  as defined in Section 9.7(a).

                  "Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor to its jurisdiction).

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                                                                               3

                  "Borrower":  as defined in the preamble hereto.

                  "Borrower Debt-to-Contributed Capital Ratio": on any date, the
ratio of Consolidated Borrower Total Debt on such date to Contributed Capital on
such date.

                  "Borrowing Date": any Business Day specified by the Borrower
in accordance with the terms hereof as a date on which the Borrower requests the
relevant Lenders to make Loans hereunder.

                  "Borrower's Telecommunications Business": the business of (a)
transmitting, or providing services related to the transmission of, voice, fax,
video or data through owned or leased transmission equipment, facilities and
services, including the sale or lease of related network equipment to customers,
(b) providing Internet access, web hosting and design, E-commerce solutions and
content products and services and (c) evaluating, participating or pursuing any
other activity or opportunity that is ancillary or complementary to any activity
described in clause (a) or (b) of this definition.

                  "Business":  as defined in Section 3.17(b).

                  "Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close, provided, that with respect to notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
such day is also a day for trading by and between banks in Dollar deposits in
the interbank eurodollar market.

                  "Business Plan":  as defined in Section 4.1(c).

                  "Capital Call Agreement": the Capital Call Agreement to be
executed and delivered by the Parent, the Borrower and the Administrative Agent,
substantially in the form of Exhibit B, as the same may be amended, supplemented
or otherwise modified from time to time.

                  "Capital Expenditures": for any period, with respect to the
Borrower and its Subsidiaries, the aggregate of all expenditures by the Borrower
and its Subsidiaries for the acquisition or leasing (pursuant to a capital
lease) of fixed or capital assets (including capital costs related to the
acquisition of FCC and PUC licenses and permits) or additions to property, plant
or equipment (including replacements, capitalized repairs and improvements
during such period) that should be capitalized under GAAP on a consolidated
balance sheet of the Borrower and its Subsidiaries; provided, however, that no
consideration paid for or related to the acquisition of any Regulatory
Authorization (other than an FCC or PUC license) necessary for the establishment
of a CLEC and no capitalized interest or financing expense shall be treated as a
Capital Expenditure nor shall any expenditure of any Reinvestment Deferred
Amount be treated as a Capital Expenditure if used to acquire assets used or
useful in the Borrower's Telecommunications Business.

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                                                                               4

                  "Capital Lease Obligations": as to the Borrower and its
Subsidiaries, the obligations of the Borrower and its Subsidiaries to pay rent
or other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a consolidated
balance sheet of the Borrower and its Subsidiaries under GAAP, and, for the
purposes of this Agreement, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.

                  "Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

                  "Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition; (b)
certificates of deposit, bankers' acceptances, time deposits, eurodollar time
deposits or overnight bank deposits having maturities of six months or less from
the date of acquisition issued by any Lender or by any commercial bank organized
under the laws of the United States or any state thereof having combined capital
and surplus of not less than $500,000,000; (c) commercial paper of an issuer
rated at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by
Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within nine months from the date of acquisition; (d) repurchase obligations of
any Lender or of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of one year or less from
the date of acquisition backed by standby letters of credit issued by any Lender
or any commercial bank satisfying the requirements of clause (b) of this
definition; or (g) shares of money market mutual or similar funds at least 95%
of the assets of which are invested in the types of investments satisfying the
requirements of clauses (a) through (f) of this definition.

                  "CIBC":  as defined in the preamble hereto.

                  "CLEC":  a competitive local exchange carrier.

                  "Closing Date":  as defined in Section 4.1.

                  "Code": the Internal Revenue Code of 1986, as amended from
time to time.

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                                                                               5

                  "Collateral": all property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.

                  "Commitment": as to any Lender, the sum of the Term Commitment
and the Revolving Commitment of such Lender, and "Commitments" means the Term
Commitments and the Revolving Commitments of all Lenders in the aggregate.

                  "Commonly Controlled Entity": an entity, whether or not
incorporated, that is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.

                  "Communications Act": the Communications Act of 1934, as
amended (including, without limitation, the Telecommunications Act of 1996), or
any successor statute or statutes thereto, and all regulations thereunder, in
each case as from time to time in effect.

                  "Communications Licenses": all licenses, authorizations,
certifications, waivers and permits required from the FCC, any PUC or any other
relevant Governmental Authority acting under applicable law or regulations
pertaining to or regulating Borrower's Telecommunications Business.

                  "Completed Market": any Market in which the Borrower or any of
its Subsidiaries (a) has deployed switches and network equipment for the
provision of CLEC telephony service, data transport, internet access and other
related services, (b) is switching paid traffic through its own facilities and
(c) has sales, customer service and billing systems operational.

                  "Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit D.

                  "Consolidated Borrower EBITDA": for any period, Consolidated
Borrower Net Income for such period plus, without duplication and to the extent
deducted in determining such Consolidated Borrower Net Income for such period,
the sum of (a) income tax expense and, to the extent based upon income,
franchise tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring non-cash expenses or losses, and (f) any other non-cash charges,
and minus, to the extent included in determining such Consolidated Borrower Net
Income for such period, the sum of (a) interest income, (b) any extraordinary,
unusual or non-recurring income or gains and (c) any other non-cash income, all
as determined on a consolidated basis. For the purposes of calculating
Consolidated Borrower EBITDA for any period in connection with any determination
of the Consolidated Borrower Leverage Ratio, (i) if at any time during such
period the Borrower or any Subsidiary shall have made any Material Disposition,
the Consolidated Borrower EBITDA for such period shall be reduced by an amount
equal to the Consolidated Borrower EBITDA (if positive) attributable to the
property that is the

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                                                                               6

subject of such Material Disposition for such period or increased by an amount
equal to the Consolidated Borrower EBITDA (if negative) attributable thereto for
such period and (ii) if during such period the Borrower or any Subsidiary shall
have made a Material Acquisition, Consolidated Borrower EBITDA for such period
shall be calculated after giving pro forma effect thereto as if such Material
Acquisition occurred on the first day of such period. As used in this
definition, "Material Acquisition" and "Material Disposition" mean,
respectively, any acquisition or disposition of property or series of related
acquisitions or dispositions of property that comprises all or substantially all
of an operating unit of a business or constitutes all or substantially all of
the common stock of a Person.

                  "Consolidated Borrower Leverage Ratio": as at the last day of
any period of two consecutive fiscal quarters, the ratio of (a) Consolidated
Borrower Total Debt on such day to (b) two times Consolidated Borrower EBITDA
for such period.

                  "Consolidated Borrower Net Income": for any period, the
consolidated net income (or loss) of the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded (a) the aggregate amount of reciprocal compensation receivable
with respect to calls terminated to Internet service providers and accrued by
the Borrower and its Subsidiaries during such period (except to the extent of
the net amount thereof actually received by the Borrower and its Subsidiaries
during such period in cash), (b) the income (or deficit) of any Person accrued
prior to the date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries, (c) the income (or
deficit) of any Person (other than a Subsidiary of the Borrower) in which the
Borrower or any of its Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by the Borrower or such
Subsidiary in the form of dividends or similar distributions and (d) the
undistributed earnings of any Subsidiary of the Borrower to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any Contractual Obligation (other
than under any Loan Document) or Requirement of Law applicable to such
Subsidiary.

                  "Consolidated Borrower Total Debt": at any date, the aggregate
principal amount of all Indebtedness of the Borrower and its Subsidiaries (other
than Permitted Borrower Subordinated Indebtedness) at such date, determined on a
consolidated basis in accordance with GAAP.

                  "Consolidated Current Assets": at any date, all amounts (other
than cash and Cash Equivalents) that would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date.

                  "Consolidated Current Liabilities": at any date, all amounts
that would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet of
the Borrower and its Subsidiaries at such date, but excluding (a) the current
portion of any Funded Debt of the Borrower and its Subsidiaries and

<PAGE>   12
                                                                               7

(b) without duplication of clause (a) above, all Indebtedness consisting of
Revolving Loans to the extent otherwise included therein.

                  "Consolidated Interest Coverage Ratio": at any date, the ratio
of (a) Consolidated Borrower EBITDA for the six-month period ended on such date
to (b) Consolidated Interest Expense for such period.

                  "Consolidated Interest Expense": for any period, the sum,
without duplication, of (a) total cash interest expense (including that
attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries
for such period with respect to all outstanding Indebtedness of the Borrower and
its Subsidiaries (including all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Hedge Agreements in respect of interest rates to the extent
such net costs are allocable to such period in accordance with GAAP) and (b) the
amount of dividends paid by the Borrower to Parent during such period which
dividends were permitted to be paid pursuant to Section 6.6(b)(i).

                  "Consolidated Parent Capitalization": at any date, the sum of
Consolidated Parent Total Debt and Consolidated Parent Equity Capital.

                  "Consolidated Parent Debt-to-Capitalization Ratio": at any
date of determination, the ratio (expressed as a percentage) of (a) Consolidated
Parent Total Debt on such date of determination to (b) the Consolidated Parent
Capitalization on such date of determination.

                  "Consolidated Parent EBITDA": for any period, Consolidated
Parent Net Income for such period plus, without duplication and to the extent
deducted in determining such Consolidated Parent Net Income for such period, the
sum of (a) income tax expense and, to the extent based upon income, franchise
tax expense, (b) interest expense, amortization or writeoff of debt discount and
debt issuance costs and commissions, discounts and other fees and charges
associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring non-cash expenses or losses and (f) any other non-cash charges,
and minus, to the extent included in determining of such Consolidated Parent Net
Income for such period, the sum of (a) interest income, (b) any extraordinary,
unusual or non-recurring income or gains and (c) any other non-cash income, all
as determined on a consolidated basis. For the purposes of calculating
Consolidated Parent EBITDA for any period in connection with any determination
of the Consolidated Parent Leverage Ratio, (i) if at any time during such period
the Parent or any of its Subsidiaries shall have made any Material Disposition,
the Consolidated Parent EBITDA for such period shall be reduced by an amount
equal to the Consolidated Parent EBITDA (if positive) attributable to the
property that is the subject of such Material Disposition for such period or
increased by an amount equal to the Consolidated Parent EBITDA (if negative)
attributable thereto for such period and (ii) if during such period the Parent
or any of its Subsidiaries shall have made a Material Acquisition, Consolidated
Parent EBITDA for such period shall be calculated after giving pro forma effect
thereto as if such Material Acquisition occurred on the first day of such
period. As used in this definition, "Material

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                                                                               8

Acquisition" and "Material Disposition" mean, respectively, any acquisition or
disposition of property or series of related acquisitions or dispositions of
property that comprise all or substantially all of an operating unit of a
business or constitutes all or substantially all of the common stock of a
Person.

                  "Consolidated Parent Equity Capital": at any date, the
aggregate amount of paid in equity capital of Parent on a consolidated basis,
excluding any accumulated deficit.

                  "Consolidated Parent Leverage Ratio": as at the last day of
any period of two consecutive fiscal quarters, the ratio of (a) Consolidated
Parent Total Debt on such day to (b) two times Consolidated Parent EBITDA for
such period.

                  "Consolidated Parent Net Income": for any period, the
consolidated net income (or loss) of the Parent and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the aggregate amount of reciprocal compensation receivable with
respect to calls terminated to Internet service providers and accrued by the
Parent and its Subsidiaries during such period (except to the extent actually
received by the Parent and its Subsidiaries during such period in cash), (b) the
income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Parent or is merged into or consolidated with the Parent or
any of its Subsidiaries, (c) the income (or deficit) of any Person (other than a
Subsidiary of the Parent) in which the Parent or any of its Subsidiaries has an
ownership interest, except to the extent that any such income is actually
received by the Parent or such Subsidiary in the form of dividends or similar
distributions and (d) the undistributed earnings of any Subsidiary of the Parent
to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any Contractual Obligation (other than under any Loan Document) or Requirement
of Law applicable to such Subsidiary.

                  "Consolidated Parent Total Debt": at any date, the aggregate
principal amount of all Indebtedness of the Parent and its Subsidiaries (other
than Permitted Borrower Subordinated Indebtedness) at such date, determined on a
consolidated basis in accordance with GAAP.

                  "Consolidated Pro Forma Debt Service": as of the end of the
last day of any fiscal quarter of the Borrower, the sum of the following
determined on a consolidated basis, without duplication, for the Borrower and
its Subsidiaries in accordance with GAAP: (a) the aggregate amount of principal
payments scheduled to be made during the period of twelve months following such
last day in respect of Indebtedness of the Borrower or any of its Subsidiaries
(including scheduled principal payments in respect of the Term Loans) and (b)
Consolidated Interest Expense to be incurred during the period of twelve months
following such last day (based upon, in the case of floating-rate debt, the
assumption that the interest rate in effect on such last day will remain in
effect throughout such twelve-month period).

                  "Consolidated Pro Forma Debt Service Coverage Ratio": at any
date, the ratio of (a) two times Consolidated Borrower EBITDA for the six-month
period ended on such date to (b) Consolidated Pro Forma Debt Service as of the
end of the last day of such period.

<PAGE>   14
                                                                               9

                  "Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current Liabilities
on such date.

                  "Continuing Directors": the directors of the Parent on the
Closing Date and each other director, if, in each case, such other director's
nomination for election to the board of directors of the Parent is recommended
by at least 66-2/3% of the then Continuing Directors or such other director
receives the vote of the Venture Investors in his or her election by the
shareholders of the Parent.

                  "Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

                  "Contributed Capital": with respect to the Borrower on any
date, the sum of (a) the aggregate amount which theretofore shall have been
received by the Borrower (in cash or other assets, provided that any such other
assets shall be valued at the book value thereof as reflected on the
consolidated financial statements of the Parent, so long as such valuation is
reasonably acceptable to the Lenders) as a contribution to its capital or as
consideration for the issuance of Capital Stock of the Borrower (including all
Permitted Borrower Subordinated Indebtedness outstanding on such date) and (b)
the aggregate amount of Parent Expenditure Contributions.

                  "Contributed Parent Indebtedness": the amount of proceeds of
Indebtedness incurred by the Parent pursuant to Section 6A.2(b) which is
contributed as non-redeemable equity capital to the Borrower.

                  "Default": any of the events specified in Section 7, whether
or not any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.

                  "Disposition": with respect to any property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other disposition
thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.

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

                  "Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States.

                  "Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.

                  "ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.

<PAGE>   15
                                                                              10

                  "Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System; provided, however, that, in the case of any Lender that is not subject
to such reserve requirements, the Eurocurrency Reserve Requirements shall be
deemed to be zero.

                  "Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum determined
on the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period. In the event that such rate
does not appear on Page 3750 of the Telerate screen (or otherwise on such
screen), the "Eurodollar Base Rate" shall be determined by reference to such
other comparable publicly available service for displaying eurodollar rates as
may be mutually acceptable to the Administrative Agent and the Borrower or, in
the absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.

                  "Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.

                  "Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100th of 1%):

                              Eurodollar Base Rate
                    ----------------------------------------
                    1.00 - Eurocurrency Reserve Requirements

                  "Eurodollar Tranche": the collective reference to Eurodollar
Loans under a particular Facility the then current Interest Periods with respect
to all of which begin on the same date and end on the same later date (whether
or not such Loans shall originally have been made on the same day).

                  "Event of Default": any of the events specified in Section 7,
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.

                  "Excess Cash Flow": for any fiscal year of the Borrower, the
excess, if any, of (a) the sum, without duplication, of (i) Consolidated
Borrower Net Income for such fiscal year,

<PAGE>   16
                                                                              11

(ii) an amount equal to the amount of all non-cash charges (including
depreciation, amortization and non-cash interest expense and taxes) deducted in
arriving at such Consolidated Borrower Net Income, (iii) decreases in
Consolidated Working Capital for such fiscal year, and (iv) an amount equal to
the aggregate net non-cash loss on the Disposition of property by the Borrower
and its Subsidiaries during such fiscal year (other than sales of inventory,
capacity in a telecommunications network or dark fiber in the ordinary course of
business), to the extent deducted in arriving at such Consolidated Borrower Net
Income over (b) the sum, without duplication, of (i) an amount equal to the
amount of all non-cash credits included in arriving at such Consolidated
Borrower Net Income, (ii) the aggregate amount actually paid (x) by the Borrower
and its Subsidiaries in cash during such fiscal year on account of Capital
Expenditures expended in accordance with this Agreement (excluding the principal
amount of Indebtedness incurred in connection with such expenditures and any
such expenditures financed with the proceeds of any Reinvestment Deferred
Amount) and (y) by the Borrower as dividends to the Parent pursuant to Section
6.6, (iii) the aggregate amount of all prepayments of Revolving Loans during
such fiscal year to the extent accompanying permanent optional reductions of the
Revolving Commitments and all optional prepayments of the Term Loans during such
fiscal year, (iv) the aggregate amount of all regularly scheduled principal
payments of Funded Debt (including the Term Loans) of the Borrower and its
Subsidiaries made during such fiscal year (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder), (v) increases in Consolidated Working
Capital for such fiscal year, and (vi) an amount equal to the aggregate net
non-cash gain on the Disposition of property by the Borrower and its
Subsidiaries during such fiscal year (other than sales of inventory, capacity in
a telecommunications network or dark fiber in the ordinary course of business),
to the extent included in arriving at such Consolidated Borrower Net Income.

                  "Excess Cash Flow Application Date": as defined in Section
2.9(c).

                  "FCC": the Federal Communications Commission of the United
States or any successor to its jurisdiction.

                  "Facility": each of (a) the Term Commitments and the Term
Loans made thereunder (the "Term Facility") and (b) the Revolving Commitments
and the Revolving Loans made thereunder (the "Revolving Facility").

                  "Federal Funds Effective Rate": for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day of such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.

                  "Funded Debt": as to any Person, all Indebtedness of such
Person that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the option of
such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders to

<PAGE>   17
                                                                              12

extend credit during a period of more than one year from such date, including
all current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the date of
its creation and, in the case of the Borrower, Indebtedness in respect of the
Loans.

                  "Funding Office": the office of the Administrative Agent
specified in Section 9.2 or such other office as may be specified from time to
time by the Administrative Agent as its funding office by written notice to the
Borrower and the Lenders.

                  "GAAP": generally accepted accounting principles in the United
States as in effect from time to time.

                  "Governmental Authority": any nation or government, any state
or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government (including in the case of the Borrower and its
Subsidiaries, the FCC and each applicable PUC), any applicable securities
exchange and any applicable self-regulatory organization.

                  "Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by the Parent, the Borrower
and each Subsidiary, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.

                  "Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not

<PAGE>   18
                                                                              13

stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.

                  "Guarantors": the collective reference to the Parent and the
Subsidiaries of the Borrower.

                  "Hedge Agreements": all interest rate swaps, caps or collar
agreements or similar arrangements designed to hedge against fluctuations in
interest rates or currency exchange rates.

                  "Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of such
Person's business that are current or are being contested in good faith), (c)
all obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations of such Person, (f)
all obligations of such Person, contingent or otherwise, as an account party
under acceptance facilities, (g) the liquidation value of all mandatorily
redeemable preferred Capital Stock of such Person, (h) all Guarantee Obligations
of such Person in respect of obligations of the kind referred to in clauses (a)
through (g) above, (i) all obligations of the kind referred to in clauses (a)
through (h) above secured by any Lien on property (including accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation, and (j) for the purposes of
Sections 6.2 and 7(e) only, all obligations of such Person in respect of Hedge
Agreements. The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness expressly provide that such Person is
not liable therefor.

                  "Initial Capital Contributions": as defined in Section 4.1(b).

                  "Initial Markets": the Markets (a) entry into which by the
Borrower and its Subsidiaries has been approved by the board of directors of the
Parent as of the Closing Date and (b) listed on Schedule 6.16A.

                  "Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

                  "Insolvent":  pertaining to a condition of Insolvency.

                  "Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or

<PAGE>   19
                                                                              14

foreign laws or otherwise, including copyrights, copyright licenses, patents,
patent licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement or
other impairment thereof, including the right to receive all proceeds and
damages therefrom.

                  "Interconnection Agreement": any agreement entered into with
an incumbent provider of local exchange telephone service in accord with
Sections 251 and 252 of the Communications Act.

                  "Interest Payment Date": (a) as to any ABR Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day that is three months, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period and (d) as to any Loan (other than any Revolving Loan that is an ABR
Loan), the date of any repayment or prepayment made in respect thereof.

                  "Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent (which notice must be received by the Administrative Agent
no later than 11:00 A.M., New York City time, three Business Days prior to the
last day of the then current Interest Period with respect thereto); provided
that, all of the foregoing provisions relating to Interest Periods are subject
to the following:

                           (i) if any Interest Period would otherwise end on a
         day that is not a Business Day, such Interest Period shall be extended
         to the next succeeding Business Day unless the result of such extension
         would be to carry such Interest Period into another calendar month in
         which event such Interest Period shall end on the immediately preceding
         Business Day;

                           (ii) the Borrower may not select an Interest Period
         under a particular Facility that would extend beyond the Termination
         Date or beyond the date final payment is due on the Term Loans, as the
         case may be;

                           (iii) any Interest Period that begins on the last
         Business Day of a calendar month (or on a day for which there is no
         numerically corresponding day in the calendar month at the end of such
         Interest Period) shall end on the last Business Day of the calendar
         month at the end of such Interest Period; and

<PAGE>   20

                                                                              15

                           (iv) the Borrower shall select Interest Periods so as
         not to require a payment or prepayment of any Eurodollar Loan during an
         Interest Period for such Loan.

                  "Investments":  as defined in Section 6.8.

                  "Landlord Waiver and Consent": a landlord waiver and consent
(a) in the form of Exhibit M or with such non-substantive, non-material changes
thereto as shall be approved by the Administrative Agent or (b) in such other
form as shall be reasonably satisfactory to the Required Lenders, provided that,
in the case of this clause (b), any Lender that does not indicate its
disapproval of such other form within five days of having been presented by the
Borrower with such other form shall be deemed to have found such other form to
be reasonably satisfactory.

                  "Lenders":  as defined in the preamble hereto.

                  "Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement and any capital lease)
having substantially the same economic effect as any of the foregoing.

                  "Loan": any loan made by any Lender pursuant to this
Agreement.

                  "Loan Documents": this Agreement, the Security Documents, the
Notes, the Capital Call Agreement and the Lockbox Agreement.

                  "Loan Parties": The Parent, the Borrower and each Subsidiary
of the Borrower that is a party to a Loan Document.

                  "Lockbox Agreement": the Lockbox Agreement to be executed and
delivered by the Borrower, the Administrative Agent and Bank of America, N.A.,
as lockbox bank thereunder, substantially in the form of Exhibit C, as the same
may be amended, supplemented or otherwise modified from time to time.

                  "Majority Facility Lenders": with respect to either Facility,
the holders of more than 50% of the aggregate unpaid principal amount of the
Term Loans or the Revolving Loans, as the case may be (or, in the case of the
Revolving Facility, prior to any termination of the Revolving Commitments, the
holders of more than 50% of the Total Revolving Commitments).

                  "Management Agreement":  as defined in Section 4.1(c)(ii).

                  "Market": any MSA and its environs located in the United
States of America.

                  "Material Adverse Effect": a material adverse effect on (a)
the business, property, operations, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any of the other Loan

<PAGE>   21
                                                                              16

Documents or the rights or remedies of the Administrative Agent or the Lenders
hereunder or thereunder.

                  "Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.

                  "Mortgage Recording Certificate": with respect to any
Mortgage, a certificate duly executed by a Responsible Officer specifying the
appropriate office or offices for filing such Mortgage in order to perfect a
Lien on the Property described therein and proceeds thereof.

                  "Mortgages": each of the mortgages and deeds of trust made by
any Loan Party in favor of, or for the benefit of, the Administrative Agent for
the benefit of the Lenders, in form and substance satisfactory to the
Administrative Agent, as the same may be amended, supplemented or otherwise
modified from time to time.

                  "MSA": a Metropolitan Statistical Area as such term is defined
and modified by the U.S. Census Bureau.

                  "Multiemployer Plan": a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

                  "Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such Asset
Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment
banking fees, amounts required to be applied to the repayment of Indebtedness
(including, without limitation, any prepayment premium thereon) secured by a
Lien expressly permitted hereunder on any asset that is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and excluding any portion of any
such cash proceeds which Borrower or any of its Subsidiaries determines should
be reserved for post-closing adjustments (provided that such reserved portion
shall constitute Net Cash Proceeds when and to the extent that such reserve is
no longer required) and (b) in connection with any issuance or sale of Capital
Stock or any incurrence of Indebtedness, the cash proceeds received from such
issuance or incurrence, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.

                  "Non-Excluded Taxes":  as defined in Section 2.17(a).

                  "Non-U.S. Lender":  as defined in Section 2.17(d).

<PAGE>   22
                                                                              17

                  "Notes": the collective reference to any promissory note
evidencing Loans.

                  "Obligations": the unpaid principal of and interest on
(including interest accruing after the maturity of the Loans and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender (or, in the case of Hedge
Agreements, any affiliate of any Lender), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, this Agreement, any other
Loan Document, any Hedge Agreement entered into with any Lender or any affiliate
of any Lender or any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest, fees,
indemnities, costs, expenses (including all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to be
paid by the Borrower pursuant hereto) or otherwise.

                  "Operations Support Systems": the software systems of Parent
and its Subsidiaries with respect to the provisioning, care of customers,
network surveillance, integration and billing of or related to their
telecommunications services.

                  "Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

                  "Parent":  as defined in the preamble hereto.

                  "Parent Expenditure Contributions": the aggregate amount of
expenditures by the Parent on behalf of the Borrower and its Subsidiaries
(excluding expenditures for assets not owned by the Borrower or its Subsidiaries
and excluding expenditures made for services covered by payments under the
Management Agreement).

                  "Parent's Telecommunications Business": the business of (i)
transmitting, or providing services related to the transmission of, voice, fax,
video or data through owned or leased transmission equipment, facilities and
services, including the sale or lease of related network equipment to customers,
(ii) providing Internet access, web hosting and design, E-commerce solutions and
content products and services, (iii) creating, developing and marketing
communications-related network equipment, software and devices for use in such
transmission or provision and (iv) evaluating, participating or pursuing any
other activity or opportunity that is similar, related, ancillary or
complementary to any activity described in clause (i), (ii) or (iii) of this
definition.

                  "Participant":  as defined in Section 9.6(b).

<PAGE>   23

                                                                              18

                  "PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).

                  "Permitted Acquisition": any acquisition, consisting of a
single transaction or a series of related transactions, by the Borrower or any
one or more of its Wholly Owned Subsidiaries of all of the Capital Stock of, or
all or a substantial part of the assets of, or of a business unit of, any Person
for the purpose of developing or expanding the Borrower's Telecommunications
Business in certain Markets in accordance with the Business Plan (such business,
unit or division, the "Acquired Business"), provided that (a) the Borrower shall
have delivered to each Lender, at least five Business Days prior to the
consummation of such acquisition, evidence reasonably satisfactory to the
Required Lenders that the Borrower shall be in compliance, on a pro forma basis
after giving effect to such acquisition, with the covenants contained in Section
6.1, recomputed as at the last day of the most recently ended fiscal quarter of
the Borrower for which financial statements shall have been delivered to the
Lenders as if such acquisition had occurred on the first day of each relevant
period for testing such compliance, (b) no Default or Event of Default shall
have occurred and be continuing, or would occur after giving effect to such
acquisition, (c) all actions required to be taken with respect to any acquired
or newly formed Subsidiary or otherwise with respect to the Acquired Business in
such acquisition under Section 5.10 shall have been taken, (d) the aggregate
Purchase Prices in respect of such acquisition and all other Permitted
Acquisitions consummated subsequent to the date hereof shall not exceed
$8,000,000 and (e) any such acquisition shall have been approved by the board of
directors or such comparable governing body of the Person (or whose business,
unit or division is, as the case may be) being acquired.

                  "Permitted Borrower Subordinated Indebtedness": Indebtedness
of the Borrower to one or more of its Affiliates (including the Parent) which is
evidenced by a promissory note substantially in the form of Exhibit L.

                  "Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.

                  "Plan": at a particular time, any employee benefit plan that
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.

                  "Pricing Grid":  the pricing grid attached hereto as Annex A.

                  "Pro Forma Balance Sheet":  as defined in Section 3.1(a).

                  "Projections":  as defined in Section 5.2(c).

                  "Properties":  as defined in Section 3.17(a).

<PAGE>   24
                                                                              19

                  "Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.

                  "PUC": with respect to any state, the public utilities
commission, public service commission or other state Governmental Authority with
responsibility for telecommunications regulation in such state and/or having
telecommunications regulatory jurisdiction over the Parent, the Borrower or any
of its Subsidiaries, or any of their respective businesses, operations or
assets.

                  "Purchase Price": with respect to any Permitted Acquisition,
the sum of (a) the aggregate amount of cash paid by the Borrower and its
Subsidiaries in connection with such acquisition and (b) the value (as
determined for purposes of such acquisition in accordance with the applicable
acquisition agreement) of all Capital Stock of the Borrower issued or given, and
all other assets of the Borrower and its Subsidiaries given, as consideration in
connection with such acquisition.

                  "Quarterly Revenue": for any fiscal quarter of the Borrower,
the aggregate amount of revenues recorded by the Borrower and its Subsidiaries
on a consolidated basis during such quarter, determined in accordance with GAAP,
excluding the aggregate amount of reciprocal compensation receivable with
respect to calls terminated to Internet service providers and accrued by the
Borrower and its Subsidiaries during such quarter (except to the extent actually
received by the Borrower and its Subsidiaries during such quarter in cash).

                  "Recovery Event": any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding relating
to any asset of the Borrower or any of its Subsidiaries.

                  "Register":  as defined in Section 9.6(d).

                  "Regulation U": Regulation U of the Board as in effect from
time to time.

                  "Regulatory Authorization": as defined in Section 7(m).

                  "Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by the Borrower or
any of its Subsidiaries in connection therewith that are not applied to prepay
the Term Loans or reduce the Commitments pursuant to Section 2.9(b) as a result
of the delivery of a Reinvestment Notice.

                  "Reinvestment Event": any Asset Sale or Recovery Event in
respect of which the Borrower has delivered a Reinvestment Notice.

                  "Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Event of Default has occurred and is
continuing and that the Borrower (directly or indirectly through a Subsidiary)
intends and expects to use all or a specified portion of the Net

<PAGE>   25
                                                                              20

Cash Proceeds of an Asset Sale or Recovery Event to acquire assets used or
useful in Borrower's Telecommunications Business.

                  "Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any
amount expended prior to the relevant Reinvestment Prepayment Date to acquire
assets used or useful in the Borrower's Telecommunications Business.

                  "Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date occurring 210 days after such
Reinvestment Event and (b) the date on which the Borrower shall have determined
not to acquire assets used or useful in the Borrower's Telecommunication
Business with all or any portion of the relevant Reinvestment Deferred Amount.

                  "Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

                  "Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .21 through .35 of PBGC Reg. '4043.

                  "Required Lenders": at any time, the holders of more than
66 2/3% of the sum of (a) the undrawn Commitments at such time and (b) the
aggregate unpaid principal amount of the Term Loans and Revolving Loans then
outstanding.

                  "Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

                  "Responsible Officer": with respect to any Person, the chief
executive officer, president or chief financial officer of such Person, but in
any event, with respect to financial matters, the chief financial officer of
such Person.

                  "Restricted Payments":  as defined in Section 6.6.

                  "Revolving Commitment": as to any Lender, the obligation of
such Lender, if any, to make Revolving Loans in an aggregate principal amount
not to exceed the amount set forth under the heading "Revolving Commitment"
opposite such Lender's name on Schedule 1.1A or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto, as the same may be changed
from time to time pursuant to the terms hereof. The original amount of the Total
Revolving Commitments is $10,000,000.

                  "Revolving Commitment Fee Rate":  2 of 1% per annum.
<PAGE>   26
                                                                              21

                  "Revolving Commitment Period":  the period from and including
the Closing Date to the Termination Date.

                  "Revolving Lender":  each Lender that has a Revolving
Commitment or that holds Revolving Loans.

                  "Revolving Loans":  as defined in Section 2.4(a).

                  "Revolving Percentage": as to any Revolving Lender at any
time, the percentage which such Lender's Revolving Commitment then constitutes
of the Total Revolving Commitments (or, at any time after the Revolving
Commitments shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Loans then outstanding constitutes
of the aggregate principal amount of the Revolving Loans then outstanding).

                  "SEC":  the Securities and Exchange Commission of the United
States and any successor to its jurisdiction.

                  "Security Documents": the collective reference to the
Guarantee and Collateral Agreement, the Mortgages and all other security
documents hereafter delivered to the Administrative Agent granting a Lien on any
property of any Person to secure the obligations and liabilities of any Loan
Party under any Loan Document.

                  "Single Employer Plan":  any Plan that is covered by Title IV
of ERISA, but that is not a Multiemployer Plan.

                  "Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the amount of
all "liabilities of such Person, contingent or otherwise", as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the probable liability of such
Person on its debts as such debts become absolute and matured, (c) such Person
will not have, as of such date, an unreasonably small amount of capital with
which to conduct its business, and (d) such Person will be able to pay its debts
as they mature. For purposes of this definition, (i) "debt" means liability on a
"claim", and (ii) "claim" means any (x) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (y) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.

                  "Stage 2 Commencement Date":  as defined in Section 6.1(a).

<PAGE>   27
                                                                              22
                  "Stock Agreements":  as defined in Section 4.1(d).

                  "Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.

                  "Term Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Term Loan to the Borrower hereunder in a principal
amount not to exceed the amount set forth under the heading "Term Commitment"
opposite such Lender's name on Schedule 1.1A or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto, as the same be changed from
time to time pursuant to the terms hereof. The original aggregate amount of the
Term Commitments is $80,000,000.

                  "Term Commitment Fee Rate":  a per annum rate based on Term
Facility usage as set forth below:

<TABLE>
<CAPTION>
                           % of Term Facility Drawn           Rate
                           ------------------------           ----
                           <S>                                <C>
                           < 33 1/3%                          1.25%

                           > 33 1/3% but < 66 2/3%            1.00%
                           -

                           > 66 2/3%                          0.75%;
                           -
</TABLE>

provided that if the aggregate outstanding principal amount of Term Loans on the
first anniversary of the Closing Date is less than $35,000,000 (the excess on
any such day of $35,000,000 over the aggregate then unpaid principal amount of
the Term Loans being the "Shortfall Amount" on such day), the Term Commitment
Fee Rate applicable to the Shortfall Amount on such day shall be a per annum
rate equal to 50% of the Applicable Margin then in effect with respect to
Eurodollar Loans; provided, further, that the foregoing proviso shall have no
force or effect on and after the day on which the aggregate amount of the Term
Loans made hereunder shall exceed $35,000,000.

                  "Term Commitment Period":  the period from and including the
Closing Date to and including the earlier of (a) September 30, 2001 and (b) the
date on which the Term Commitments are terminated in accordance with this
Agreement.

                  "Termination Date":  the eighth anniversary of the Closing
Date.

                  "Term Lender":  each Lender that has a Term Commitment or is
the holder of a Term Loan.
<PAGE>   28
                                                                              23
                  "Term Loan":  as defined in Section 2.1.

                  "Term Percentage": as to any Term Lender at any time prior to
the Closing Date, the percentage which the amount of such Lender's Term
Commitment then constitutes of the Total Term Commitments (or, at any time after
the Closing Date, the percentage which the aggregate principal amount of such
Lender's Term Loans and unused Term Commitment then outstanding constitutes of
the aggregate principal amount of the Term Loans and Term Commitments then
outstanding).

                  "Total Revolving Commitments":  at any time, the aggregate
amount of the Revolving Commitments then in effect.

                  "Total Term Commitments":  at any time, the aggregate amount
of the Term Commitments then in effect.

                  "Transferee":  any Assignee or Participant.

                  "24-Market Completion Amount":  as defined in Section 5.11.

                  "Type":  as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.

                  "Unfunded 24-Market Amount": at any time, an amount equal to
the excess, if any, of (a) the 24-Market Completion Amount set forth in the most
recent certificate delivered pursuant to Section 5.11, over (b) the aggregate
amount of cash and Cash Equivalents then held by the Borrower and its
Subsidiaries.

                  "United States":  the United States of America.

                  "Venture Investors":  the Persons listed on Schedule 1.1B.

                  "Venture Stockholders Agreement":  as defined in Section
 4.1(d).

                  "Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying shares
required by law) is owned by such Person directly and/or through other Wholly
Owned Subsidiaries.

                  1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.

                  (b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to The Parent, the Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings given to them

<PAGE>   29
                                                                              24

under GAAP, (ii) the words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation" and (iii) the words "asset"
and "property" shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including
cash, Capital Stock, securities, revenues, accounts, leasehold interests and
contract rights.

                  (c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.

                  (d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

                   SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

                  2.1 Term Commitments. Subject to the terms and conditions
hereof, each Term Lender severally agrees to make term loans (each, a "Term
Loan") to the Borrower from time to time during the Term Commitment Period in an
aggregate principal amount for all Term Lenders that, taken together with the
aggregate principal amount of all other Term Loans made by the Term Lenders
during the Term Commitment Period, shall not exceed the Total Term Commitments;
provided that (i) no Lender shall be required to make Term Loans in any event or
at any time in excess of its respective Term Commitment, (ii) each drawing of
Term Loans by the Borrower on any date during the Term Commitment Period shall
be in a minimum aggregate principal amount of $2,500,000 (or, if the then
aggregate Available Term Commitments are less than $2,500,000, such lesser
amount) and (iii) at the end of the last day of the Term Commitment Period, the
Available Term Commitment of each Lender, if any, automatically shall be reduced
to zero. The Term Loans may from time to time be Eurodollar Loans or ABR Loans,
as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.10.

                  2.2 Procedure for Term Loan Borrowing. The Borrower may,
subject to Section 2.1, borrow under the Term Commitments on any Business Day
during the Term Commitment Period; provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, (i) three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(ii) one Business Day prior to the requested Borrowing Date, in the case of ABR
Loans), specifying (x) the amount and Type of Term Loans to be borrowed, (y) the
requested Borrowing Date and (z) in the case of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Period therefor. Each such borrowing under the Term Commitments shall
be in an amount equal to (A) in the case of ABR Loans, $1,000,000 or a whole
multiple of $250,000 in excess thereof (or, if the then aggregate Available Term
Commitments are less than $1,000,000, such lesser amount) and (B) in the case of
Eurodollar Loans, $1,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Term Lender

<PAGE>   30
                                                                              25

thereof. Each Term Lender will, subject to the terms and conditions hereof, make
the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the Funding Office prior
to 12:00 Noon, New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of the Funding Office
with the aggregate of the amounts made available to the Administrative Agent by
the Term Lenders and in like funds as received by the Administrative Agent.

                  2.3 Repayment of Term Loans. The Term Loan of each Term Lender
shall be repaid in 20 consecutive quarterly installments, commencing on December
31, 2002, and on the last day of each March, June, September and December
thereafter to and including September 30, 2007, each of which shall be in an
amount equal to such Lender's Term Percentage multiplied by the amount set forth
below opposite such installment (provided that, if less than the full amount of
the Term Commitments is actually drawn by the Borrower, then the amount of each
such installment shall be proportionately reduced):

<TABLE>
<CAPTION>
                  Installment Number                Principal Amount of Installment
                  ------------------                -------------------------------
                  <S>                               <C>
                  1-8                                $2,000,000
                  9-12                               $4,000,000
                  13-20                              $6,000,000
</TABLE>

                  2.4 Revolving Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Lender severally agrees to make revolving
credit loans ("Revolving Loans") to the Borrower from time to time during the
Revolving Commitment Period in an aggregate principal amount at any one time
outstanding which does not exceed the amount of such Lender's Revolving
Commitment. During the Revolving Commitment Period the Borrower may use the
Revolving Commitments by borrowing, prepaying the Revolving Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
The Revolving Loans may from time to time be Eurodollar Loans or ABR Loans, as
determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.5 and 2.10.

                  (b)  The Borrower shall repay all outstanding Revolving Loans
on the Termination Date.

                  2.5 Procedure for Revolving Loan Borrowing. The Borrower may
borrow under the Revolving Commitments during the Revolving Commitment Period on
any Business Day, provided that the Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 12:00 Noon, New York City time, (a) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, or (b) one Business
Day prior to the requested Borrowing Date, in the case of ABR Loans), specifying
(i) the amount and Type of Revolving Loans to be borrowed, (ii) the requested
Borrowing Date and (iii) in the case of Eurodollar Loans, the respective amounts
of each such Type of Loan and the respective lengths of the initial Interest
Period therefor. Any Revolving Loans made on the

<PAGE>   31
                                                                              26

Closing Date shall initially be ABR Loans. Each borrowing under the Revolving
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$1,000,000 or a whole multiple of $250,000 in excess thereof (or, if the then
aggregate Available Revolving Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple
of $1,000,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Revolving Lender
thereof. Each Revolving Lender will, subject to the terms and conditions hereof,
make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the Funding Office prior
to 12:00 Noon, New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of the Funding Office
with the aggregate of the amounts made available to the Administrative Agent by
the Revolving Lenders and in like funds as received by the Administrative Agent.

                  2.6 Commitment Fees, etc. (a) The Borrower agrees to pay to
the Administrative Agent for the account of each Revolving Lender a commitment
fee for the period from and including the Closing Date to the last day of the
Revolving Commitment Period, computed at the Revolving Commitment Fee Rate on
the average daily amount of the Available Revolving Commitment of such Lender
during the period for which payment is made, payable quarterly in arrears on the
last day of each March, June, September and December and on the Termination
Date, commencing on the first of such dates to occur after the Closing Date.

                  (b) The Borrower agrees to pay to the Administrative Agent for
the account of each Term Lender a commitment fee for the period from and
including the Closing Date to the last day of the Term Commitment Period,
computed at the Term Commitment Fee Rate on the average daily amount of the
Available Term Commitment of such Lender during the period for which payment is
made, payable quarterly in arrears on the last day of each March, June,
September and December and on the last day of the Term Commitment Period,
commencing on the first of such dates to occur after the Closing Date.

                  (c) The Borrower agrees to pay to the Administrative Agent the
fees in the amounts and on the dates previously agreed to in writing by the
Borrower and the Administrative Agent.

                  2.7 Termination and Reduction of Commitments. (a) The Borrower
shall have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate the Revolving Commitments or, from time to
time, to reduce the amount of the Revolving Commitments; provided that no such
termination or reduction of Revolving Commitments shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Loans made on the
effective date thereof, the aggregate outstanding principal amount of Revolving
Loans would exceed the Total Revolving Commitments. Any such reduction shall be
in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce
permanently the Revolving Commitments then in effect.

<PAGE>   32
                                                                              27

                  (b) On June 30, 2007, the Revolving Commitments then in effect
automatically shall be reduced permanently by $4,000,000. Such reduction shall
be accompanied by prepayment of the Revolving Loans to the extent, if any, that
the aggregate outstanding principal amount of the Revolving Loans exceeds the
amount of the Total Revolving Commitments as so reduced. The application of any
prepayment pursuant to this Section 2.7 shall be made, first, to ABR Loans and,
second, to Eurodollar Loans. Each prepayment of Revolving Loans that are
Eurodollar Loans under this Section 2.7 shall be accompanied by accrued interest
to the date of such prepayment on the amount prepaid.

                  (c) At any time prior to the end of the Term Commitment
Period, the Borrower shall have the right, upon not less than three Business
Days' notice to the Administrative Agent, to terminate the Available Term
Commitments then in effect or, from time to time, to reduce the amount of the
Available Term Commitments then in effect. Any such reduction shall be in an
amount equal to $1,000,000, or a whole multiple thereof, and shall reduce
permanently the Available Term Commitments then in effect.

                  2.8 Optional Prepayments. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable notice delivered to the Administrative Agent at least
three Business Days prior thereto in the case of Eurodollar Loans and at least
one Business Day prior thereto in the case of ABR Loans, which notice shall
specify the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans or ABR Loans; provided, that if a Eurodollar Loan is prepaid on
any day other than the last day of the Interest Period applicable thereto, the
Borrower shall also pay any amounts owing pursuant to Section 2.18. Upon receipt
of any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with (except in
the case of Revolving Loans that are ABR Loans) accrued interest to such date on
the amount prepaid. Partial prepayments of Term Loans and Revolving Loans shall
be in an aggregate principal amount of $1,000,000 or a whole multiple thereof.

                  2.9 Mandatory Prepayments and Commitment Reductions. (a) If
any Capital Stock or Indebtedness shall be issued or incurred by the Borrower or
any of its Subsidiaries (excluding any Capital Stock issued to provide the
Additional Capital and any Indebtedness incurred in accordance with Section
6.2), an amount equal to (i) in the case of issuances of Capital Stock, 50%, and
(ii) in the case of incurrences of Indebtedness, 100%, of the Net Cash Proceeds
thereof shall be applied on the date of such issuance or incurrence toward the
prepayment of the Term Loans and the reduction of the Term Commitments and the
Revolving Commitments as set forth in Section 2.9(d).

                  (b) If on any date during any of its fiscal years the Borrower
or any of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sale
or Recovery Event in an amount (i) which, when added to the aggregate amount of
Net Cash Proceeds from Asset Sales and Recovery Events during such fiscal year,
exceeds $250,000 or (ii) which, when added to the aggregate amount of Net Cash
Proceeds from Asset Sales and Recovery Events received subsequent to the date
hereof, exceeds $500,000, then, unless a Reinvestment Notice shall be

<PAGE>   33
                                                                              28

delivered in respect thereof, such excess Net Cash Proceeds (or if, as a result
of such Asset Sale or Recovery Event, excess Net Cash Proceeds would exist under
both clauses (i) and (ii) above, the provisions of this paragraph (b) shall be
applicable to the greater of such excess Net Cash Proceeds amounts) shall be
applied on such date toward the prepayment of the Term Loans and the reduction
of the Term Commitments and the Revolving Commitments as set forth in Section
2.9(d); provided, that, notwithstanding the foregoing, (i) the aggregate Net
Cash Proceeds of Recovery Events that may be excluded from the foregoing
requirement pursuant to a Reinvestment Notice shall not exceed $7,500,000 in any
fiscal year of the Borrower and (ii) on each Reinvestment Prepayment Date, an
amount equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans and
the reduction of the Term Commitments and the Revolving Commitments as set forth
in Section 2.9(d).

                  (c) If, for any fiscal year of the Borrower, commencing with
the fiscal year ending December 31, 2003, there shall be Excess Cash Flow, the
Borrower shall, on the relevant Excess Cash Flow Application Date, apply 50% of
such Excess Cash Flow toward the prepayment of the Term Loans and the reduction
of the Term Commitments and the Revolving Commitments as set forth in Section
2.9(d). Each such prepayment and commitment reduction shall be made on a date
(an "Excess Cash Flow Application Date") no later than five days after the
earlier of (i) the date on which the financial statements of the Borrower
referred to in Section 5.1(a), for the fiscal year with respect to which such
prepayment is made, are required to be delivered to the Lenders and (ii) the
date such financial statements are actually delivered.

                  (d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 2.9 shall be applied, first, to
reduce permanently the then unused Term Commitments, second, to prepay the Term
Loans, and third, to reduce permanently the Revolving Commitments. Any such
reduction of the Revolving Commitments shall be accompanied by prepayment of the
Revolving Loans to the extent, if any, that the aggregate outstanding principal
amount of the Revolving Loans exceeds the amount of the Total Revolving
Commitments as so reduced. The application of any prepayment pursuant to Section
2.9 shall be made, first, to ABR Loans and, second, to Eurodollar Loans. Each
prepayment of the Loans under Section 2.9 (except in the case of Revolving Loans
that are ABR Loans) shall be accompanied by accrued interest to the date of such
prepayment on the amount prepaid.

                  2.10 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent irrevocable notice of such election (which notice must be
received by the Administrative Agent prior to 11:00 A.M., New York City time,
three Business Days prior to the requested conversion date), provided that any
such conversion of Eurodollar Loans may only be made on the last day of an
Interest Period with respect thereto. The Borrower may elect from time to time
to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days' prior irrevocable notice of such election (which
notice shall specify the length of the initial Interest Period therefor),
provided that no ABR Loan under a particular Facility may be converted into a
Eurodollar Loan when any Event of Default has occurred and is continuing and the
Administrative Agent or the Majority Facility Lenders in respect of such
Facility have determined

<PAGE>   34
                                                                              29

in its or their sole discretion not to permit such conversions. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.

                  (b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable notice to the Administrative Agent, in accordance
with the applicable provisions of the term "Interest Period" set forth in
Section 1.1, of the length of the next Interest Period to be applicable to such
Loans, provided that no Eurodollar Loan under a particular Facility may be
continued as such when any Event of Default has occurred and is continuing and
the Administrative Agent has or the Majority Facility Lenders in respect of such
Facility have determined in its or their sole discretion not to permit such
continuations, and provided, further, that if such continuation is not permitted
pursuant to the preceding proviso such Loans shall be automatically converted to
ABR Loans on the last day of such then expiring Interest Period; and provided,
further, that if the Borrower shall fail to give any required notice as
described above in this paragraph, such Loans shall be automatically continued
as Eurodollar Loans having an Interest Period of one month. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof.

                  2.11 Limitations on Eurodollar Tranches. Notwithstanding
anything to the contrary in this Agreement, all borrowings, conversions and
continuations of Eurodollar Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, (a) after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to $1,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no
more than ten Eurodollar Tranches shall be outstanding at any one time.

                  2.12 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.

                  (b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.

                  (c) (i) If all or a portion of the principal amount of any
Loan shall not be paid when due (whether at the stated maturity, by acceleration
or otherwise), all outstanding Loans (whether or not overdue) shall bear
interest at a rate per annum equal to the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus 2%,
and (ii) if all or a portion of any interest payable on any Loan or any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall, to the extent not prohibited by applicable law, bear interest at a
rate per annum equal to the rate then applicable to ABR Loans under the relevant
Facility plus 2% (or, in the case of any such other amounts that do not relate
to a particular Facility, the rate then applicable to ABR Loans under the
Revolving Facility plus 2%), in each case, with respect to clauses (i) and (ii)
above, from the date of such non-payment until such amount is paid in full (as
well after as before judgment).

<PAGE>   35
                                                                              30

                  (d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable from time to time on demand.

                  2.13 Computation of Interest and Fees. (a) Interest and fees
payable pursuant hereto shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to ABR Loans the rate of
interest on which is calculated on the basis of the Prime Rate, the interest
thereon shall be calculated on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of the effective date and the amount of each
such change in interest rate.

                  (b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to Section
2.12(a).

                  2.14  Inability to Determine Interest Rate.  If prior to the
first day of any Interest Period:

                  (a) the Administrative Agent shall have determined (which
         determination shall be conclusive and binding upon the Borrower) that,
         by reason of circumstances affecting the relevant market, adequate and
         reasonable means do not exist for ascertaining the Eurodollar Rate for
         such Interest Period, or

                  (b) the Administrative Agent shall have received notice from
         the Majority Facility Lenders in respect of the relevant Facility that
         the Eurodollar Rate determined or to be determined for such Interest
         Period will not adequately and fairly reflect the cost to such Lenders
         (as conclusively certified by such Lenders) of making or maintaining
         their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be continued as
ABR Loans and (z) any outstanding Eurodollar Loans under the relevant Facility
shall be converted, on the last day of the then-current Interest Period, to ABR
Loans. Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans under the relevant Facility

<PAGE>   36
                                                                              31

shall be made or continued as such, nor shall the Borrower have the right to
convert Loans under the relevant Facility to Eurodollar Loans.

                  2.15 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on account
of any commitment fee and any reduction of the Commitments of the Lenders shall
be made pro rata according to the respective Term Percentages or Revolving
Percentages, as the case may be, of the relevant Lenders.

                  (b) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Term Loans shall be made pro rata
according to the respective outstanding principal amounts of the Term Loans then
held by the Term Lenders. The amount of each principal prepayment of the Term
Loans shall be applied to reduce the then remaining installments of the Term
Loans in inverse order of maturity. Amounts prepaid on account of the Term Loans
may not be reborrowed.

                  (c) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Revolving Loans shall be made pro
rata according to the respective outstanding principal amounts of the Revolving
Loans then held by the Revolving Lenders.

                  (d) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Funding Office, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day. If any payment on a Eurodollar Loan becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day. In
the case of any extension of any payment of principal pursuant to the preceding
two sentences, interest thereon shall be payable at the then applicable rate
during such extension.

                  (e) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the

<PAGE>   37
                                                                              32

Administrative Agent. A certificate of the Administrative Agent submitted to any
Lender with respect to any amounts owing under this paragraph shall be
conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans under the relevant Facility, on demand, from
the Borrower.

                  (f) Unless the Administrative Agent shall have been notified
in writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.

                  2.16 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority
applicable to such Lender made subsequent to the date hereof:

                    (i) shall subject any Lender to any tax of any kind
               whatsoever with respect to this Agreement or any Eurodollar Loan
               made by it, or change the basis of taxation of payments to such
               Lender in respect thereof (except for Non-Excluded Taxes covered
               by Section 2.17 and changes in the rate of tax on the overall net
               income of such Lender);

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

                    (iii) shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall pay
such Lender, within fifteen (15) days following such Lender's demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable. If any Lender becomes entitled to claim any
additional amounts pursuant to this paragraph, it shall promptly notify the
Borrower (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled.

<PAGE>   38
                                                                              33

                  (b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within fifteen (15) days after submission
by such Lender to the Borrower (with a copy to the Administrative Agent) of a
written request therefor, the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction; provided
that the Borrower shall not be required to compensate a Lender pursuant to this
paragraph for any amounts incurred more than six months prior to the date that
such Lender notifies the Borrower of such Lender's intention to claim
compensation therefor; and provided further that, if the circumstances giving
rise to such claim have a retroactive effect, then such six-month period shall
be extended to include the period of such retroactive effect.

                  (c) A certificate as to any additional amounts payable
pursuant to this Section submitted by any Lender to the Borrower (with a copy to
the Administrative Agent) shall constitute prima facie evidence of such
additional amounts payable, absent manifest error. The obligations of the
Borrower pursuant to this Section shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.

                  2.17 Taxes. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the

<PAGE>   39
                                                                              34

requirements of paragraph (d) or (e) of this Section or (ii) that are United
States withholding taxes imposed on amounts payable to such Lender at the time
the Lender becomes a party to this Agreement, except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Non-Excluded Taxes
pursuant to this paragraph.

                  (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

                  (c) Whenever any Non-Excluded Taxes or Other Taxes are payable
by the Borrower, as promptly as possible thereafter the Borrower shall send to
the Administrative Agent for its own account or for the account of the relevant
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure.

                  (d) Each Lender (or Transferee) that is not a citizen or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under the laws of the United States of America
(or any jurisdiction thereof), or any estate or trust that is subject to federal
income taxation regardless of the source of its income (a "Non-U.S. Lender")
shall deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit G and a Form W-8, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.

                  (e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in which
the Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement shall deliver to

<PAGE>   40
                                                                              35

the Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower, 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,
provided that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender's judgment such completion, execution or
submission would not materially prejudice the legal position of such Lender.

                  (f) The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

                  2.18 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense that such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of or conversion from Eurodollar Loans after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurodollar Loans on a day that is not the last day of
an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest that would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) that would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. A certificate as to any
amounts payable pursuant to this Section submitted to the Borrower by any Lender
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

                  2.19 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 2.16 or
2.17(a) with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.16 or 2.17(a).

                  2.20 Replacement of Lenders. The Borrower shall be permitted
to replace any Lender that (a) requests reimbursement for amounts owing pursuant
to Section 2.16 or 2.17(a) or (b) defaults in its obligation to make Loans
hereunder, with a replacement financial institution;

<PAGE>   41
                                                                              36

provided that (i) such replacement does not conflict with any Requirement of
Law, (ii) no Event of Default shall have occurred and be continuing at the time
of such replacement, (iii) prior to any such replacement, such Lender shall have
taken no action under Section 2.19 so as to eliminate the continued need for
payment of amounts owing pursuant to Section 2.16 or 2.17(a), (iv) the
replacement financial institution shall purchase, at par (or at such lesser
price as such Lender and the replacement financial institution may agree), all
Loans and other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.18 if any Eurodollar Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(vi) the replacement financial institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
Section 9.6 (provided that the Borrower shall be obligated to pay the
registration and processing fee referred to therein), (viii) until such time as
such replacement shall be consummated, the Borrower shall pay all additional
amounts (if any) required pursuant to Section 2.16 or 2.17(a), as the case may
be, and (ix) any such replacement shall not be deemed to be a waiver of any
rights that the Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender.

                    SECTION 3. REPRESENTATIONS AND WARRANTIES

                  To induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Loans, the Parent and the Borrower hereby
jointly and severally represent and warrant to the Administrative Agent and each
Lender that:

                  3.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at July 31, 1999 (including the notes thereto) (the "Pro Forma Balance Sheet"),
copies of which have heretofore been furnished to each Lender, has been prepared
giving effect (as if such events had occurred on such date) to (i) the
Investments in the Borrower to be made on the Closing Date and (ii) the payment
of fees and expenses in connection with the foregoing. The Pro Forma Balance
Sheet has been prepared based on the best information available to the Borrower
as of the date of delivery thereof, and presents fairly on a pro forma basis the
estimated financial position of Borrower and its consolidated Subsidiaries as at
July 31, 1999, assuming that the events specified in the preceding sentence had
actually occurred at such date.

                  (b) The audited consolidated balance sheets of the Parent and
its Subsidiaries as at December 31, 1998, and the related consolidated
statements of income and of cash flows for the fiscal year ended on such date,
reported on by and accompanied by an unqualified report from KPMG, present
fairly, in accordance with GAAP, the consolidated financial condition of the
Parent and its Subsidiaries as at such date, and the consolidated results of its
operations and its consolidated cash flows for the fiscal year then ended. The
unaudited consolidated balance sheet of the Parent and its Subsidiaries as at
July 31, 1999, and the related unaudited consolidated statements of income and
cash flows for the seven-month period ended on such date, present fairly, in
accordance with GAAP, the consolidated financial condition of the Parent and its
Subsidiaries as at such date, and the consolidated results of its operations and
its consolidated

<PAGE>   42
                                                                              37

cash flows for the six-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). The Parent, the Borrower and its
Subsidiaries do not have any material Guarantee Obligations (excluding the
Loans), contingent liabilities and liabilities for taxes, or any long-term
leases or unusual forward or long-term commitments, including any interest rate
or foreign currency swap or exchange transaction or other obligation in respect
of derivatives, that are not reflected in the most recent financial statements
referred to in this paragraph. During the period from December 31, 1998 to and
including the date hereof there has been no Disposition by the Parent, the
Borrower or any of its Subsidiaries of any material part of its business or
property.

                  3.2  No Change.  Since July 31, 1999, there has been no
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.

                  3.3 Corporate Existence; Compliance with Law. Each of the
Parent, the Borrower and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.

                  3.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of the Borrower, to borrow hereunder. Each Loan Party has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and, in the case of the Borrower,
to authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or any of the Loan
Documents, except (i) consents, authorizations, filings and notices described in
Schedule 3.4 and (ii) the filings referred to in Section 3.19. Each Loan
Document has been duly executed and delivered on behalf of each Loan Party party
thereto. This Agreement constitutes, and each other Loan Document upon execution
will constitute, a legal, valid and binding obligation of each Loan Party party
thereto, enforceable against each such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, including
concepts of reasonableness, materiality, good faith and fair dealing and the
possible unavailability of specific performance, injunctive relief or other
equitable remedies (whether enforcement is sought by proceedings in equity or at
law).

<PAGE>   43
                                                                              38

                  3.5 No Legal Bar; Regulatory Authorizations. (a) The
execution, delivery and performance of this Agreement and the other Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate any Requirement of Law or any Contractual Obligation of the Parent, the
Borrower or any of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such Contractual Obligation
(other than the Liens created by the Security Documents). Compliance by the
Borrower and its Subsidiaries with any applicable Requirement of Law or
Contractual Obligation could not reasonably be expected to have a Material
Adverse Effect.

                  (b) Each of the Parent, the Borrower and its Subsidiaries has
obtained all Regulatory Authorizations necessary to carry out its business and
operations as presently conducted, except to the extent the failure to obtain
such Regulatory Authorizations, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Each Communications
License held by each Loan Party on the date hereof was duly and validly issued
by the FCC, relevant PUC or other relevant Governmental Authority pursuant to
procedures that materially comply with all applicable requirements of all
applicable federal, state and local laws and is in full force and effect except
to the extent the failure thereof to be in full force and effect, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. None of the Loan Parties has any knowledge of the occurrence of any
event or the existence of any circumstance which, in the reasonable judgment of
such Loan Party, is likely to result in the revocation, suspension, non-renewal
or adverse modification of any material Communications License.

                  3.6 Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Parent or the Borrower, threatened by or against the Parent,
the Borrower or any of its Subsidiaries or against any of their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.

                  3.7 No Default. Neither the Parent, the Borrower nor any of
its Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.

                  3.8 Ownership of Property; Liens. Each of the Parent, the
Borrower and its Subsidiaries has title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to, or a valid leasehold
interest in, all its other property, and none of such property is subject to any
Lien except as permitted by Section 6.3.

                  3.9 Intellectual Property. The Parent, the Borrower and each
of its Subsidiaries owns, or is licensed to use, all Intellectual Property
necessary for the conduct of its business as currently conducted. No material
claim has been asserted and is pending by any Person

<PAGE>   44
                                                                              39

challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does the Parent or the
Borrower know of any valid basis for any such claim. The use of Intellectual
Property by the Parent, the Borrower and its Subsidiaries does not infringe on
the rights of any Person in any material respect.

                  3.10 Taxes. Each of the Parent, the Borrower and each of its
Subsidiaries has filed or caused to be filed all Federal, state and other
material tax returns that are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any the amount or
validity of that are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Parent, the Borrower or its Subsidiaries, as the
case may be); no tax Lien has been filed, and, to the knowledge of the Parent
and the Borrower, no claim is being asserted, with respect to any such tax, fee
or other charge.

                  3.11 Federal Regulations. No part of the proceeds of any Loans
will be used for "buying" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1, as applicable, referred to in Regulation U.

                  3.12 Labor Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes or other labor disputes against the Parent, the Borrower or any of its
Subsidiaries pending or, to the knowledge of the Parent or the Borrower,
threatened; (b) hours worked by and payment made to employees of the Parent, the
Borrower and its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters; and (c) all payments due from the Parent, the Borrower or any of its
Subsidiaries on account of employee health and welfare insurance have been paid
or accrued as a liability on the books of the Parent, the Borrower or the
relevant Subsidiary.

                  3.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Single
Employer Plan, and each Plan and, to the knowledge of the Parent and Borrower,
each Multiemployer Plan, has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a Single Employer
Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by a material amount. Neither the
Borrower nor any

<PAGE>   45
                                                                              40

Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result
in a material liability under ERISA, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent.

                  3.14  Investment Company Act.  No Loan Party is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.

                  3.15 Subsidiaries. Except as disclosed to the Administrative
Agent (and the Administrative Agent will then disclose to the Lenders) by the
Borrower in writing from time to time after the Closing Date, (a) Schedule 3.15
sets forth the name and jurisdiction of incorporation of each Subsidiary and, as
to each such Subsidiary, the percentage of each class of Capital Stock owned by
any Loan Party and (b) there are no outstanding subscriptions, options,
warrants, calls, rights or other agreements or commitments (other than stock
options granted to employees or directors and directors' qualifying shares) of
any nature relating to any Capital Stock of the Borrower or any Subsidiary,
except as created by the Loan Documents.

                  3.16 Use of Proceeds. The proceeds of the Loans shall be used
by the Borrower to finance (a) Capital Expenditures as permitted by Section 6.7,
(b) transaction fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby and (c) working capital and other general
corporate purposes, including Permitted Acquisitions; provided, however, that
proceeds used to finance switch-related soft costs (including installation,
delivery and engineering costs, but excluding switch software) shall not exceed
16% of the cost of the related switch.

                  3.17  Environmental Matters.  Except as, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect:

                  (a) the facilities and properties owned, leased or operated by
         the Parent, the Borrower or any of its Subsidiaries (the "Properties")
         do not contain, and have not previously contained, any Materials of
         Environmental Concern in amounts or concentrations or under
         circumstances that constitute or constituted a violation of, or could
         give rise to liability under, any Environmental Law;

                  (b) neither the Parent, the Borrower nor any of its
         Subsidiaries has received or is aware of any notice of violation,
         alleged violation, non-compliance, liability or potential liability
         regarding environmental matters or compliance with Environmental Laws
         with regard to any of the Properties or the business operated by the
         Parent, the Borrower or any of its Subsidiaries (the "Business"), nor
         does the Parent or the Borrower have knowledge or reason to believe
         that any such notice will be received or is being threatened;

<PAGE>   46
                                                                              41

                  (c) Materials of Environmental Concern have not been
         transported or disposed of from the Properties in violation of, or in a
         manner or to a location that could give rise to liability under, any
         Environmental Law, nor have any Materials of Environmental Concern been
         generated, treated, stored or disposed of at, on or under any of the
         Properties in violation of, or in a manner that could give rise to
         liability under, any applicable Environmental Law;

                  (d) no judicial proceeding or governmental or administrative
         action is pending or, to the knowledge of the Parent and the Borrower,
         threatened, under any Environmental Law to which the Parent, the
         Borrower or any Subsidiary is or will be named as a party with respect
         to the Properties or the Business, nor are there any consent decrees or
         other decrees, consent orders, administrative orders or other orders,
         or other administrative or judicial requirements outstanding under any
         Environmental Law with respect to the Properties or the Business;

                  (e) there has been no release or threat of release of
         Materials of Environmental Concern at or from the Properties, or
         arising from or related to the operations of the Parent, the Borrower
         or any Subsidiary in connection with the Properties or otherwise in
         connection with the Business, in violation of or in amounts or in a
         manner that could give rise to liability under Environmental Laws;

                  (f) the Properties and all operations at the Properties are in
         compliance, and have in the last five years been in compliance, with
         all applicable Environmental Laws, and there is no contamination at,
         under or on the Properties or violation of any Environmental Law with
         respect to the Properties or the Business; and

                  (g) neither the Parent, the Borrower nor any of its
         Subsidiaries has assumed any liability of any other Person under
         Environmental Laws.

                  3.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document or any other document,
certificate or statement furnished by or on behalf of any Loan Party to the
Administrative Agent or the Lenders, or any of them, for use in connection with
the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished, any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements contained herein or therein not
misleading. The projections and pro forma financial information contained in the
materials referenced above are based upon good faith estimates and assumptions
believed the Borrower to be reasonable at the time made, it being recognized by
the Lenders that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the period or periods
covered by such financial information may differ from the projected results set
forth therein by a material amount. There is no fact known to any Loan Party
that could reasonably be expected to have a Material Adverse Effect that has not
been expressly disclosed herein, in the other Loan Documents or in any other

<PAGE>   47
                                                                              42

documents, certificates and statements furnished to the Administrative Agent and
the Lenders for use in connection with the transactions contemplated hereby and
by the other Loan Documents.

                  3.19 Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Lenders, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the Pledged
Stock described in the Guarantee and Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the Administrative
Agent, and in the case of the other Collateral described in the Guarantee and
Collateral Agreement, when financing statements and other filings specified on
Schedule 3.19(a) in appropriate form are filed in the offices specified on
Schedule 3.19(a), the Guarantee and Collateral Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Loan Parties in such Collateral (excluding unregistered copyrightable
works) and the proceeds thereof, as security for the Obligations (as defined in
the Guarantee and Collateral Agreement), in each case prior and superior in
right to any other Person (except, in the case of Collateral other than Pledged
Stock, Liens permitted by Section 6.3).

                  (b) Each of the Mortgages (if any) is effective to create in
favor of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable Lien on the Property described therein and proceeds
thereof, and when such Mortgages, together with any applicable UCC-1 forms
related to fixtures, are filed in the offices specified in the applicable
Mortgage Recording Certificate, each such Mortgage shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Property and the proceeds thereof, as security for the
Obligations (as defined in the relevant Mortgage), in each case prior and
superior in right to any other Person. As of the Closing Date, neither the
Borrower nor any of its Subsidiaries owns in fee simple any real property.

                  3.20 Solvency. Each Loan Party is, and after giving effect to
the incurrence of all Indebtedness and obligations being incurred in connection
herewith will be and will continue to be, Solvent.

                  3.21 Year 2000 Matters. Each of the Parent, the Borrower and
its Subsidiaries (a) has received representations and warranties made to the
Parent, the Borrower and its Subsidiaries by equipment and software vendors
relating to year 2000 issues concerning such equipment and software vendors'
products, (b) has tested its respective network equipment and Operations Support
Systems, and (c) reasonably believes that such network equipment and Operations
Support Systems will (i) process calendar dates falling on or after January 1,
2000 with substantially the same functionality as such network equipment and
Operations Support Systems process calendar dates falling on or before December
31, 1999 and (ii) provide substantially the same functionality with respect to
the introduction of records containing dates falling on or after January 1,
2000, as such equipment, software and systems provide with respect to the
introduction of records containing dates falling on or before December 31, 1999.
Each of the Parent, the Borrower and its Subsidiaries will continue to monitor
the performance of its network equipment and Operations Support Systems and
those of its third-party constituents with a view towards identifying and
resolving any year 2000 issues.

<PAGE>   48
                                                                              43

                  3.22 Regulation H. No Mortgage encumbers improved real
property that is located in an area that has been identified by the Secretary of
Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood Insurance
Act of 1968.

                  3.23 Certain Documents. The Borrower has delivered to each
Lender complete and correct copies of the Business Plan, the Management
Agreement and the Stock Agreements, including any amendments, supplements or
modifications with respect to any of the foregoing.

                  3.24  Venture Investors.  Schedule 1.1B sets forth a complete
and correct list of all holders of the Capital Stock of the Parent on the date
hereof.

                         SECTION 4. CONDITIONS PRECEDENT

                  4.1 Conditions to Effectiveness. The effectiveness of the
obligations of the Lenders to make Loans under this Agreement and the agreement
of each Lender to make the initial Loans requested to be made by it is subject
to the satisfaction, on or before November   , 1999, of the following conditions
precedent (the date of effectiveness, the "Closing Date"):

                  (a) Credit Agreement; Guarantee and Collateral Agreement;
         Capital Call Agreement; Lockbox Agreement. The Administrative Agent
         shall have received (i) this Agreement, executed and delivered by the
         Administrative Agent, the Parent, the Borrower and each Person listed
         on Schedule 1.1A, (ii) the Guarantee and Collateral Agreement, executed
         and delivered by the Parent, the Borrower and each Subsidiary, (iii)
         the Capital Call Agreement, executed and delivered by the Parent, the
         Borrower and the Administrative Agent, and (iv) the Lockbox Agreement,
         executed and delivered by the Borrower, the Administrative Agent and
         the lockbox bank thereunder.

                  (b) Initial Capital Contributions. The Parent shall have
         contributed to the capital of (or expended on behalf of) the Borrower
         and its Subsidiaries cash and/or Cash Equivalents and/or other assets
         in an aggregate amount equal to at least $53,000,000 in a manner and on
         terms and conditions reasonably satisfactory to the Lenders (the
         "Initial Capital Contributions"), provided that (i) any such other
         assets so contributed shall be valued at the book value thereof as
         reflected on the consolidated financial statements of the Parent, so
         long as such valuation is reasonably acceptable to the Lenders, and
         (ii) any such expenditures by the Parent on behalf of the Borrower and
         its Subsidiaries shall be credited towards contribution to the Borrower
         of Initial Capital Contributions only in amounts reflected as losses on
         the consolidated financial statements of the Parent, so long as such
         amounts are reasonably acceptable to the Lenders.

                  (c) Business Plan; Management Agreement. The Lenders shall
         have received certified copies of (i) the 24-market development plan of
         the Borrower as contained in the memorandum dated September 13, 1999
         (the "Business Plan") and the individual business plans for St. Louis,
         Missouri; Kansas City, Missouri and Kansas; Springfield, Missouri;

<PAGE>   49
                                                                              44

         Wichita, Kansas; Tulsa, Oklahoma; Oklahoma City, Oklahoma; and Little
         Rock, Arkansas and (ii) the management agreement between the Borrower
         and the Parent relating to, among other things, the Parent's delivery
         of services to the Borrower and its Subsidiaries via the Parent's
         network operations control center (as the same may be amended,
         supplemented or otherwise modified from time to time in accordance with
         Section 6.9 hereto, the "Management Agreement"), which agreement shall
         be in substantially the form of Exhibit I.

                  (d) Stock Agreements. The Administrative Agent shall have
         received a certificate of a Responsible Officer of the Parent (i)
         attaching a certified copy of each of (A) the Shareholders Agreement,
         dated as of August 14, 1998, as amended as of November 18, 1998 (as the
         same may be amended, supplemented or otherwise modified from time to
         time in accordance with Section 6.9, the "Shareholders Agreement"), (B)
         the Stockholders' Agreement, dated as of November 18, 1998, as amended
         as of December 14, 1998 and July 20, 1999 (as the same may be amended,
         supplemented or otherwise modified from time to time in accordance with
         Section 6.9, the "Venture Stockholders Agreement") and (C) the
         Securities Purchase Agreement dated as of November 18, 1998, as amended
         as of December 14, 1998, and the related Registration Rights Agreement,
         dated as of November 18, 1998 (as the same may be amended, supplemented
         or otherwise modified from time to time in accordance with Section 6.9,
         the "Securities Purchase Agreement"; the Securities Purchase Agreement;
         the Shareholders Agreement and the Venture Stockholders Agreement,
         collectively, the "Stock Agreements") and (ii) confirming that none of
         the Stock Agreements has been amended, waived or otherwise modified in
         any manner that, in the reasonable discretion of the Required Lenders,
         could reasonably be expected to be materially adverse to the interests
         of the Lenders or that would not be permitted by Section 6.9.

                  (e) Subordination of Vendor Contracts. The Administrative
         Agent shall have received evidence, in form and substance satisfactory
         to it, that each vendor contract requiring payments in excess of
         $1,000,000 in the aggregate during the term of such contract to which
         the Borrower or any of its Subsidiaries is a party shall have been
         modified with respect to subordination of the applicable vendor's Liens
         to the Liens securing the Obligations in a manner reasonably
         satisfactory to the Lenders to the extent such vendor's Liens are not
         otherwise permitted pursuant to Section 6.3(f).

                  (f) Amendment of Software Contracts. The Administrative Agent
         shall have received evidence, in form and substance satisfactory to it,
         that each software vendor contract with respect to any aspect of the
         Operations Support Systems of the Parent and its Subsidiaries to which
         the Parent is a party shall have been modified, in a manner reasonably
         satisfactory to the Lenders, so as to add the Borrower and its
         Subsidiaries as parties thereto, with the same rights as the Parent
         thereunder.

                  (g) Completed Markets. The Administrative Agent shall have
         received evidence, in form and substance satisfactory to it, that the
         Borrower shall have achieved at least three Completed Markets.

<PAGE>   50
                                                                              45

                  (h) Approvals. The Administrative Agent shall have received
         evidence, in form and substance satisfactory to it, that all
         governmental and third party approvals (including landlords' and other
         consents) reasonably necessary or, in the reasonable discretion of the
         Administrative Agent, advisable in connection with the financing
         contemplated hereby and the operations of the Parent, the Borrower and
         its Subsidiaries shall have been obtained and be in full force and
         effect.

                  (i) Lien Searches. The Administrative Agent shall have
         received the results of a recent lien search in each of the
         jurisdictions where assets of the Loan Parties are located, and such
         search shall reveal no liens on any of the assets of the Borrower or
         its Subsidiaries except for liens permitted by Section 6.3 or
         discharged on or prior to the Closing Date pursuant to documentation
         satisfactory to the Administrative Agent.

                  (j) Fees. The Lenders and the Administrative Agent shall have
         received all fees required to be paid, and all expenses for which
         invoices have been presented (including the reasonable fees and
         expenses of legal counsel), on or before the Closing Date.

                  (k) Closing and Secretary's Certificates. The Administrative
         Agent shall have received, with a counterpart for each Lender, (i) a
         certificate of each Loan Party, dated the Closing Date, substantially
         in the form of E-1 and (ii) a certificate of each Loan Party, dated the
         Closing Date, substantially in the form of Exhibit E-2, with
         appropriate insertions and attachments.

                  (l)  Legal Opinions.  The Administrative Agent shall have
         received the following executed legal opinions:

                           (i) the legal opinion of Bryan Cave LLP, special
                  counsel to the Borrower and its Subsidiaries, in substantially
                  the form and substance of Exhibit J; and

                           (ii) the legal opinion of Morrison & Foerster LLP,
                  special FCC counsel to the Borrower and its Subsidiaries, in
                  substantially the form and substance of Exhibit K.

         Each such legal opinion shall cover such other matters incident to the
         transactions contemplated by this Agreement as the Administrative Agent
         may reasonably require.

                  (m) Pledged Stock; Stock Powers; Pledged Notes. The
         Administrative Agent shall have received (i) the certificates
         representing the shares of Capital Stock of the Borrower and its
         Subsidiaries pledged pursuant to the Guarantee and Collateral
         Agreement, together with an undated stock power for each such
         certificate executed in blank by a duly authorized officer of the
         pledgor thereof, and (ii) each promissory note (if any) pledged to the
         Administrative Agent pursuant to the Guarantee and Collateral Agreement
         endorsed (without recourse or warranty of any kind or nature whatsoever
         other than those provided for in the Guarantee and Collateral
         Agreement) in blank (or accompanied by an executed transfer form in
         blank) by the pledgor thereof.
<PAGE>   51
                                                                              46

                  (n) Filings, Registrations and Recordings. Each document
         (including any Uniform Commercial Code financing statement and, in any
         case, including UCC-1 forms related to fixtures on the premises listed
         on Schedule 4.2) required by the Security Documents or under law or
         reasonably requested by the Administrative Agent to be filed,
         registered or recorded in order to create in favor of the
         Administrative Agent, for the benefit of the Lenders, a perfected Lien
         on the Collateral described therein (excluding unregistered
         copyrightable works), prior and superior in right to any other Person
         (other than with respect to Liens expressly permitted by Section 6.3),
         shall be in proper form for filing, registration or recordation.

                  (o) Insurance. The Administrative Agent shall have received
         insurance certificates satisfying the requirements of Section 5.3 of
         the Guarantee and Collateral Agreement.

                  4.2 Other Conditions. The effectiveness of the obligations of
the Lenders to make Term Loans in the aggregate in excess of $35,000,000 under
this Agreement and the agreement of each Lender to make any such Term Loans in
such excess amount requested to be made by it is subject to the Borrower having
obtained a duly executed Landlord Waiver and Consent from the landlords of at
least four of the premises listed on Schedule 4.2 (it being understood and
agreed by the Borrower that the foregoing condition precedent shall not be
deemed to have been satisfied by any compliance with the terms and conditions of
Section 5.12 in the absence of the Borrower's having obtained a duly executed
Landlord Waiver and Consent from the landlords of at least four of the premises
listed on Schedule 4.2).

                  4.3 Conditions to Each Loan. The agreement of each Lender to
make any Loan requested to be made by it on any date (including its initial
Loan) is subject to the satisfaction of the following conditions precedent:

                  (a) Representations and Warranties. Each of the
         representations and warranties made by any Loan Party in or pursuant to
         the Loan Documents shall be true and correct in all material respects
         on and as of such date as if made on and as of such date, except to the
         extent such representations and warranties relate to a specific earlier
         date, in which case such representations and warranties shall have been
         true and correct in all material respects on and as of such earlier
         date.

                  (b)  No Default.  No Default or Event of Default shall have
         occurred and be continuing on such date or after giving effect to the
         Loans requested to be made on such date.

Each borrowing by the Borrower hereunder and the effectiveness of this Agreement
under Section 4.1 shall constitute a representation and warranty by the Borrower
as of the date of such borrowing or such initial effectiveness under Section
4.1, as the case may be, that the conditions contained in this Section 4.3 have
been satisfied.

                        SECTION 5. AFFIRMATIVE COVENANTS

<PAGE>   52

                                                                              47

                  The Parent and the Borrower hereby jointly and severally agree
that, so long as the Commitments remain in effect or any Loan or other amount is
owing to any Lender or the Administrative Agent hereunder:

                  5.1  Financial Statements.  The Parent will furnish to the
Administrative Agent (which will to each Lender):

                  (a) (i) as soon as available, but in any event within 90 days
         after the end of each fiscal year of the Parent, a copy of the audited
         consolidated and unaudited consolidating balance sheet of the Parent
         and its consolidated Subsidiaries as at the end of such year and the
         related audited consolidated and unaudited consolidating statements of
         income and of cash flows for such year, setting forth in each case in
         comparative form the figures for the previous year, reported on without
         a "going concern" or like qualification or exception, or qualification
         arising out of the scope of the audit, by KPMG LLP ("KPMG") or other
         independent certified public accountants of nationally recognized
         standing;

                  (ii) as soon as available, but in any event within 90 days
         after the end of each fiscal year of the Borrower, a copy of the
         audited consolidated and unaudited consolidating balance sheet of the
         Borrower and its consolidated Subsidiaries as at the end of such year
         and the related audited consolidated and unaudited consolidating
         statements of income and of cash flows for such year, setting forth in
         each case in comparative form the figures for the previous year,
         reported on without a "going concern" or like qualification or
         exception, or qualification arising out of the scope of the audit, by
         KPMG or other independent certified public accountants of nationally
         recognized standing;

                  (b) (i) as soon as available, but in any event not later than
         45 days after the end of each of the first three quarterly periods of
         each fiscal year of the Parent, the unaudited consolidated and
         consolidating balance sheet of the Parent and its consolidated
         Subsidiaries as at the end of such quarter and the related unaudited
         consolidated and consolidating statements of income and of cash flows
         for such quarter and the portion of the fiscal year through the end of
         such quarter, setting forth in each case in comparative form the
         figures for the corresponding period from the previous year, certified
         by a Responsible Officer of the Parent as being fairly stated in all
         material respects (subject to normal year-end audit adjustments) in
         accordance with GAAP;

                  (ii) as soon as available, but in any event not later than 45
         days after the end of each of the first three quarterly periods of each
         fiscal year of the Borrower, the unaudited consolidated and
         consolidating balance sheet of the Borrower and its consolidated
         Subsidiaries as at the end of such quarter and the related unaudited
         consolidated and consolidating statements of income and of cash flows
         for such quarter and the portion of the fiscal year through the end of
         such quarter, setting forth in each case in comparative form the
         figures for the corresponding period from the previous year, certified
         by a Responsible Officer of the Borrower as being fairly stated in all
         material respects (subject to normal year-end audit adjustments) in
         accordance with GAAP; and

<PAGE>   53

                                                                              48

                  (c) as soon as available, but in any event not later than 45
         days after the end of each month occurring during each fiscal year of
         the Borrower (other than the third, sixth, ninth and twelfth such
         month), the unaudited consolidated and consolidating balance sheets of
         the Borrower and its Subsidiaries as at the end of such month and the
         related unaudited consolidated and consolidating statements of income
         and of cash flows for such month and the portion of the fiscal year
         through the end of such month, setting forth in each case in
         comparative form the figures for the corresponding period from the
         previous year, certified by a Responsible Officer of the Borrower as
         being fairly stated in all material respects (subject to normal
         year-end audit adjustments) in accordance with GAAP.

All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
(except, in the case of unaudited quarterly and monthly statements, for
accompanying notes thereto) applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such accountants
or officer, as the case may be, and disclosed therein).

                  5.2  Certificates; Other Information.  The Parent will furnish
to the Administrative Agent and each Lender (or, in the case of clause (h), to
the relevant Lender):

                  (a) concurrently with the delivery of the financial statements
         referred to in Section 5.1(a), a certificate of the independent
         certified public accountants reporting on such financial statements
         stating that in making the examination necessary therefor no knowledge
         was obtained of any Default or Event of Default, except as specified in
         such certificate;

                  (b) concurrently with the delivery of any financial statements
         pursuant to Section 5.1, (i) a certificate of a Responsible Officer of
         the Parent or the Borrower, as the case may be, stating in substance
         that, to the best of each such Responsible Officer's knowledge, each
         Loan Party during such period has observed or performed all of its
         covenants and other agreements, and satisfied every condition,
         contained in this Agreement and the other Loan Documents to which it is
         a party to be observed, performed or satisfied by it, and that such
         Responsible Officer has obtained no knowledge of any Default or Event
         of Default except as specified in such certificate and (ii) in the case
         of quarterly or annual financial statements, (x) a Compliance
         Certificate containing all information and calculations necessary for
         determining compliance by the Parent, the Borrower and its Subsidiaries
         with the provisions of this Agreement referred to therein as of the
         last day of the fiscal quarter or fiscal year of the Borrower, as the
         case may be, and (y) to the extent not previously disclosed to the
         Administrative Agent, a listing of any county or state within the
         United States where any Loan Party keeps any material item of inventory
         or equipment and of any Intellectual Property acquired by any Loan
         Party since the date of the most recent list delivered pursuant to this
         clause (y) (or, in the case of the first such list so delivered, since
         the Closing Date);

<PAGE>   54

                                                                              49

                  (c) as soon as available, and in any event no later than 30
         days after the end of each fiscal year, a detailed consolidated budget
         for the Borrower and its Subsidiaries for each of the twelve months
         comprising the succeeding fiscal year;

                  (d) as soon as available, and in any event no later than 45
         days after the end of the second and fourth quarters of each fiscal
         year, a projected consolidated balance sheet of the Borrower and its
         Subsidiaries as of the last day of each fiscal year during the term of
         this Agreement, the related consolidated statements of projected cash
         flow, projected changes in financial position and projected income for
         the twelve-month period (or, in the case of the first such period
         following the second quarter of any fiscal year, the six-month period)
         ending on such last day and a description of the underlying assumptions
         applicable thereto (collectively, the "Projections"), which Projections
         shall in each case be accompanied by a certificate of a Responsible
         Officer of the Borrower stating that such Projections have been
         prepared in good faith based on estimates, information and assumptions
         believed by the Borrower to be reasonable; provided, however, that
         unless any such Projections would describe a material adverse change
         (relative to the Borrower and its Subsidiaries, taken as a whole) from
         the then most recent Projections furnished to the Administrative Agent,
         Borrower shall only be obligated to furnish Projections pursuant to
         this paragraph within 45 days after delivery of financial statements as
         of the end of the fourth quarter of each fiscal year;

                  (e) as soon as available, and in any event no later than 45
         days after the end of each fiscal quarter, summary Market information,
         substantially in the form of Exhibit H, as of the end of such fiscal
         quarter;

                  (f) within five days after the same are sent, copies of all
         financial statements and reports that the Parent or the Borrower sends
         to the holders of any other class of its debt securities or any class
         of its public equity securities and, within five days after the same
         are filed, copies of all financial statements and reports that the
         Parent or the Borrower may make to, or file with, the SEC;

                  (g) promptly upon receipt of notice of (i) any forfeiture,
         non-renewal, cancellation, termination, revocation, suspension,
         impairment or material modification of any material Communications
         License held by the Parent, the Borrower or any of its Subsidiaries, or
         any notice of default or forfeiture with respect to any such material
         Communications License, or (ii) any refusal by the FCC or any PUC to
         renew or extend any such material Communications License, a certificate
         of a Responsible Officer specifying the nature of such event, the
         period of existence thereof, and what action the Parent, the Borrower
         or its Subsidiaries, as the case may be, are taking and propose to take
         with respect thereto; and

                  (h) upon reasonable notice and subject to any applicable
         confidentiality undertakings of any Loan Party to any third party, such
         additional financial and other information as any Lender may from time
         to time reasonably request.

<PAGE>   55

                                                                              50

                  5.3 Payment of Obligations. The Borrower will, and will cause
each of its Subsidiaries to, pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower and its Subsidiaries.

                  5.4 Maintenance of Existence; Compliance. The Borrower will,
and will cause each of its Subsidiaries to, (a) (i) preserve, renew and keep in
full force and effect its corporate existence and (ii) take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its business (including, without limitation, all
Communications Licenses and franchises issued or granted by any Governmental
Authority), except, in each case, as otherwise permitted by Section 6.4 and
except, in the case of clause (ii) above, to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and (b)
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.

                  5.5 Maintenance of Property; Insurance. The Borrower will, and
will cause each of its Subsidiaries to, (a) keep all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted and (b) maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and against at
least such risks (but including in any event public liability, product liability
and business interruption) as are usually insured against in the same general
area by CLECs, so long as such insurance is commercially available.

                  5.6 Inspection of Property; Books and Records; Discussions.
(a) The Borrower will, and will cause each of its Subsidiaries to, keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at reasonable times
and intervals and, unless a Default or Event of Default shall have occurred and
be continuing (in which circumstances only one day's notice shall be required),
upon not less than five (5) Business Days' prior written notice and to discuss
the business, operations, properties and financial and other condition of the
Parent, the Borrower and its Subsidiaries with officers and employees of the
Parent, the Borrower and its Subsidiaries and with its independent certified
public accountants (provided that any Responsible Officer of the Parent, the
Borrower or any of its Subsidiaries may, if it so desires, be present at and
participate in any such discussion), in each case, subject to any applicable
confidentiality undertakings by the Parent, the Borrower and its Subsidiaries to
third parties.

                  5.7  Notices.  The Parent or the Borrower will promptly give
notice to the Administrative Agent and each Lender of:

                  (a)  the occurrence of any Default or Event of Default;

<PAGE>   56

                                                                            51

                  (b) the occurrence of any (i) default or event of default
         under any Contractual Obligation of the Parent, the Borrower or any of
         its Subsidiaries or (ii) litigation, investigation or proceeding that
         may exist at any time between the Parent, the Borrower or any of its
         Subsidiaries and any Governmental Authority, that in either case, if
         not cured or if adversely determined, as the case may be, could
         reasonably be expected to have a Material Adverse Effect;

                  (c) the commencement of any litigation or proceeding affecting
         the Parent, the Borrower or any of its Subsidiaries in which the amount
         of damages sought from the Parent, the Borrower or any Subsidiary is
         $1,000,000 or more and not covered by insurance or in which injunctive
         or similar relief is sought against the Parent, the Borrower or any of
         its Subsidiaries;

                  (d) the occurrence of any of the following events, as soon as
         possible and in any event within 30 days after the Borrower knows or
         has reason to know thereof: (i) the occurrence of any Reportable Event
         with respect to any Plan, a failure to make any required contribution
         to a Plan, the creation of any Lien in favor of the PBGC or a Plan or
         any withdrawal from, or the termination, Reorganization or Insolvency
         of, any Multiemployer Plan or (ii) the institution of proceedings or
         the taking of any other action by the PBGC or the Borrower or any
         Commonly Controlled Entity or any Multiemployer Plan with respect to
         the withdrawal from, or the termination, Reorganization or Insolvency
         of, any Plan; and

                  (e) any development or event that has had or could reasonably
         be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 5.7 shall be accompanied by a statement of
a Responsible Officer of the relevant Person setting forth details of the
occurrence referred to therein and stating what action the Parent, the Borrower
or the relevant Subsidiary proposes to take with respect thereto.

                  5.8 Environmental Laws. (a) The Borrower will, and will cause
each of its Subsidiaries to, comply in all material respects with, and use
reasonable efforts to ensure compliance in all material respects by all tenants
and subtenants, if any, with, all applicable Environmental Laws, and obtain and
comply in all material respects with and maintain, and use reasonable efforts to
ensure that all tenants and subtenants obtain and comply in all material
respects with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws.

                  (b) The Borrower will, and will cause each of its Subsidiaries
to, conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions, required under Environmental Laws and
promptly comply in all material respects with all lawful orders and directives
of all Governmental Authorities regarding Environmental Laws.

<PAGE>   57

                                                                              52

                  5.9 Interest Rate Protection. The Borrower will, on or prior
to the second anniversary of the Closing Date, enter into Hedge Agreements to
the extent necessary to provide that at least 50% of the aggregate principal
amount of the Indebtedness of the Borrower and its Subsidiaries is subject to
either a fixed interest rate or interest rate protection, for a period of not
less than three years, which Hedge Agreements shall have terms and conditions
reasonably satisfactory to the Administrative Agent.

                  5.10  Additional Collateral, etc. The Borrower will, and will
 cause each of its Subsidiaries to,

                  (a) with respect to any property acquired after the Closing
Date by the Borrower or any of its Subsidiaries (other than (x) any property
described in paragraph (b) or (c) below, (y) any property subject to a Lien
expressly permitted by Section 6.3(g) and (z) any property specifically excluded
from the Collateral by the terms of the Guarantee and Collateral Agreement) as
to which the Administrative Agent, for the benefit of the Lenders, does not have
a perfected Lien, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent deems reasonably necessary or advisable to
grant to the Administrative Agent, for the benefit of the Lenders, a security
interest in such property and (ii) take all other actions reasonably necessary
or advisable to grant to the Administrative Agent, for the benefit of the
Lenders, a perfected first priority security interest in such property,
including the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Guarantee and Collateral Agreement or by
law or as may be reasonably requested by the Administrative Agent.

                  (b) with respect to any fee interest in any real property
having a value (together with improvements thereof) of at least $1,000,000
acquired after the Closing Date by the Borrower or any of its Subsidiaries, such
Loan Party will promptly (i) execute and deliver a first priority Mortgage, in
favor of the Administrative Agent, for the benefit of the Lenders, covering such
real property, together with a Mortgage Recording Certificate with respect
thereto, (ii) if requested by the Administrative Agent, provide the Lenders with
(x) title and extended coverage insurance covering such real property in an
amount at least equal to the purchase price of such real property (or such other
amount as shall be reasonably specified by the Administrative Agent) as well as
a current ALTA survey thereof, together with a surveyor's certificate and (y)
any tenant consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust, each of
the foregoing in customary form and substance reasonably satisfactory to the
Administrative Agent and (iii) if reasonably requested by the Administrative
Agent, deliver to the Administrative Agent customary legal opinions relating to
the matters described above, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Administrative Agent.

                  (c) with respect to any new Subsidiary created or acquired
after the Closing Date by the Borrower or any of its Subsidiaries, such Loan
Party will promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems reasonably necessary or advisable to grant to the Administrative Agent,
for the benefit of the Lenders, a perfected first priority security interest in
the Capital

<PAGE>   58

                                                                              53

Stock of such new Subsidiary that is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement, (B) to take such actions as the
Administrative Agent deems reasonably necessary or advisable to grant to the
Administrative Agent for the benefit of the Lenders a perfected first priority
security interest in the Collateral described in the Guarantee and Collateral
Agreement with respect to such new Subsidiary, including the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required by
the Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent and (C) to deliver to the Administrative Agent a
certificate of such Subsidiary, substantially in the form of Exhibit E, with
appropriate insertions and attachments, and (iv) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent customary legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.

                  5.11 24-Market Reporting Requirement. From and after the date
of incurrence by the Parent of any Indebtedness pursuant to Section 6A.2(b), the
Parent and the Borrower will, within forty-five days following the last day of
each fiscal quarter, jointly deliver to the Administrative Agent a certificate
of a Responsible Officer of the Parent setting forth (a) a good-faith estimate
(based upon assumptions included in the Business Plan) of the remaining cost
(the A24-Market Completion Amount"), as of the last day of such fiscal quarter,
to complete the build-out of the 24 markets contemplated by the Business Plan
(the A24-Market Build-Out") and (b) the aggregate amount of cash and Cash
Equivalents held by the Parent and its Subsidiaries as of the last day of such
fiscal quarter.

                  5.12 Landlord Waivers and Consents. (a) The Borrower will use
its reasonable best efforts to obtain a duly executed Landlord Waiver and
Consent from each of the landlords of the premises listed on Schedule 4.2 (it
being understood that the Borrower will be under no obligation to pay money or
waive any legal rights it may have in order to obtain any such Landlord Waiver
and Consent).

                  (b) Prior to or concurrently with the Borrower achieving its
ninth Completed Market, the Borrower will, or will cause its relevant Subsidiary
to, obtain a duly executed Landlord Waiver and Consent from the landlord(s) of
at least six of premises then leased by the Borrower or its Subsidiaries.

                  (c) If, after the Borrower has achieved nine Completed
Markets, the Borrower or any of its Subsidiaries (i) acquires any property
subject to a lease or (ii) leases any property, the Borrower will, or will cause
its relevant Subsidiary to, use its reasonable best efforts to obtain a duly
executed Landlord Waiver and Consent from the landlord(s) of each such newly
acquired or leased property (it being understood that the Borrower will be under
no obligation to pay money or waive any legal rights it may have in order to
obtain any such Landlord Waiver and Consent).

<PAGE>   59

                                                                              54

                  SECTION 6. NEGATIVE COVENANTS OF THE BORROWER

                  The Borrower hereby agrees that, so long as the Commitments
remain in effect or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, the Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly:

                  6.1  Financial Condition Covenants.

                  (a) Stage 1. Until the earlier of (x) the first time that the
Consolidated Borrower EBITDA shall be greater than zero for any period of two
consecutive fiscal quarters and the Consolidated Borrower Leverage Ratio on the
last day of such period shall be at or below 10.0 to 1.00 and (y) June 30, 2003
(the earlier of the dates specified in clauses (x) and (y), the "Stage 2
Commencement Date"):

                           (i)  Borrower Debt-to-Contributed Capital Ratio.
         Permit the Borrower Debt-to-Contributed Capital Ratio as at the last
         day of any fiscal quarter of the Borrower to exceed 1.00 to 1.00.

                           (ii)  Quarterly Revenue.  Permit the Quarterly
         Revenue for any fiscal quarter of the Borrower set forth below to be
         less than the amount set forth below opposite such fiscal quarter:

<TABLE>
<CAPTION>

                              Fiscal Quarter         Quarterly Revenue
                              --------------         -----------------

                            <S>                      <C>
                                3/31/00                 $1,700,000
                                6/30/00                  3,617,000
                                9/30/00                  6,003,000
                               12/31/00                  9,130,000
                                3/31/01                 12,571,000
                                6/30/01                 16,627,000
                                9/30/01                 21,187,000
                               12/31/01                 26,365,000
                                3/31/02                 31,216,000
                                6/30/02                 36,645,000
                                9/30/02                 42,193,000
                               12/31/02                 47,868,000
</TABLE>

                           (iii) Consolidated Borrower EBITDA. For any fiscal
         quarter of the Borrower set forth below, permit the Consolidated
         Borrower EBITDA for such fiscal quarter to be less than the amount set
         forth below opposite the corresponding number of Completed Markets:

                  Up to and        10-15 Completed     16-20          20-24
                  including 9      Markets             Completed      Completed
                  Completed                            Markets        Markets
                  Markets

<PAGE>   60

                                                                              55

<TABLE>

<S>                     <C>                   <C>                     <C>                   <C>
12/31/99                 $(6,925,000)          $(6,925,000)            $(6,925,000)           $(6,925,000)

03/31/00                 $(8,289,000)          $(8,289,000)            $(8,289,000)           $(8,289,000)

06/30/00                 $(8,732,000)          $(8,732,000)            $(8,732,000)           $(8,732,000)

09/30/00                 $(7,776,000)          $(11,108,000)           $(11,108,000)          $(11,108,000)

12/31/00                 $(5,035,000)          $(9,867,000)            $(9,867,000)           $(9,867,000)

03/31/01                 $(4,457,000)          $(9,701,000)            $(10,953,000)          $(10,953,000)

06/30/01                 $(3,404,000)          $(7,767,000)            $(10,119,000)          $(10,119,000)

09/30/01                 $(2,246,000)          $(5,860,000)            $(8,352,000)           $(8,988,000)

12/31/01                 $(944,000)            $(3,802,000)            $(5,617,000)           $(8,056,000)

03/31/02                 $(186,000)            $(2,689,000)            $(3,945,000)           $(6,081,000)

06/30/02                 $563,000              $(1,297,000)            $(2,048,000)           $(3,454,000)

09/30/02                 $1,474,000            $381,000                $190,000               $(814,000)

12/31/02                 $2,513,000            $2,135,000              $2,513,000             $1,964,000

</TABLE>

                  (b)  Stage 2.  From and after the Stage 2 Commencement Date:

                           (i) Consolidated Borrower Leverage Ratio. Permit the
         Consolidated Borrower Leverage Ratio as at the last day of any fiscal
         quarter set forth below to exceed the ratio set forth below opposite
         such fiscal quarter:
<TABLE>
<CAPTION>

                                                           Consolidated Borrower
                           Fiscal Quarter                     Leverage Ratio
                           --------------                     --------------

                         <S>                               <C>
                            3/31/03                              7.00 to 1
                            6/30/03                              5.00 to 1
                            9/30/03                              4.00 to 1
                           12/31/03                              3.00 to 1
                            3/31/04 and each fiscal              3.00 to 1
                                    quarter end thereafter
</TABLE>

                           (ii) Consolidated Interest Coverage Ratio. Permit the
         Consolidated Interest Coverage Ratio for any period of two consecutive
         fiscal quarters of the Borrower ending with any fiscal quarter set
         forth below to be less than the ratio set forth below opposite such
         fiscal quarter:
<TABLE>
<CAPTION>

                                                            Consolidated Interest
                           Fiscal Quarter                     Coverage Ratio
                           --------------                     --------------
                           <S>                              <C>
                             3/31/03                             1.50 to 1
                             6/30/03                             1.50 to 1
                             9/30/03 and each fiscal             2.00 to 1
                                     quarter end thereafter
</TABLE>

<PAGE>   61

                                                                              56

                           (iii) Consolidated Pro Forma Debt Service Coverage
         Ratio. Permit the Consolidated Pro Forma Debt Service Coverage Ratio
         for any period of two consecutive fiscal quarters of the Borrower
         ending with any fiscal quarter set forth below to be less than the
         ratio set forth below opposite such fiscal quarter:

<TABLE>
<CAPTION>

                                                    Consolidated Pro Forma
                   Fiscal Quarter                 Debt Service Coverage Ratio
                   --------------                 ---------------------------

                 <S>                             <C>
                     3/31/04                             1.00 to 1
                     6/30/04                             1.00 to 1
                     9/30/04                             1.25 to 1
                    12/31/04                             1.25 to 1
                     3/31/05 and each fiscal             1.50 to 1
                             quarter end thereafter
</TABLE>

                  6.2  Indebtedness.  Create, issue, incur, assume, become
liable in respect of or suffer to any Indebtedness, except:

                  (a)  Indebtedness of any Loan Party pursuant to any Loan
         Document;

                  (b)  Indebtedness of the Borrower to any Subsidiary and of any
         Wholly Owned Subsidiary to the Borrower or any other Subsidiary;

                  (c)  Guarantee Obligations incurred in the ordinary course of
         business by the Borrower or any of its Subsidiaries of obligations of
         the Borrower or any Wholly Owned Subsidiary;

                  (d) Indebtedness (including, without limitation, Capital Lease
         Obligations) secured by Liens permitted by Section 6.3(f) in an
         aggregate principal amount not to exceed $8,500,000 at any one time
         outstanding;

                  (e)  Permitted Borrower Subordinated Indebtedness; and

                  (f) Hedge Agreements in respect of Indebtedness otherwise
         permitted hereby that bears interest at a floating rate, so long as
         such agreements are not entered into for speculative purposes.

                  6.3 Liens. Create, incur, assume or suffer to exist any Lien
upon any of its property, whether now owned or hereafter acquired, except for:

                  (a) Liens for taxes not yet due or that are being contested in
         good faith by appropriate proceedings, provided that adequate reserves
         with respect thereto are maintained on the books of the Borrower or its
         Subsidiaries, as the case may be, as may be required in conformity with
         GAAP;

<PAGE>   62

                                                                              57

                  (b) carriers', warehousemen's, mechanics', materialmen's,
         repairmen's or other like Liens arising in the ordinary course of
         business that are not overdue for a period of more than 30 days or that
         are being contested in good faith by appropriate proceedings;

                  (c)  pledges or deposits in connection with workers'
         compensation, unemployment insurance and other social security
         legislation;

                  (d) deposits to secure the performance of bids, trade
         contracts (other than for borrowed money), leases, statutory
         obligations, surety, customs and appeal bonds, performance bonds and
         other obligations of a like nature incurred in the ordinary course of
         business;

                  (e) easements, rights-of-way, restrictions and other similar
         encumbrances incurred in the ordinary course of business that are not
         substantial in amount and that, individually or in the aggregate, do
         not materially detract from the value of the property subject thereto
         or materially interfere with the ordinary conduct of the business of
         the Borrower or any of its Subsidiaries;

                  (f) Liens securing Indebtedness of the Borrower or any other
         Subsidiary incurred pursuant to Section 6.2(d) to finance the
         acquisition of fixed or capital assets, provided that (i) such Liens
         shall be created substantially simultaneously with the acquisition of
         such fixed or capital assets, (ii) such Liens do not at any time
         encumber any property other than the property financed by such
         Indebtedness and (iii) the amount of Indebtedness secured thereby is
         not increased;

                  (g)  Liens created pursuant to the Security Documents;

                  (h) any interest or title of a lessor (or sublessor) under any
         lease (or sublease) entered into by the Borrower or any other
         Subsidiary in the ordinary course of its business and covering only the
         assets so leased (or subleased);

                  (i) judgment Liens with respect to judgments not in excess of
         $2,000,000 in the aggregate and with respect to which Lien execution
         has been stayed within thirty (30) days by appropriate judicial
         proceedings or the posting of an appeal bond or other security; and

                  (j) statutory and common law landlord's liens under leases to
         which the Borrower or any of its Subsidiaries is a party.

                  6.4 Fundamental Changes. Enter into any merger, consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:

<PAGE>   63

                  (a) any Subsidiary of the Borrower may be merged or
         consolidated with or into the Borrower (provided that the Borrower
         shall be the continuing or surviving corporation) or with or into any
         Wholly Owned Subsidiary (provided that a Wholly Owned Subsidiary shall
         be the continuing or surviving corporation); and

                  (b) any Subsidiary of the Borrower may Dispose of any or all
         of its assets (upon voluntary liquidation or otherwise) to the Borrower
         or any Wholly Owned Subsidiary.

                  6.5 Disposition of Property. Dispose of any of its property,
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:

                  (a) the Disposition in the ordinary course of business of
         obsolete or worn out property or any other property (other than voice
         circuit switches) which Parent deems no longer needed or useful in the
         conduct of the business of the Borrower and its Subsidiaries;

                  (b)  the sale of inventory, capacity in a telecommunications
         network or dark fiber in the ordinary course of business;

                  (c)  Dispositions permitted by Section 6.4(b);

                  (d)  the sale or issuance of any Subsidiary's Capital Stock to
         the Borrower or any Wholly Owned Subsidiary; and

                  (e) Dispositions of (i) other property yielding gross proceeds
         to the Borrower and its Subsidiaries (valued at the initial principal
         amount thereof in the case of non-cash proceeds consisting of notes or
         other debt securities and valued at fair market value in the case of
         other non-cash proceeds) not in excess of (x) $250,000 in the aggregate
         for any fiscal year of the Borrower and (y) $500,000 in the aggregate
         during the term of this Agreement and (ii) voice circuit switches.

                  6.6 Restricted Payments. Declare or pay any dividend (other
than dividends payable solely in common stock or preferred Capital Stock (which
preferred Capital Stock shall not be subject to any mandatory redemption
provisions) of the Person making such dividend) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
Capital Stock of the Borrower or any Subsidiary of the Borrower, whether now or
hereafter outstanding, or make any other distribution in respect thereof, or (in
the case of the Borrower) return any capital of the Borrower to the Parent, or
make any other payment or other distribution to the Parent or any Subsidiary of
the Parent that is not the Borrower or a Subsidiary of the Borrower, in any such
case, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (collectively, "Restricted
Payments"), except that:

<PAGE>   64

                                                                              59

                  (a)  any Subsidiary may make Restricted Payments to the
         Borrower or any Wholly Owned Subsidiary of the Borrower;

                  (b) the Borrower may pay (i) dividends to the Parent after
         December 31, 2003 in amounts no greater than the amounts of scheduled
         cash interest payments in respect of Indebtedness of the Parent the
         proceeds of which were used to fund Contributed Parent Indebtedness or
         Permitted Borrower Subordinated Indebtedness (provided that such
         dividends may only be paid as and when such interest becomes due and
         payable) and (ii) management fees to the Parent pursuant to the
         Management Agreement not more often than quarterly, provided that each
         such quarterly management fee payment shall be in an amount not to
         exceed (A) for any fiscal quarter of the Borrower prior to the date
         which the Borrower has delivered a Compliance Certificate indicating
         that the Consolidated Borrower Leverage Ratio as at the last day of a
         fiscal quarter is not greater than 3.0 to 1.00, an amount equal to the
         greater of (I) $4,000,000 and (II) the sum of (x) the product of
         $250,000 multiplied by the number of Completed Markets achieved by the
         Borrower and its Subsidiaries as of the end of such fiscal quarter
         (provided that such number of Completed Markets may not exceed 15
         Completed Markets for purposes of this clause (x)) plus (y) the product
         of $175,000 multiplied by the number of Completed Markets achieved by
         the Borrower and its Subsidiaries as of the end of such fiscal quarter
         that are in excess of 15 Completed Markets and (B) for any other fiscal
         quarter, the product of 0.25 multiplied by the amount set forth below
         opposite the year such management fee is to be paid:

<TABLE>
<CAPTION>

                          Year                    Amount
                          ----                    ------

                 <S>                          <C>
                       1999-2003               $23,000,000
                         2004                   24,000,000
                   2005 - thereafter            27,500,000
</TABLE>

; provided that no such payment may be made pursuant to the foregoing clauses
(i) and (ii), unless (A) no Default or Event of Default shall have occurred and
be continuing both before and after the making of such payment and (B) the
Parent and the Borrower shall have delivered to the Administrative Agent
certificates demonstrating compliance, on a pro forma basis after giving effect
to such payment and the application of the proceeds thereof by the Parent, with
the covenants set forth in Section 6.1 and 6A.1, respectively; and

                  (c) the Borrower may reimburse the Parent for expenditures
         made by the Parent on behalf of the Borrower and its Subsidiaries in
         the ordinary course of business.

                  6.7 Capital Expenditures. Make or commit to make any Capital
Expenditure (other than Capital Expenditures for additional Markets permitted by
Section 6.16 funded with Contributed Capital in excess of Additional Capital),
except Capital Expenditures of the Borrower and its Subsidiaries in the ordinary
course of business in amounts not exceeding the amount set forth below for each
of the periods set forth below:

<PAGE>   65

                                                                              60

<TABLE>
<CAPTION>

                      -------------------------------------------------------------------
                      Period                                             Amount
                      -------------------------------------------------------------------

                      <S>                                                <C>
                      1999                                                   $20,307,280
                      -------------------------------------------------------------------
                      2000                                                    53,924,410
                      -------------------------------------------------------------------
                      2001                                                    80,474,560
                      -------------------------------------------------------------------
                      2002                                                    54,479,440
                      -------------------------------------------------------------------
                      2003                                                    55,463,370
                      -------------------------------------------------------------------
                      2004                                                    48,014,860
                      -------------------------------------------------------------------
                      2005                                                    47,746,100
                      -------------------------------------------------------------------
                      2006                                                    48,250,550
                      -------------------------------------------------------------------
                      2007                                                    47,478,670
                      -------------------------------------------------------------------
</TABLE>

provided, that (A) any amount not so expended in the period for which it is
permitted may be carried over for expenditure in the next succeeding period and
(B) Capital Expenditures made pursuant hereto during any period shall be deemed
made, first, in respect of amounts permitted for such period as provided above
and, second, in respect of amounts carried over from the prior period pursuant
to subclause (A) above.

                  6.8 Investments. Make any advance, loan, extension of credit
(by way of guaranty or otherwise) or capital contribution to, or purchase any
Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting a business unit of, or make any other investment in, any
Person (all of the foregoing, "Investments"), except:

                  (a)  extensions of trade credit in the ordinary course of
         business;

                  (b)  investments in Cash Equivalents;

                  (c)  Guarantee Obligations permitted by Section 6.2;

                  (d) travel advances to employees of the Borrower or any
         Subsidiary of the Borrower in the ordinary course of business, and
         relocation and other loans to such employees not in excess of $500,000,
         in the case of any such employee at any one time outstanding, or
         $1,000,000 in the aggregate for all such employees at any one time
         outstanding;

                  (e)  Permitted Acquisitions;

                  (f)  Investments in assets useful in the Borrower's
         Telecommunications Business with the proceeds of any Reinvestment
         Deferred Amount; and

                  (g)  intercompany Investments by the Borrower or any of its
         Subsidiaries in the Borrower or any Person that, prior to such
         investment, is a Wholly Owned Subsidiary;

                  (h)  Restricted Payments permitted by Section 6.6;

<PAGE>   66

                                                                              61

                  (i) Investments acquired (i) in exchange for any other
         Investment or any receivable in connection with or as a result of a
         bankruptcy, workout, reorganization or recapitalization of any Person,
         (ii) as a result of a foreclosure upon any assets securing any secured
         Indebtedness or (iii) in satisfaction of a judgment;

                  (j) Investments in prepaid expenses, negotiable instruments
         held for collection and lease, utility, workers' compensation,
         performance and other similar deposits in the ordinary course of
         business; and

                  (k) promissory notes or other Indebtedness received in
         connection with Dispositions permitted by Section 6.5 in an aggregate
         amount not to exceed $2,000,000 at any one time outstanding; provided
         that any such promissory note (or series of related promissory notes)
         payable in a principal amount equal to or greater than $50,000 shall
         have been delivered to the Administrative Agent to be held as
         Collateral pursuant to the Guarantee and Collateral Agreement.

                  6.9 Optional Payments Under and Modifications of Certain
Agreements. (a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of or otherwise optionally or voluntarily
defease or segregate funds with respect to any Permitted Borrower Subordinated
Indebtedness or (b) amend, modify, waive or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of (i) any Permitted Borrower Subordinated Indebtedness (other than any
such amendment, modification, waiver or other change that would extend the
maturity or reduce the amount of any payment of principal thereof or reduce the
rate or extend any date for payment of interest thereon), (ii) the Management
Agreement or (iii) the Stock Agreements, except, in the case of clause (ii) or
(iii) above, in a manner that, in the reasonable discretion of the Required
Lenders, could not be expected to be materially adverse to the interests of the
Lenders.

                  6.10 Transactions with Affiliates. Except for (i) the exercise
of rights and performance of obligations under the Management Agreement in
accordance with the terms thereof, (ii) the payment of reasonable and customary
directors fees to, and reasonable and customary indemnity provided on behalf of,
officers and directors of any Loan Party and (iii) any Restricted Payments
permitted by Section 6.6 and any Investments permitted by Section 6.8, directly
or indirectly enter into any transaction, including any purchase, sale, lease or
exchange of property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate of the Borrower (other
than the Borrower or any Wholly Owned Subsidiary) unless (a) such transaction is
(i) otherwise permitted under this Agreement, (ii) in the ordinary course of
business of the Borrower or such Subsidiary, as the case may be, and (iii) upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person that is not an Affiliate and (b) in the case of any
such transaction involving consideration in excess of $1,000,000, the Lenders
shall have received prior written notice thereof.

                6.11 Sales and Leasebacks. Enter into any arrangement with any
Person providing for the leasing by the Borrower or any Subsidiary of real or
personal property that has

<PAGE>   67

                                                                              62

been or is to be sold or transferred by the Borrower or such Subsidiary to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of the
Borrower or such Subsidiary.

                  6.12 Changes in Fiscal Periods. Permit the fiscal year of the
Borrower to end on a day other than December 31 or change the Borrower's method
of determining fiscal quarters except with the prior written consent of the
Required Lenders, which consent shall not be unreasonably withheld.

                  6.13 Negative Pledge Clauses. Enter into or suffer to exist or
become effective any agreement that prohibits or limits the ability of the
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property or revenues, whether now owned or hereafter
acquired, to secure its obligations under the Loan Documents to which it is a
party, other than (a) this Agreement and the other Loan Documents and (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).

                  6.14 Clauses Restricting Subsidiary Distributions. Enter into
or suffer to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary of the Borrower to (a) make Restricted Payments
in respect of any Capital Stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b)
make loans or advances to, or other Investments in, the Borrower or any other
Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or
any other Subsidiary of the Borrower, except for such encumbrances or
restrictions existing under or by reason of (i) any restrictions existing under
the Loan Documents and (ii) any restrictions with respect to a Subsidiary
imposed pursuant to an agreement that has been entered into in connection with
the Disposition of all or substantially all of the Capital Stock or assets of
such Subsidiary.

                  6.15 Lines of Business. Enter into any business, either
directly or through any Subsidiary, except for the Borrower's Telecommunications
Business in the United States of America.

                  6.16 Entry Into Additional Markets. Expend an amount in excess
of $250,000 in connection with the development or build-out of any Market (other
than the Initial Markets) unless the following conditions shall be satisfied:
(a) the Borrower shall have given at least 15 days' prior written notice to the
Administrative Agent and each Lender, (b) such Market shall have been listed on
Schedule 6.16B and (c) the Borrower shall have delivered to the Lenders a
certificate of a Responsible Officer of the Borrower attaching the business plan
for such Market and stating that (and setting forth in reasonable detail the
relevant information) the Borrower and its Subsidiaries have a combination of
(i) cash and Cash Equivalents, (ii) unused availability under the Term Facility
and (iii) unused irrevocable commitments under the Capital Call Agreement, to
fund fully (taking into account its other capital requirements and other sources
of funds permitted hereunder) the build-out of such Market, including start-up
losses (the amount of such additional capital, the "Additional Capital").

<PAGE>   68

                                                                              63

                  SECTION 6A. NEGATIVE COVENANTS OF THE PARENT

                  The Parent hereby agrees that, so long as the Commitments
remain in effect or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, the Parent shall not, directly or indirectly:

                  6A.1.  Financial Condition Covenants.

                  (a)  Consolidated Parent Debt-to-Capitalization Ratio.
Permit the Consolidated Parent Debt-to-Capitalization Ratio at any time to
exceed 75%.

                  (b) Consolidated Parent Leverage Ratio. From and after March
31, 2004, permit the Consolidated Parent Leverage Ratio as at the last day of
any fiscal quarter set forth below to exceed the ratio set forth below opposite
such fiscal quarter:

<TABLE>
<CAPTION>

                                                    Consolidated Parent
                   Fiscal Quarter                     Leverage Ratio
                   --------------                     --------------

                  <S>                              <C>
                     3/31/04                           15.00 to 1
                     6/30/04                           11.00 to 1
                     9/30/04                            9.00 to 1
                    12/31/04                            8.00 to 1
                     3/31/05                            7.00 to 1
                     6/30/05                            7.00 to 1
                     9/30/05                            6.00 to 1
                    12/31/05                            6.00 to 1
                     3/31/06                            5.00 to 1
                     6/30/06                            5.00 to 1
                     9/30/06                            5.00 to 1
                    12/31/06 and each fiscal            5.00 to 1
                             quarter end thereafter
</TABLE>

                  6A.2.  Indebtedness.  Create, issue, incur, assume, become
liable in respect of or suffer to exist any Indebtedness, except:

                  (a) Indebtedness outstanding on the date hereof and listed on
         Schedule 6A.2(a) and any refinancings, refundings, renewals or
         extensions thereof (without increasing, or shortening the maturity of,
         the principal amount thereof); and

                  (b) additional Indebtedness not otherwise permitted pursuant
         to this Section 6A.2, provided that (i) at the time of incurrence
         thereof, the Parent is in compliance with the Capital Call Agreement,
         (ii) the Borrower shall have achieved at least six Completed Markets
         and (iii) (A) the terms of such additional Indebtedness shall not
         contain any cross-default provisions (but may include a
         cross-acceleration provision), (B) the terms of such

<PAGE>   69

                                                                              64

         additional Indebtedness shall not contain any financial maintenance
         covenants, (C) such additional Indebtedness shall not be secured by any
         asset of the Parent or any of its Subsidiaries (other than restricted
         cash or Cash Equivalents securing prefunded interest payments), (D) no
         portion of the principal of such additional Indebtedness shall be
         scheduled to be redeemed, repurchased or otherwise repaid prior to the
         date that is six months after the Termination Date and (E) such
         additional Indebtedness shall otherwise be on terms then customary for
         high-yield debt securities of comparable issuers.

                  6A.3.  Lines of Business.  Enter into any business, either
directly or through any Subsidiary, except for the Parent's Telecommunications
Business in North America.

                  6A.4. Negative Pledge Clauses. Enter into or suffer to exist
or become effective any agreement that prohibits or limits the ability of the
Parent to create, incur, assume or suffer to exist any Lien upon the Capital
Stock of the Borrower or the network operations equipment owned by the Parent or
hereafter acquired by it, to secure its obligations under the Loan Documents to
which it is a party, other than this Agreement and the other Loan Documents.

                  6A.5. Changes in Fiscal Periods. Permit the fiscal year of the
Parent to end on a day other than December 31 or change the Parent's method of
determining fiscal quarters except with the prior written consent of the
Required Lenders, which consent shall not be unreasonably withheld.

                  6A.6. No Expenditures of Unfunded 24-Market Amount. From and
after the date of incurrence by the Parent of any Indebtedness pursuant to
Section 6A.2(b), make or commit to make any payment or expenditure of any kind,
other than a contribution to the capital of (or expenditure on behalf of) the
Borrower, unless, on a pro forma basis after giving effect to such payment or
expenditure, no Default or Event of Default shall have occurred and be
continuing and the Parent shall have on deposit cash and Cash Equivalents in an
aggregate amount that is greater than or equal to the Unfunded 24-Market Amount,
if any, as of the date of the making of (or the commitment to make, as the case
may be) such payment or expenditure.

                          SECTION 7. EVENTS OF DEFAULT

                  If any of the following events shall occur and be continuing:

                  (a) the Borrower shall fail to pay any principal of any Loan
         when due in accordance with the terms hereof; or the Borrower shall
         fail to pay any interest on any Loan, or any other amount payable
         hereunder or under any other Loan Document, within five days after any
         such interest or other amount becomes due in accordance with the terms
         hereof; or

                  (b) any representation or warranty made or deemed made by any
         Loan Party herein or in any other Loan Document or that is contained in
         any certificate, document or financial or other statement furnished by
         it at any time under or in connection with this

<PAGE>   70
                                                                              65

         Agreement or any such other Loan Document shall prove to have been
         inaccurate in any material respect on or as of the date made or deemed
         made; or

                  (c) (i) any Loan Party shall default in the observance or
         performance of any agreement contained in Section 5.7(a), Section 6 or
         Section 6A of this Agreement or Sections 5.5 and 5.7(b) of the
         Guarantee and Collateral Agreement or (ii) an "Event of Default" under
         and as defined in any Mortgage shall have occurred and be continuing;
         or

                  (d) any Loan Party shall default in the observance or
         performance of any other agreement contained in this Agreement or any
         other Loan Document (other than as provided in paragraphs (a) through
         (c) of this Section), and such default shall continue unremedied for a
         period of 30 days after notice to the Borrower from the Administrative
         Agent or any Lender; or

                  (e) the Parent, the Borrower or any of their respective
         Subsidiaries shall (i) default in making any payment of any principal
         of any Indebtedness (including any Guarantee Obligation, but excluding
         the Loans) on the due date thereof; or (ii) default in making any
         payment of any interest on any such Indebtedness beyond the period of
         grace, if any, provided in the instrument or agreement under which such
         Indebtedness was created; or (iii) default in the observance or
         performance of any other agreement or condition relating to any such
         Indebtedness or contained in any instrument or agreement evidencing,
         securing or relating thereto, or any other event shall occur or
         condition exist, the effect of which default or other event or
         condition is to cause, or to permit the holder or beneficiary of such
         Indebtedness (or a trustee or agent on behalf of such holder or
         beneficiary) to cause, with the giving of notice if required, such
         Indebtedness to become due prior to its stated maturity or (in the case
         of any such Indebtedness constituting a Guarantee Obligation) to become
         payable; provided, that a default, event or condition described in
         clause (i), (ii) or (iii) of this paragraph (e) shall not at any time
         constitute an Event of Default unless, at such time, one or more
         defaults, events or conditions of the type described in clauses (i),
         (ii) and (iii) of this paragraph (e) shall have occurred and be
         continuing with respect to Indebtedness the outstanding principal
         amount of which exceeds in the aggregate (x) in the case of the Parent
         or any of its Subsidiaries (other than the Borrower and its
         Subsidiaries), $2,500,000, or (y) in the case of the Borrower and its
         Subsidiaries, $1,500,000; or

                  (f) (i) the Parent, the Borrower or any of their respective
         Subsidiaries shall commence any case, proceeding or other action (A)
         under any existing or future law of any jurisdiction, domestic or
         foreign, relating to bankruptcy, insolvency, reorganization or relief
         of debtors, seeking to have an order for relief entered with respect to
         it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
         reorganization, arrangement, adjustment, winding-up, liquidation,
         dissolution, composition or other relief with respect to it or its
         debts, or (B) seeking appointment of a receiver, trustee, custodian,
         conservator or other similar official for it or for all or any
         substantial part of its assets, or the Parent, the Borrower or any of
         their respective Subsidiaries shall make a general assignment for the
         benefit of its creditors; or (ii) there shall be commenced against the
         Parent, the

<PAGE>   71
                                                                              66

         Borrower or any of their respective Subsidiaries any case,
         proceeding or other action of a nature referred to in clause (i) above
         that (A) results in the entry of an order for relief or any such
         adjudication or appointment or (B) remains undismissed, undischarged or
         unbonded for a period of 60 days; or (iii) there shall be commenced
         against the Parent, the Borrower or any of their respective
         Subsidiaries any case, proceeding or other action seeking issuance of a
         warrant of attachment, execution, distraint or similar process against
         all or any substantial part of its assets that results in the entry of
         an order for any such relief that shall not have been vacated,
         discharged, or stayed or bonded pending appeal within 60 days from the
         entry thereof; or (iv) the Parent, the Borrower or any of their
         respective Subsidiaries shall take any action in furtherance of, or
         indicating its consent to, approval of, or acquiescence in, any of the
         acts set forth in clause (i), (ii), or (iii) above; or (v) the Parent,
         the Borrower or any of their respective Subsidiaries shall generally
         not, or shall admit in writing its inability to, pay its debts as they
         become due; or

                  (g) (i) any Person shall engage in any "prohibited
         transaction" (as defined in Section 406 of ERISA or Section 4975 of the
         Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
         defined in Section 302 of ERISA), whether or not waived, shall exist
         with respect to any Plan or any Lien in favor of the PBGC or a Plan
         shall arise on the assets of the Borrower or any Commonly Controlled
         Entity, (iii) a Reportable Event shall occur with respect to, or
         proceedings shall commence to have a trustee appointed, or a trustee
         shall be appointed, to administer or to terminate, any Single Employer
         Plan, which Reportable Event or commencement of proceedings or
         appointment of a trustee is, in the reasonable opinion of the Required
         Lenders, likely to result in the termination of such Plan for purposes
         of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
         purposes of Title IV of ERISA, (v) the Borrower or any Commonly
         Controlled Entity shall, or in the reasonable opinion of the Required
         Lenders is likely to, incur any liability in connection with a
         withdrawal from, or the Insolvency or Reorganization of, a
         Multiemployer Plan or (vi) any other similar event or condition not in
         the ordinary course shall occur or exist with respect to a Plan; and in
         each case in clauses (i) through (vi) above, such event or condition,
         together with all other such events or conditions, if any, could, in
         the sole judgment of the Required Lenders, reasonably be expected to
         have a Material Adverse Effect; or

                  (h) one or more judgments or decrees shall be entered against
         the Parent, the Borrower or any of their respective Subsidiaries
         involving in the aggregate a liability (not paid or fully covered by
         insurance) of (x) in the case of the Parent or any of its Subsidiaries
         (other than the Borrower and its Subsidiaries), $2,500,000 or more, or
         (y) in the case of the Borrower or any of its Subsidiaries, $1,500,000
         or more, and all such judgments or decrees shall not have been vacated,
         discharged, stayed or bonded pending appeal within 60 days from the
         entry thereof; or

                  (i) the Capital Call Agreement or any of the Security
         Documents shall cease, for any reason, to be in full force and effect,
         or any Loan Party or any Affiliate of any Loan Party shall so assert,
         or any Lien created by any of the Security Documents shall cease to be
         enforceable and of the same effect and priority purported to be created
         thereby; or
<PAGE>   72
                                                                              67

                  (j) any guarantee of any Loan Party contained in Section 2 of
         the Guarantee and Collateral Agreement shall cease, for any reason, to
         be in full force and effect while such Loan Party remains a party
         thereto or any Loan Party or any Affiliate of any Loan Party shall so
         assert; or

                  (k) (i) the Venture Investors shall cease to have the power to
         vote or direct the voting of securities having a majority of the
         ordinary voting power for the election of directors of the Parent
         (determined on a fully diluted basis); or (ii) the Founding Stockholder
         (as defined in the Venture Stockholders Agreement) transfers any of its
         Founder's Shares (as defined therein) in violation of Section 5(a) of
         the Venture Stockholders Agreement; or (iii) any "person" or "group"
         (as such terms are used in Sections 13(d) and 14(d) of the Securities
         Exchange Act of 1934, as amended (the "Exchange Act")), excluding the
         Venture Investors, shall become, or obtain rights (whether by means or
         warrants, options or otherwise) to become, the "beneficial owner" (as
         defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly
         or indirectly, of more than 35% of the combined voting power of the
         outstanding Capital Stock of the Parent; or (iv) any Venture Investor,
         together with its affiliates, shall become, or obtain rights (whether
         by means or warrants, options or otherwise) to become, the "beneficial
         owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange
         Act), directly or indirectly, of more than 50% of the combined voting
         power of the outstanding Capital Stock of the Parent; or (v) the board
         of directors of the Parent shall cease to consist of a majority of
         Continuing Directors; or (vi) the Parent at any time shall cease to own
         and control, of record and beneficially, directly, 100% of each class
         of outstanding Capital Stock of the Borrower free and clear of all
         Liens (except Liens created by the Guarantee and Collateral Agreement);
         or (vii) the shares of each class of outstanding Capital Stock of any
         Subsidiary of the Borrower shall cease to be owned by the Borrower free
         and clear of all Liens (except Liens created by the Guarantee and
         Collateral Agreement and Liens, if any, permitted by Section 6.3); or

                  (l) (i) the Parent at any time shall fail to perform any of
         its obligations under the Capital Call Agreement, including, without
         limitation, the funding of capital contributions to the Borrower in the
         amounts and on the dates provided for therein, or (ii) the Parent shall
         fail to maintain at all times cash and Cash Equivalents in an aggregate
         amount equal to its then-remaining obligations to the Borrower under
         the Capital Call Agreement; or

                  (m) any of the following events shall occur and the occurrence
         thereof, individually or in the aggregate, could reasonably be expected
         to have a Material Adverse Effect: (i) any filing with, license,
         permit, certification or franchise granted by, or authorization or
         other consent or approval of, the FCC, any PUC or any other
         Governmental Authority (collectively, "Regulatory Authorizations") (x)
         shall not be made or obtained, as the case may be, as and when required
         to permit (A) the continuing conduct by the Parent, the Borrower and
         its Subsidiaries of their respective businesses and operations in
         substantially the manner then being conducted and (B) the performance
         by each Loan Party of its obligations under the Loan Documents, or (y)
         shall be cancelled, terminated, rescinded,

<PAGE>   73
                                                                              68

         revoked, suspended, materially impaired or otherwise finally denied
         renewal, or shall cease to be in full force and effect, or (ii) any
         proceeding shall have been instituted by or shall have been commenced
         before any court, the FCC, any PUC or any other Governmental Authority
         that could reasonably be expected to result in (x) cancellation,
         termination, rescission, revocation, suspension, material impairment or
         denial of renewal of any Regulatory Authorization or (y) a modification
         of any Regulatory Authorization in a material adverse respect or a
         renewal thereof on terms that materially and adversely affect the
         economic or commercial value or usefulness thereof, or (iii) any
         material Interconnection Agreement shall be terminated and not renewed
         or replaced or shall be suspended or otherwise materially impaired, or
         shall be renegotiated and renewed or replaced on terms that materially
         and adversely affect the economic or commercial value or usefulness
         thereof, whether by action of the parties thereto or by action of or
         under, modification to, or rescinding of the Communications Act or any
         other applicable laws or regulations, in whole or in part;

then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents shall immediately become due and payable,
and (B) if such event is any other Event of Default, either or both of the
following actions may be taken: (i) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived by the Borrower.

                       SECTION 8. THE ADMINISTRATIVE AGENT

                  8.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
<PAGE>   74
                                                                              69

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

                  8.3 Exculpatory Provisions. Neither Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party a party thereto to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.

                  8.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Parent or the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
<PAGE>   75
                                                                              70

                  8.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender, the Parent or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or, if
so specified by this Agreement, all Lenders); provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.

                  8.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
have made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of a
Loan Party or any Affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
Affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their Affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any Affiliate of
a Loan Party that may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.

                  8.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Parent or the Borrower and without limiting the obligation of the Parent or
the Borrower to do so), ratably according to their respective Aggregate Exposure
Percentages in effect on the date on which indemnification is sought under this
Section (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such Aggregate Exposure Percentages immediately prior
to such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits,

<PAGE>   76
                                                                              71

costs, expenses or disbursements of any kind whatsoever that may at any time
(whether before or after the payment of the Loans) be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or arising out
of, the Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements that are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from the
Administrative Agent's gross negligence or willful misconduct. The agreements in
this Section shall survive the payment of the Loans and all other amounts
payable hereunder.

                  8.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Loan Party as though the
Administrative Agent were not the Administrative Agent. With respect to its
Loans made or renewed by it, the Administrative Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not the Administrative Agent, and the
terms "Lender" and "Lenders" shall include the Administrative Agent in its
individual capacity.

                  8.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor Administrative Agent for the Lenders,
which successor Administrative Agent shall (unless an Event of Default under
Section 7(a) or Section 7(f) with respect to the Borrower shall have occurred
and be continuing) be subject to approval by the Borrower (which approval shall
not be unreasonably withheld or delayed), whereupon such successor
Administrative Agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor Administrative Agent effective upon such appointment and approval, and
the former Administrative Agent's rights, powers and duties as Administrative
Agent shall be terminated, without any other or further act or deed on the part
of such former Administrative Agent or any of the parties to this Agreement or
any holders of the Loans. If no successor Administrative Agent has accepted
appointment as Administrative Agent by the date that is 10 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall assume and perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor Administrative Agent as provided for above. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 8 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.

                            SECTION 9. MISCELLANEOUS

<PAGE>   77
                                                                              72

                  9.1 Amendments and Waivers. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 9.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) eliminate or reduce any voting rights under
this Section 9.1, forgive the principal amount or extend the final scheduled
date of maturity of any Loan, extend the scheduled date of any amortization
payment in respect of any Term Loan, reduce the stated rate of any interest or
fee payable hereunder or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Lender's Commitment, in
each case without the consent of each Lender directly affected thereby; (ii)
reduce any percentage specified in the definition of Required Lenders, consent
to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, release all or
substantially all of the Collateral, release all or substantially all of the
Subsidiaries from their obligations under the Guarantee and Collateral Agreement
or release the Parent from its obligations under the Capital Call Agreement, in
each case without the consent of all Lenders; (iii) amend, modify or waive any
provision of Section 2.15 without the consent of the Majority Facility Lenders
in respect of each Facility adversely affected thereby; (iv) reduce the
percentage specified in the definition of Majority Facility Lenders with respect
to any Facility without the consent of all Lenders under such Facility; or (v)
amend, modify or waive any provision of Section 8 without the consent of the
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.

                  9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Parent, the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
<PAGE>   78
                                                                              73

        The Parent:                   Gabriel Communications, Inc.
                                      16090 Swingley Ridge Road
                                      Suite 500
                                      Chesterfield, Missouri 63017
                                      Attention:  Thomas P. Erickson,
                                      Chief Financial Officer
                                      Telecopy: (314) 537-5702
                                      Telephone: (314) 537-5702

        The Borrower and              Gabriel Communications Finance Company
          its Subsidiaries:           16090 Swingley Ridge Road
                                      Suite 500
                                      Chesterfield, Missouri 63017
                                      Attention:  Thomas P. Erickson,
                                      Chief Financial Officer
                                      Telecopy: (314) 537-5702
                                      Telephone: (314) 537-5702

        The Administrative Agent:     Canadian Imperial Bank of Commerce
                                      425 Lexington Avenue
                                      New York, New York  10017
                                      Attention:  Peter Medina
                                      Telecopy:  (212) 856-3763
                                      Telephone:  (212) 856-4217;

provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.

                  9.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

                  9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans and other extensions of credit hereunder until
payment in full of the Loans, interest thereon and all fees and other
Obligations hereunder.

                  9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Administrative Agent for all its out-of-pocket costs and
expenses incurred in

<PAGE>   79
                                                                              74

connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including the reasonable fees and disbursements of counsel to the
Administrative Agent and filing and recording fees and expenses, with statements
with respect to the foregoing to be submitted to the Borrower prior to the
Closing Date (in the case of amounts to be paid on the Closing Date) and from
time to time thereafter on a quarterly basis or at such other times as the
Administrative Agent shall deem appropriate, (b) to pay or reimburse each Lender
and the Administrative Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including the
fees and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Administrative Agent, (c)
to pay, indemnify, and hold each Lender and the Administrative Agent harmless
from, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, that may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the other
Loan Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Administrative Agent and their respective officers,
directors, employees, affiliates, agents and controlling persons (each, an
"Indemnitee") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including any
of the foregoing relating to the use of proceeds of the Loans or the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Parent, the Borrower any of its Subsidiaries or any of the
Properties and the reasonable fees and expenses of legal counsel in connection
with claims, actions or proceedings by any Indemnitee against any Loan Party
under any Loan Document (all the foregoing in this clause (d), collectively, the
"Indemnified Liabilities"), provided, that the Borrower shall have no obligation
hereunder to any Indemnitee with respect to Indemnified Liabilities to the
extent such Indemnified Liabilities are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Indemnitee. Without limiting the
foregoing, and to the extent permitted by applicable law, the Borrower agrees
not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries to so waive, all rights for contribution or any
other rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any Indemnitee. All amounts due under this Section
9.5 shall be payable promptly after written demand therefor. Statements payable
by the Borrower pursuant to this Section 9.5 shall be submitted to Thomas P.
Erickson (Telephone No. (314) 537-5702) (Telecopy No. (314) 537-5702), at the
address of the Borrower set forth in Section 9.2, or to such other Person or
address as may be hereafter designated by the Borrower in a written notice to
the Administrative Agent.

<PAGE>   80
                                                                              75

The agreements in this Section 9.5 shall survive repayment of the Loans and all
other amounts payable hereunder.

                  9.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the Parent,
the Borrower, the Lenders, the Administrative Agent, all future holders of the
Loans and their respective successors and assigns, except that the Borrower may
not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.

                  (b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Loans or any fees
payable hereunder, or postpone the date of the final maturity of the Loans, in
each case to the extent subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement and the Loans are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 9.7(a) as fully as
if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; provided that, in the case of Section 2.17, such
Participant shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.

                  (c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time assign to any Lender, any
affiliate of any Lender or any Approved Fund or, with the consent of the
Borrower and the Administrative Agent (which, in each case, shall not be
unreasonably withheld or delayed), to an additional bank, financial institution
or other

<PAGE>   81
                                                                              76

entity (an "Assignee") all or any part of its rights and obligations under this
Agreement pursuant to an Assignment and Acceptance, executed by such Assignee,
such Assignor and any other Person whose consent is required pursuant to this
paragraph, and delivered to the Administrative Agent for its acceptance and
recording in the Register; provided that no such assignment to an Assignee
(other than any Lender, any affiliate of any Lender or any Approved Fund) shall
be in an aggregate principal amount of less than $5,000,000 (other than in the
case of an assignment of all of a Lender's interests under this Agreement),
unless otherwise agreed by the Borrower and the Administrative Agent. For
purposes of the proviso contained in the preceding sentence, the amount
described therein shall be aggregated in respect of each Lender and its related
Approved Funds, if any. Any such assignment need not be ratable as among the
Facilities. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment and/or Loans as set forth therein, and (y) the
Assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of an Assignor's rights and
obligations under this Agreement, such Assignor shall cease to be a party
hereto). Notwithstanding any provision of this Section 9.6, the consent of the
Borrower shall not be required for any assignment that occurs when an Event of
Default shall have occurred and be continuing.

                  (d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Lenders and the Commitment of, and the
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, each other Loan Party, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loans and any Notes evidencing the Loans recorded therein for all
purposes of this Agreement. Any assignment of any Loan, whether or not evidenced
by a Note, shall be effective only upon appropriate entries with respect thereto
being made in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of a Loan evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment or
transfer of the Note evidencing such Loan, accompanied by a duly executed
Assignment and Acceptance, and thereupon one or more new Notes shall be issued
to the designated Assignee.

                  (e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an Assignor, an Assignee and any other Person whose
consent is required by Section 9.6(c), together with payment to the
Administrative Agent of a registration and processing fee of $4,000, the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) record the information contained therein in the Register on the
effective date determined pursuant thereto.

                  (f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 9.6 concerning assignments of
Loans and Notes relate only to absolute

<PAGE>   82
                                                                              77

assignments and that such provisions do not prohibit assignments creating
security interests, including any pledge or assignment by a Lender of any Loan
or Note to any Federal Reserve Bank in accordance with applicable law.

                  (g) The Borrower, upon receipt of written notice from the
relevant Lender, agrees to issue Notes to any Lender requiring Notes to
facilitate transactions of the type described in paragraph (f) above.

                  9.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement expressly provides for payments to be allocated to a particular Lender
or to the Lenders under a particular Facility, if any Lender (a "Benefitted
Lender") shall, at any time after the Loans and other amounts payable hereunder
shall immediately become due and payable pursuant to Section 7, receive any
payment of all or part of the Obligations owing to it, or receive any collateral
in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant
to events or proceedings of the nature referred to in Section 7(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of the Obligations owing to
such other Lender, such Benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of the Obligations owing to
each such other Lender, or shall provide such other Lenders with the benefits of
any such collateral, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.

                  (b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Parent or the Borrower, any such notice being expressly waived by the Parent and
the Borrower to the extent permitted by applicable law, upon any amount becoming
due and payable by the Parent or the Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise), to set off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of the Parent
or the Borrower, as the case may be. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender, provided that the failure to give such notice shall not affect
the validity of such setoff and application.

                  9.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. Delivery of an executed signature page of this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof. A set of the copies of this Agreement signed by all
the parties shall be lodged with the Borrower and the Administrative Agent.
<PAGE>   83
                                                                              78

                  9.9 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

                  9.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Parent, the Borrower, the Administrative Agent
and the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.

                  9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

                  9.12 Submission To Jurisdiction; Waivers. Each party to this
Agreement hereby irrevocably and unconditionally:

                  (a) submits for itself and its property in any legal action or
         proceeding relating to this Agreement and the other Loan Documents to
         which it is a party, or for recognition and enforcement of any judgment
         in respect thereof, to the non-exclusive general jurisdiction of the
         courts of the State of New York, the courts of the United States for
         the Southern District of New York, and appellate courts from any
         thereof;

                  (b) consents that any such action or proceeding may be brought
         in such courts and waives any objection that it may now or hereafter
         have to the venue of any such action or proceeding in any such court or
         that such action or proceeding was brought in an inconvenient court and
         agrees not to plead or claim the same;

                  (c) agrees that service of process in any such action or
         proceeding may be effected by mailing a copy thereof by registered or
         certified mail (or any substantially similar form of mail), postage
         prepaid, to the Parent or the Borrower, as the case may be at its
         address set forth in Section 9.2 or at such other address of which the
         Administrative Agent shall have been notified pursuant thereto;

                  (d) agrees that nothing herein shall affect the right to
         effect service of process in any other manner permitted by law or shall
         limit the right to sue in any other jurisdiction; and
<PAGE>   84
                                                                              79

                  (e) waives, to the maximum extent not prohibited by law, any
         right it may have to claim or recover in any legal action or proceeding
         referred to in this Section any special, exemplary, punitive or
         consequential damages.

                  9.13 Acknowledgements. Each of the Parent and the Borrower
hereby acknowledges that:

                  (a)  it has been advised by counsel in the negotiation,
         execution and delivery of this Agreement and the other Loan Documents;

                  (b) neither the Administrative Agent nor any Lender has any
         fiduciary relationship with or duty to the Parent or the Borrower
         arising out of or in connection with this Agreement or any of the other
         Loan Documents, and the relationship between Administrative Agent and
         Lenders, on one hand, and the Parent and the Borrower, on the other
         hand, in connection herewith or therewith is solely that of debtor and
         creditor; and

                  (c) no joint venture is created hereby or by the other Loan
         Documents or otherwise exists by virtue of the transactions
         contemplated hereby among the Lenders or among the Parent, the Borrower
         and the Lenders.

                  9.14 Releases of Guarantees and Liens. (a) Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Administrative Agent is hereby irrevocably authorized by each Lender (without
requirement of notice to or consent of any Lender except as expressly required
by Section 9.1) to take any action requested by the Borrower having the effect
of releasing any Collateral or guarantee obligations (i) to the extent necessary
to permit consummation of any transaction not prohibited by any Loan Document or
that has been consented to in accordance with Section 9.1 or (ii) under the
circumstances described in paragraph (b) below.

                  (b) At such time as the Loans and the other obligations under
the Loan Documents (other than obligations under or in respect of Hedge
Agreements) shall have been paid in full and the Commitments have been
terminated, the Collateral shall be released from the Liens created by the
Security Documents, and the Security Documents and all obligations (other than
those expressly stated to survive such termination) of the Administrative Agent
and each Loan Party under the Security Documents shall terminate, all without
delivery of any instrument or performance of any act by any Person.

                  9.15 Confidentiality. Each of the Administrative Agent and
each Lender agrees to keep confidential all non-public information provided to
it by any Loan Party pursuant to this Agreement that is designated by such Loan
Party as confidential; provided that nothing herein shall prevent the
Administrative Agent or any Lender from disclosing any such information (a) to
the Administrative Agent, any other Lender, any Affiliate of any Lender or any
Approved Fund, (b) to any Transferee or prospective Transferee that agrees to
comply with the provisions of this Section, (c) to its employees, directors,
agents, attorneys, accountants and other professional advisors or those of any
of its Affiliates, (d) if required by any Governmental Authority having

<PAGE>   85
                                                                              80

jurisdiction over the Administrative Agent or such Lender, (e) in response to
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (f) if required to do so in
connection with any litigation or similar proceeding, (g) that has been publicly
disclosed, (h) to the National Association of Insurance Commissioners or any
similar organization or any nationally recognized rating agency that requires
access to information about a Lender's investment portfolio in connection with
ratings issued with respect to such Lender, or (i) in connection with the
exercise of any remedy hereunder or under any other Loan Document.

                  9.16 WAIVERS OF JURY TRIAL. THE PARENT, THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

<PAGE>   86
                                                                              81

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

                                   GABRIEL COMMUNICATIONS, INC.

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

                                   GABRIEL COMMUNICATIONS FINANCE COMPANY

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

                                   CANADIAN IMPERIAL BANK OF COMMERCE,
                                   as Administrative Agent

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

<PAGE>   87

                                   CIBC INC.

                                   By:
                                      ------------------------------------------

                                      Name:

                                      Title:

<PAGE>   88

                                   BARCLAYS BANK PLC

                                   By:
                                      ------------------------------------------

                                      Name:

                                      Title:

<PAGE>   89

                                   GENERAL ELECTRIC CAPITAL CORPORATION

                                   By:
                                      ------------------------------------------

                                      Name:

                                      Title:

<PAGE>   90

                                   NEWCOURT COMMERCIAL FINANCE CORPORATION

                                   By:
                                      ------------------------------------------

                                      Name:

                                      Title:

<PAGE>   91

                                   UNION BANK OF CALIFORNIA, N.A.

                                   By:
                                      ------------------------------------------

                                      Name:

                                      Title:

<PAGE>   92

                                                                         Annex A

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                  Pricing Grid
--------------------------------------------------------------------------------
   Consolidated Borrower      Applicable Margin for     Applicable Margin for
      Leverage Ratio             Eurodollar Loans            ABR Loans
--------------------------------------------------------------------------------
<S>                           <C>                       <C>
         > 12:1                       3.75%                     2.75%
--------------------------------------------------------------------------------

    >10:1(pound)12:1                  3.50%                     2.50%
--------------------------------------------------------------------------------

     >8:1(pound)10:1                  3.25%                     2.25%
--------------------------------------------------------------------------------

      >6:1(pound)8:1                  3.00%                     2.00%
--------------------------------------------------------------------------------

       (pound) 6:1                    2.75%                     1.75%
--------------------------------------------------------------------------------
</TABLE>

Changes in the Applicable Margin resulting from changes in the Consolidated
Borrower Leverage Ratio shall become effective on the date (the "Adjustment
Date") on which financial statements are delivered to the Lenders pursuant to
Section 5.1 (but in any event not later than the 45th day after the end of each
of the first three quarterly periods of each fiscal year or the 90th day after
the end of each fiscal year, as the case may be) and shall remain in effect
until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Consolidated Borrower Leverage Ratio as at the end of the fiscal period that
would have been covered thereby shall for the purposes of this definition be
deemed to be greater than 12.0 to 1.0. In addition, at all times while an Event
of Default shall have occurred and be continuing, the Consolidated Borrower
Leverage Ratio shall for the purposes of this definition be deemed to be greater
than 12.0 to 1.0. Each determination of the Consolidated Borrower Leverage Ratio
pursuant to this pricing grid shall be made with respect to (or, in the case of
Consolidated Total Debt, as at the end of) the period of four consecutive fiscal
quarters of the Borrower ending at the end of the period covered by the relevant
financial statements.

<PAGE>   93

                                                                   SCHEDULE 1.1A

                                   COMMITMENTS

<TABLE>
<CAPTION>

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

   Lender                                                    Revolving                           Term
   ------                                                    Commitment                       Commitment
                                                             ----------                       ----------
   ----------------------------------------------------------------------------------------------------------

<S>                                                        <C>                              <C>
   CIBC Inc.                                               $2,222,222.22                    $17,777,777.78

   Barclays Bank PLC                                       $2,222,222.22                    $17,777,777.78

   General Electric Capital Corporation                    $2,222,222.22                    $17,777,777.78

   Newcourt Commercial Finance Corporation                 $2,222,222.22                    $17,777,777.78

   Union Bank of California, N.A.                          $1,111,111.11                     $8,888,888.90

            Total                                           $10,000,000                       $80,000,000
                                                            ===========                       ===========
   ----------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>   94

                                                                   SCHEDULE 1.1B

                                VENTURE INVESTORS

ROBERT A. BROOKS
         Brooks Investments, L.P.
         RAB Partnership, L.P.

GOLDMAN SACHS
         Stone Street Fund 1998, L.P.
         Bridge Street Fund 1998, L.P.
         GS Capital Partners III, L.P.
         GS Capital Partners III Offshore, L.P.
         Goldman Sachs & Co Verwaltungs GMbH

THE PRITZKER ORGANIZATION
         Don Investment Group, LP

CENTENNIAL FUNDS, LP
         Centennial Funds V, L.P.
         Centennial Entrepreneurs Fund V, L.P.

TELECOM PARTNERS, LP
         Telecom Partners II, L.P.

ONELIBERTY VENTURES, LP
         OneLiberty Advisors Fund IV, L.P.
         OneLiberty Fund IV, L.P.

NORWEST
         Norwest Equity Partners VI, L.P.

CHASE CAPITAL PARTNERS
         Chase Venture Capital Associates, L.P.

J.H. WHITTNEY & CO.
         J. H. Whittney, L.P.
         Whitney Strategic Partners III, L.P.

<PAGE>   95

                                                                    SCHEDULE 3.4

                  CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES

Collateral assignment of Kansas CLEC authority -- Gabriel Communications of
Kansas, Inc. is required to file an application pursuant to K.S.A. 66-136 for
approval of the assignment of the Kansas CLEC authority pursuant to Section 3.2
of the Guarantee and Collateral Agreement, and such assignment is subject to
receipt of that approval.

<PAGE>   96

                                                                SCHEDULE 3.19(A)

                            UCC FILING JURISDICTIONS

GABRIEL COMMUNICATIONS, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

GABRIEL COMMUNICATIONS FINANCE COMPANY

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

GABRIEL COMMUNICATIONS OF ARKANSAS, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri
Arkansas Secretary of State
Arkansas Secretary of State (transmitting utility filing)
Pulaski County, Arkansas

GABRIEL COMMUNICATIONS OF ILLINOIS, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

GABRIEL COMMUNICATIONS OF INDIANA, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

GABRIEL COMMUNICATIONS OF KANSAS, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri
Kansas Secretary of State
Kansas Secretary of State (transmitting utility filing)
Sedgwick County, Kansas
Johnson County, Kansas

GABRIEL COMMUNICATIONS OF KENTUCKY, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

GABRIEL COMMUNICATIONS OF MISSOURI, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri
Greene County, Missouri

GABRIEL COMMUNICATIONS OF OHIO

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

GABRIEL COMMUNICATIONS OF OKLAHOMA, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri
Tulsa County, Oklahoma
Oklahoma County, Oklahoma
Oklahoma Secretary of State (transmitting utility filing)

GABRIEL COMMUNICATIONS OF TEXAS, INC.

Delaware Secretary of State
Delaware Secretary of State (transmitting utility filing)
Missouri Secretary of State
Missouri Secretary of State (transmitting utility filing)
St. Louis County, Missouri

<PAGE>   97

                                                                   SCHEDULE 3.15

                                  SUBSIDIARIES

<TABLE>
<CAPTION>

                                                       Jurisdiction       % of Capital Stock
                Name                                 of Incorporation     Owned by Borrower
                ----                                 ----------------     ------------------
<S>                                                  <C>                  <C>
Gabriel Communications of Arkansas, Inc.                 Delaware               100%

Gabriel Communications of Illinois, Inc.                 Delaware               100%

Gabriel Communications of Indiana, Inc.                  Delaware               100%

Gabriel Communications of Kansas, Inc.                   Delaware               100%

Gabriel Communications of Kentucky, Inc.                 Delaware               100%

Gabriel Communications of Missouri, Inc.                 Delaware               100%

Gabriel Communications of Ohio, Inc.                     Delaware               100%

Gabriel Communications of Oklahoma, Inc.                 Delaware               100%

Gabriel Communications of Texas, Inc.                    Delaware               100%
</TABLE>

<PAGE>   98

                                                                  SCHEDULE 6.16A

                                 INITIAL MARKETS

The Board of Directors of Gabriel Communications, Inc. has approved entry into
the following Markets and environs:

         St. Louis, Missouri
         Kansas City, Missouri & Kansas City, Kansas
         Springfield, Missouri
         Wichita, Kansas
         Little Rock, Arkansas
         Tulsa, Oklahoma
         Oklahoma City, Oklahoma
         Indianapolis, Indiana
         Akron, Ohio
         Dayton, Ohio
         Cincinnati, Ohio
         Columbus, Ohio
         Louisville, Kentucky
         Lexington, Kentucky

<PAGE>   99

                                                                  SCHEDULE 6.16B

                               ADDITIONAL MARKETS

<TABLE>
<S>                                      <C>                                   <C>
Abilene, TX                              Columbus, GA                          Honolulu, HI
Albany, GA                               Corpus Christi, TX                    Houma, WA
Albany, NY                               Dallas - Fort Worth, TX               Houston, TX
Albuquerque, NM                          Danville, VA                          Huntington, WV
Alexandria, LA                           Davenport, IA                         Huntsville, AL
Allentown, PA                            Daytona Beach, FL                     Jackson, MI
Altoona, PA                              Decatur, AL                           Jackson, MS
Amarillo, TX                             Decatur, IL                           Jacksonville, FL
Anchorage, AK                            Denver, CO                            Jacksonville, NC
Anniston, AL                             Des Moines, IA                        Jamestown, NY
Appleton, WI                             Detroit, MI                           Janesville-Belkoit, WI
Asheville, NC                            Dothan, AL                            Johnson City, TN
Athens, GA                               Dover, DE                             Johnstown, PA
Atlanta, GA                              Duluth, MN                            Joplin, MO
Augusta, GA                              Eau Claire, WI                        Kalamazoo, MI
Austin, TX                               El Paso, TX                           Killeen, TX
Bakersfield, CA                          Elkhart-Goshen, IN                    Knoxville, TN
Barnstable-Yarmouth, MA                  Erie, PA                              LaCrosse, WI-MN
Baton Route, LA                          Eugene, OR                            Lafayette, IN
Beaumont, TX                             Evansville, IN                        Lafayette, LA
Bellingham, WA                           Fargo-Moorhead, ND-MN                 Lake Charles, LA
Benton Harbor, MI                        Fayetteville, AR                      Lakeland, FL
Billings, MT                             Fayetteville, NC                      Lancaster, PA
Biloxi, MS                               Flagstaff, AZ                         Lansing, MI
Binghamton, NY                           Florence, AL                          Laredo, TX
Birmingham, AL                           Florence, SC                          Las Cruces, NM
Bloomington, IN                          Fort Collins, CO                      Las Vegas, NV
Bloomington-Normal, IL                   Fort Myers, FL                        Lawton, OK
Boise, ID                                Fort Pierce, FL                       Lima, OH
Boston, MA                               Fort Smith, AR-OK                     Lincoln, NE
Brownsville, TX                          Fort Walton Beach, FL                 Longview, TX
Bryan-College Station, TX                Fort Wayne, IN                        Lubbock, TX
Buffalo, NY                              Fresno, CA                            Lynchburg, VA
Burlington, VT                           Gainesville, FL                       Macon, GA
Canton, OH                               Glens Falls, NY                       Madison, WI
Cedar Rapids, IA                         Goldsboro, NC                         Mansfield, OH
Charles, SC                              Grand Forks, ND-MN                    McAllen, TX
Charleston, WV                           Grand Junction, CO                    Medford-Ashland, OR
Charlotte, NC                            Grand Rapids, MI                      Melbourne, FL
Charlottesville, VA                      Green Bay, WI                         Memphis, TN
Chattanooga, TN                          Greensboro, NC                        Merced, CA
Chico-Paradise, CA                       Greenville, NC                        Miami, FL
Clarksville-Hopkinsville, TN-KY          Greenville, SC                        Milwaukee, WI
Cleveland, OH                            Harrisburg, PA                        Minneapolis - St. Paul, MN
Colorado Springs, CO                     Hartford, CT                          Mobile, AL
Columbia, MO                             Hattiesburg, MS                       Modesto, CA
Columbia, SC                             Hickory, NC                           Monroe, LA
</TABLE>

<PAGE>   100

<TABLE>
<S>                                      <C>
Montgomery, AL                           Santa FE, NM
Muncie, IN                               Sarasota, FL
Myrtle Beach, SC                         Savannah, GA
Naples, FL                               Scranton, PA
Nashville, TN                            Seattle, WA
New London, CT                           Sharon, PA
New Orleans, LA                          Sheboygan, WI
Norfolk, VA                              Shreveport, LA
Ocala, FL                                Sioux City, IA-NE
Odessa, TX                               Sioux Falls, SD
 Omaha, NE                               South Bend, IN
Orlando, FL                              Spokane, WA
Panama City, FL                          Springfield, MA
Parkersburg-Marietta, WV-OH              St. Cloud, MN
Pensacola, FL                            State College, PA
Peoria, IL                               Steubenville-Weirton, OH-WV
Philadelphia, PA                         Stockton, CA
Phoenix, AZ                              Sumter, SC
Pittsburgh, PA                           Syracuse, NY
Portland, ME                             Tallahassee, FL
Portland, OR                             Tampa, FL
Promo, UT                                Terre Haute, IN
Providence, RI                           Texarkana, TX-AR
Pueblo, CO                               Toledo, OH
Punta Gorda, FL                          Topeka, KS
Raleigh-Durham, NC                       Tucson, AZ
Reading, PA                              Tuscaloosa, AL
Redding, CA                              Tyler, TX
Reno, NV                                 Utica, NY
Richland-Kennewick-Pasco, WA             Visalia, CA
Richmond, VA                             Waco, TX
Roanoke, VA                              Washington, DC
Rochester, MN                            Waterloo-Cedar Falls, IA
Rochester, NY                            Wausau, WI
Rockford, IL                             West Palm Beach, FL
Rocky Mount, NC                          Wheeling WV
Sacramento, CA                           Wichita Falls, TX
Sagina, MI                               Williamsport, PA
Salinas, CA                              Wilmington, NC
Salt Lake City, UT                       Yakima, WA
San Angelo, TX                           York, PA
San Antonio, TX                          Youngstown, OH
San Diego, CA                            Yuba City, CA
San Francisco, CA                        Yuma, AZ
San Luis Obispo, CA
Santa Barbara, CA
</TABLE>

<PAGE>   101

                                                                SCHEDULE 6A.2(a)

                          EXISTING PARENT INDEBTEDNESS

                                     -None-<PAGE>   1

                                                                    EXHIBIT 10.7

                           SECOND AMENDED AND RESTATED

                                 LOAN AGREEMENT

                      ($25,000,000 REVOLVING LOAN FACILITY)

                           DATED AS OF AUGUST 25, 2000

                                      AMONG

                                 HYDRIL COMPANY,
                                  AS BORROWER,

                             BANK ONE, TEXAS, N.A.,
                        AS AGENT, ISSUER AND AS A LENDER,

                                       AND

                       THE OTHER LENDERS NOW OR HEREAFTER
                                 PARTIES HERETO

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

<S>      <C>                                                                                                    <C>
1.       Definitions.............................................................................................1
         1.1      Certain Defined Terms..........................................................................1
         1.2      Miscellaneous.................................................................................20
2.       Commitments and Loans..................................................................................20
         2.1      Loans.........................................................................................20
         2.2      Letters of Credit.............................................................................21
         2.3      Terminations or Reductions of  Commitments....................................................24
         2.4      Commitment Fees...............................................................................24
         2.5      Several Obligations...........................................................................24
         2.6      Notes.........................................................................................24
         2.7      Use of Proceeds...............................................................................25
3.       Borrowings, Payments, Prepayments and Interest Options.................................................25
         3.1      Borrowings....................................................................................25
         3.2      Prepayments...................................................................................25
         3.3      Interest Options..............................................................................26
4.       Payments; Pro Rata Treatment; Computations, Etc........................................................31
         4.1      Payments......................................................................................31
         4.2      Pro Rata Treatment............................................................................32
         4.3      Certain Actions, Notices, Etc.................................................................33
         4.4      Non-Receipt of Funds by Agent.................................................................33
         4.5      Sharing of Payments, Etc......................................................................34
5.       Conditions Precedent...................................................................................34
         5.1      Initial Loans and Letters of Credit...........................................................34
         5.2      All Loans and Letters of Credit...............................................................36
6.       Representations and Warranties.........................................................................36
         6.1      Organization..................................................................................36
         6.2      Financial Statements..........................................................................37
         6.3      Enforceable Obligations; Authorization........................................................37
         6.4      Other Debt....................................................................................37
         6.5      Litigation....................................................................................38
         6.6      Title.........................................................................................38
         6.7      Taxes.........................................................................................38
         6.8      Regulations G, U and X........................................................................38
         6.9      Subsidiaries..................................................................................38
         6.10     No Untrue or Misleading Statements............................................................38
         6.11     ERISA.........................................................................................39
         6.12     Investment Company Act........................................................................39
         6.13     Public Utility Holding Company Act............................................................39
         6.14     Solvency......................................................................................39
         6.15     Fiscal Year...................................................................................39
</TABLE>

                                       i
<PAGE>   3

<TABLE>
<S>      <C>                                                                                                    <C>
         6.16     Compliance....................................................................................39
         6.17     Environmental Matters.........................................................................39
7.       Affirmative Covenants..................................................................................41
         7.1      Taxes, Existence, Regulations, Property, Etc..................................................41
         7.2      Financial Statements and Information..........................................................41
         7.3      Financial Tests...............................................................................42
         7.4      Inspection....................................................................................43
         7.5      Further Assurances............................................................................43
         7.6      Books and Records.............................................................................43
         7.7      Insurance.....................................................................................43
         7.8      Notice of Certain Matters.....................................................................43
         7.9      Capital Adequacy..............................................................................44
         7.10     ERISA Information and Compliance..............................................................44
         7.11     New Subsidiaries..............................................................................45
8.       Negative Covenants.....................................................................................45
         8.1      Borrowed Money Indebtedness...................................................................45
         8.2      Liens.........................................................................................46
         8.3      Contingent Liabilities........................................................................46
         8.4      Mergers, Consolidations and Dispositions of Assets............................................46
         8.5      Redemption, Dividends and Distributions.......................................................47
         8.6      Nature of Business............................................................................47
         8.7      Transactions with Related Parties.............................................................47
         8.8      Loans and Investments.........................................................................47
         8.9      Intentionally omitted.........................................................................47
         8.10     Organizational Documents......................................................................48
         8.11     Unfunded Liabilities..........................................................................48
         8.12     Operating Lease Expenses......................................................................48
         8.13     Subordinated Indebtedness.....................................................................48
         8.14     Negative Pledges..............................................................................48
         8.15     Amendment to Long Term Debt...................................................................48
9.       Defaults and Remedies..................................................................................48
         9.1      Events of Default.............................................................................48
         9.2      Right of Setoff...............................................................................51
         9.3      Collateral Account............................................................................52
         9.4      Preservation of Security for Unmatured Reimbursement Obligations..............................52
         9.5      Remedies Cumulative...........................................................................52
10.      Agent    ..............................................................................................53
         10.1     Appointment, Powers and Immunities............................................................53
         10.2     Reliance......................................................................................54
         10.3     Defaults......................................................................................54
         10.4     Material Written Notices......................................................................54
         10.5     Rights as a Lender............................................................................55
         10.6     Indemnification...............................................................................55
         10.7     Non-Reliance on Agent and Other Lenders.......................................................55
</TABLE>

                                       ii
<PAGE>   4

<TABLE>
<S>      <C>                                                                                                    <C>
         10.8     Failure to Act................................................................................56
         10.9     Resignation or Removal of Agent...............................................................56
         10.10    No Partnership................................................................................56
11.      Miscellaneous..........................................................................................57
         11.1     Waiver........................................................................................57
         11.2     Notices.......................................................................................57
         11.3     Expenses, Etc.................................................................................57
         11.4     Indemnification...............................................................................58
         11.5     Amendments, Etc...............................................................................59
         11.6     Successors and Assigns........................................................................59
         11.7     Limitation of Interest........................................................................62
         11.8     Survival......................................................................................62
         11.9     Captions......................................................................................63
         11.10    Counterparts..................................................................................63
         11.11    Governing Law.................................................................................63
         11.12    Severability..................................................................................63
         11.13    Tax Forms.....................................................................................63
         11.14    Conflicts Between This Agreement and the Other Loan Documents.................................63
         11.15    Limitation on Charges; Substitute Lenders; Non-Discrimination.................................63
         11.16    Disclosure to Other Persons; Confidentiality..................................................64
         11.17    Conditional Release of Collateral.............................................................65
         11.18    Final Agreement...............................................................................66
</TABLE>

EXHIBITS

1.01A        Rate Designation Notice
1.01B        Request for Extension of Credit
2.6          Note
6.9          Subsidiaries
7.2          Compliance Certificate
8.2          Liens
8.4          Noteholder Letter
11.6(b)      Assignment and Acceptance

                                      iii
<PAGE>   5

                           SECOND AMENDED AND RESTATED
                                 LOAN AGREEMENT

         THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT is made and entered
into as of August 25, 2000 (the "Closing Date"), by and among HYDRIL COMPANY, a
Delaware corporation (together with its permitted successors, herein called the
"Borrower"), each of the lenders which is or may from time to time become a
party hereto (individually, a "Lender" and, collectively, the "Lenders"), and
BANK ONE, TEXAS, N.A., a national banking association ("Bank One"), as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "Agent").

         The Borrower, the Lenders and the Agent executed and delivered the
Amended and Restated Loan Agreement dated March 23, 1998 (as amended, restated,
modified or supplemented from time to time, the "1998 Loan Agreement"), which
1998 Loan Agreement was a restatement of that certain Loan Agreement dated as of
June 30, 1997. The parties desire that the 1998 Loan Agreement be amended and
restated in its entirety. While this Agreement shall replace the 1998 Loan
Agreement and the Borrower will issue new Notes, any Loan outstanding on the
date hereof under the 1998 Loan Agreement shall automatically be considered a
Loan outstanding hereunder, either as a "LIBOR Borrowing" with the same
"Interest Period" or as a "Base Rate Borrowing," as the case may be, and
evidenced by the new Notes, and all Letters of Credit outstanding on the date
hereof under the 1998 Loan Agreement shall automatically be considered a Letter
of Credit hereunder; provided, however, that any increase in the Margin
Percentage with respect to any outstanding Loan shall be effective on the
Closing Date. Any Obligation incurred under the 1998 Loan Agreement shall
automatically be considered an Obligation hereunder.

         The parties hereto agree to amend and restate the 1998 Loan Agreement
in its entirety as follows:

1.       Definitions.

         1.1      Certain Defined Terms.

         Unless a particular term, word or phrase is otherwise defined or the
context otherwise requires, capitalized terms, words and phrases used herein or
in the Loan Documents (as hereinafter defined) have the following meanings (all
definitions that are defined in this Agreement in the singular have the same
meanings when used in the plural and vice versa):

         Accounts, Equipment, General Intangibles and Inventory shall have the
respective meanings assigned to them in the Uniform Commercial Code enacted in
the State of Texas in force on the Closing Date.

         Additional Interest means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Loan Documents (other than interest on
the Notes at the Stated Rate) which,

                                       1
<PAGE>   6

under applicable laws, are or may be deemed to constitute interest on the
indebtedness evidenced by the Notes.

         Adjusted LIBOR means, with respect to each Interest Period applicable
to a LIBOR Borrowing, a rate per annum equal to the quotient, expressed as a
percentage, of (a) LIBOR with respect to such Interest Period divided by (b)
1.0000 minus the Eurodollar Reserve Requirement in effect on the first day of
such Interest Period.

         Affiliate means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.

         Agreement means this Second Amended and Restated Loan Agreement, as it
may from time to time be amended, modified, restated or supplemented.

         Annual Financial Statements means the annual financial statements of a
Person, including all notes thereto, which statements shall include a balance
sheet as of the end of such fiscal year and an income statement and a statement
of cash flows for such fiscal year, all setting forth in comparative form the
corresponding figures from the previous fiscal year, all prepared in conformity
with GAAP in all material respects, and accompanied by the opinion of
independent certified public accountants of recognized national standing, which
shall state that such financial statements present fairly in all material
respects the financial position of such Person and, if such Person has any
Subsidiaries, its consolidated Subsidiaries as of the date thereof and the
results of its operations for the period covered thereby in conformity with
GAAP. Such statements of Borrower shall be accompanied by a certificate of such
accountants that in making the appropriate audit and/or investigation in
connection with such report and opinion, such accountants did not become aware
of any Default relating to the financial tests set forth in Section 7.3 hereof
or, if in the opinion of such accountants any such Default exists, a description
of the nature and status thereof. Annual Financial Statements shall also include
unaudited consolidating financial statements for the applicable Person, in
Proper Form, certified by the chief financial officer or other authorized
officer of such Person as true, correct and complete in all material respects.

         Applications means all applications and agreements for Letters of
Credit, or similar instruments or agreements, in Proper Form, now or hereafter
executed by any Person in connection with any Letter of Credit now or hereafter
issued or to be issued under the terms hereof at the request of any Person.

         Assignment and Acceptance shall have the meaning ascribed to such term
in Section 11.6 hereof.

         Bankruptcy Code means the United States Bankruptcy Code, as amended,
and any successor statute.

                                       2
<PAGE>   7

         Base Rate means for any day a rate per annum equal to the lesser of (a)
the applicable Margin Percentage from time to time in effect plus the greater of
(1) the Prime Rate for that day and (2) the Federal Funds Rate for that day plus
2 of 1% or (b) the Ceiling Rate. If for any reason Agent shall have determined
(which determination shall be prima facie evidence of the correctness thereof)
that it is unable to ascertain the Federal Funds Rate for any reason beyond its
reasonable control, including, without limitation, the inability or failure of
Agent to obtain sufficient quotations in accordance with the terms hereof, the
Base Rate shall, until the circumstances giving rise to such inability no longer
exist, be the lesser of (a) the Prime Rate plus the applicable Margin Percentage
from time to time in effect or (b) the Ceiling Rate.

         Base Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.

         Borrowed Money Indebtedness means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money (other than
the endorsement of negotiable instruments in the ordinary course of business),
(ii) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (iii) all obligations of such Person under conditional sale
or other title retention agreements relating to Property purchased by such
Person, (iv) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (excluding obligations of such Person to
creditors incurred in the ordinary course of such Person's business), (v) all
capital lease obligations of such Person, (vi) all obligations of others secured
by any lien on property or assets owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) Interest Rate Risk
Indebtedness of such Person, (viii) all obligations of such Person in respect of
outstanding letters of credit issued for the account of such Person securing
obligations described in clauses (i) through (vii) above and (ix) all guarantees
of such Person of obligations described in the foregoing clauses (i) through
(viii) above.

         Business Day means any day other than a day on which commercial banks
are authorized or required to close in Houston, Texas.

         Capital Expenditures means, with respect to any Person for any period,
expenditures in respect of fixed or capital assets by such Person, including
capital lease obligations incurred during such period (to the extent not already
included), which would be reflected as additions to Property, plant or equipment
on a balance sheet of such Person and its consolidated Subsidiaries, if any,
prepared in accordance with GAAP; but excluding expenditures during such period
for the repair or replacement of any fixed or capital asset which was destroyed
or damaged, in whole or in part, to the extent financed by (a) the proceeds of
an insurance policy maintained by such Person; (b) condemnation proceeds
actually received by such Person; or (c) payments actually received by such
Person from a non-Affiliate of such Person.

         Capital Stock means any class of capital stock, share capital and
similar equity interest of a Person.

                                       3
<PAGE>   8

         Ceiling Rate means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas (or
any jurisdiction whose usury laws are deemed to apply to the Notes or any other
Loan Documents despite the intention and desire of the parties to apply the
usury laws of the State of Texas) laws permits the higher interest rate, stated
as a rate per annum. On each day, if any, that Texas law establishes the Ceiling
Rate, the Ceiling Rate shall be the "weekly ceiling" (as defined in Section 303
of the Texas Finance Code (the "Texas Finance Code") and Chapter 1D ("Chapter
1D") of Title 79, Tex. Rev. Civ. Stats. 1925, as amended, respectively) for that
day. Agent may from time to time, as to current and future balances, implement
any other ceiling under the Texas Finance Code or Chapter 1D by notice to
Borrower, if and to the extent permitted by the Texas Finance Code or Chapter
1D. Without notice to Borrower or any other person or entity, the Ceiling Rate
shall automatically fluctuate upward and downward as and in the amount by which
such maximum nonusurious rate of interest permitted by applicable law
fluctuates.

         Change of 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 Closing Date) or related persons constituting a "group" (as
such term is used in Rule 13d-5 under the Exchange Act in effect on the date of
the Closing Date), other than the Initial Stockholder Affiliates, 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 of the Closing Date), directly or indirectly, of 25% or more of the total
voting power of the Voting Stock of the Borrower unless at the time in question
and at all relevant times subsequent thereto, the Initial Stockholder Affiliates
are the beneficial owners of a greater percentage of such total voting power
than such "person" or "group"; (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 August 25, 2000.

         Code means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.

         Collateral means all Property, tangible or intangible, real, personal
or mixed, now or hereafter subject to the Security Documents.

                                       4
<PAGE>   9

         Collateral Agency Agreement means that one certain Collateral Agency
and Intercreditor Agreement dated as of June 25, 1998 by and among the Agent as
Collateral Agent, the parties named therein as Lenders, and the Company, setting
forth the rights and duties of each of said Persons in regard to the Collateral,
as therein defined.

         Commitment Fee Percentage means the applicable per annum percentage set
forth at the appropriate intersection in the table contained in the definition
of Margin Percentage, subject to the proviso contained at the end of said
definition, based on the Leverage Ratio as of the last day of the most recently
ended fiscal quarter of Borrower calculated by the Agent as soon as practicable
after receipt by the Agent of all financial reports required under this
Agreement with respect to such fiscal quarter (including a Compliance
Certificate) (provided, however, that if the Commitment Fee Percentage is
increased as a result of the reported Leverage Ratio, such increase shall be
retroactive to the date that Borrower was obligated to deliver such financial
reports to the Agent pursuant to the terms of this Agreement and provided
further, however, that if the Commitment Fee Percentage is decreased as a result
of the reported Leverage Ratio, and such financial reports are delivered to the
Agent not more than ten (10) calendar days after the date required to be
delivered pursuant to the terms of this Agreement, such decrease shall be
retroactive to the date that Borrower was obligated to deliver such financial
reports to the Agent pursuant to the terms of this Agreement.

         Compliance Certificate shall have the meaning given to it in Section
7.2 hereof.

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

         Corporation means any corporation, limited liability company,
partnership, joint venture, joint stock association, business trust and other
business entity.

         Cover for Letter of Credit Liabilities shall be effected by paying to
Agent immediately available funds, to be held by Agent in a collateral account
maintained by Agent at its Principal Office and collaterally assigned as
security for the financial accommodations extended pursuant to this Agreement
using documentation reasonably satisfactory to Agent, in the amount required by
any applicable provision hereof. Such amount shall be retained by Agent in such
collateral account until such time as in the case of the Cover being provided
pursuant to Section 2.2(a) or 9.3 hereof, the applicable Letter of Credit shall
have expired and the Reimbursement Obligations, if any, with respect thereto
shall have been fully satisfied; provided, however, that at such time if a
Default or Event of Default has occurred and is continuing, Agent shall not be
required to release such amount in such collateral account until such Default or
Event of Default shall have been cured or waived.

         Debt Service means, with respect to any Person for any period, the sum
of (i) Interest Expense for such period and (ii) scheduled principal payments on
Borrowed Money Indebtedness for such period.

                                       5
<PAGE>   10

         Debt to Capitalization Ratio means, as of any day, the ratio of (a)
Borrowed Money Indebtedness as of such date to (b) Total Capitalization as of
such date; provided, however, that for purposes of determining Borrowed Money
Indebtedness for purposes of calculating this ratio guaranty obligations shall
not be considered to be debt.

         Deed of Trust means that certain Deed of Trust and Security Agreement
(with Assignment of Rents) dated March 23, 1998 from the Borrower to David L.
Mendez, trustee for the benefit of the Agent, upon and covering real estate in
Harris County, Texas and securing the Obligations, as amended by the Appointment
of Substitute Trustee dated June 25, 1998, the Modification of Deed of Trust and
Extension Agreement dated June 25, 1998 and the Modification of Deed of Trust
and Extension Agreement dated of even date herewith.

         Default means an Event of Default or an event which with notice or
lapse of time or both would, unless cured or waived, become an Event of Default.

         Dollars and $ means lawful money of the United States of America.

         EBITDA means, without duplication, for any period the consolidated net
earnings (excluding any extraordinary gains or losses) of Borrower plus, to the
extent deducted in calculating consolidated net income, depreciation,
amortization, other non-cash items, Interest Expense, and federal and state
income tax expense and minus, to the extent added in calculating consolidated
net income, any non-cash items.

         Effective Date shall mean the date upon which all of the conditions
described in Section 5.1 have been completed to the reasonable satisfaction of
the Agent.

         Eligible Assignee means (a) any Lender, (b) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $250,000,000.00; (c) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development or any successor organization, or a political
subdivision of any such country, and having total assets in excess of
$1,000,000,000.00; provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is also
a member of the Organization for Economic Cooperation and Development or any
successor organization; (d) the central bank of any country which is a member of
the Organization for Economic Cooperation and Development or any successor
organization; and (e) any other bank or similar financial institution approved
by the Agent, the Majority Lenders and the Borrower, which consent of the
Borrower shall not be unreasonably withheld.

         Environmental Claim means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid

                                       6
<PAGE>   11

waste generation, handling, treatment, storage, disposal or transportation; (iv)
exposure to Hazardous Substances; (v) the safety or health of employees; or (vi)
the manufacture, processing, distribution in commerce or use of Hazardous
Substances. An "Environmental Claim" includes, but is not limited to, a common
law action, as well as a proceeding to issue, modify or terminate an
Environmental Permit, or to adopt or amend a regulation to the extent that such
a proceeding attempts to redress violations of an applicable permit, license, or
regulation as alleged by any Governmental Authority.

         Environmental Liabilities includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.

         Environmental Permit means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.

         Environmental Risk Agreement means that certain Environmental Risk
Agreement of even date herewith between the Borrower and the Agent.

         ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.

         Eurodollar Rate means for any day during an Interest Period for a LIBOR
Borrowing a rate per annum equal to the lesser of (a) the sum of (1) the
Adjusted LIBOR in effect on the first day of such Interest Period plus (2) the
applicable Margin Percentage in effect on the first day of such Interest Period
and (b) the Ceiling Rate. Each Eurodollar Rate is subject to adjustments for
reserves, insurance assessments and other matters as provided for in Section
3.3(c) hereof.

         Eurodollar Reserve Requirement means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to "Eurocurrency liabilities," as
currently defined in Regulation D. Each determination of the Eurodollar Reserve
Requirement by Agent shall

                                       7
<PAGE>   12

be prima facie evidence of the correctness thereof, and may be computed using
any reasonable averaging and attribution method.

         Event of Default shall have the meaning assigned to it in Section 9
hereof.

         Federal Funds Rate means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any such day which is a
Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal funds brokers of recognized standing
selected by Agent in its sole and absolute discretion.

         Financing Statements means all such Uniform Commercial Code financing
statements as the Agent or any Lender shall require, in Proper Form, duly
executed the Borrower to give notice of and to perfect or continue perfection of
the Agent's security interest in the Collateral.

         Funding Loss means, with respect to (a) Borrower's payment of principal
of a LIBOR Borrowing on a day other than the last day of the applicable Interest
Period; (b) Borrower's failure to borrow a LIBOR Borrowing on the date specified
by Borrower; (c) Borrower's failure to make any prepayment of the Loans (other
than Base Rate Borrowings) on the date specified by Borrower; or (d) any
cessation of a Eurodollar Rate to apply to the Loans or any part thereof
pursuant to Section 3.3, in each case whether voluntary or involuntary, any
loss, expense, penalty, premium or liability actually incurred by any Lender
(including but not limited to any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender to
fund or maintain a Loan).

         GAAP means, as to a particular Person, such accounting practice as, in
the opinion of independent certified public accountants of recognized national
standing regularly retained by such Person, conforms at the time to generally
accepted accounting principles, consistently applied for all periods after the
Closing Date (except for any such change with which such accountants concur,
pursuant to the following sentence) so as to present fairly the financial
condition, and results of operations and cash flows, of such Person. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board, all reports and financial statements required
hereunder may be prepared in accordance with such change so long as Borrower
provides to Agent such disclosures of the impact of such change as Agent may
reasonably require. No such change in any accounting principle or practice
shall, in itself, cause a Default or Event of Default hereunder (but Borrower,
Agent and Lenders shall negotiate in good faith to replace any financial
covenants hereunder to the extent such financial covenants are affected by such
change in accounting principle or practice).

         Governmental Authority means any foreign governmental authority, the
United States of America, any State of the United States, and any political
subdivision of any of the foregoing, and

                                       8
<PAGE>   13

any central bank, agency, department, commission, board, bureau, court or other
tribunal having jurisdiction over Agent, any Lender, any Obligor or their
respective Property.

         Guaranties means, collectively, any and all guaranties hereafter
executed in favor of Agent, for the benefit of Lenders, relating to the
Obligations, as any of them may from time to time be amended, modified, restated
or supplemented.

         Guarantors means all domestic Subsidiaries of the Borrower, for which a
guaranty is requested by Agent in accordance with Section 7.11 hereof.

         Hazardous Substance means petroleum products, and any hazardous or
toxic waste or substance defined or regulated as such from time to time by any
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law."

         Indebtedness means, without duplication, (a) all items which in
accordance with GAAP would be included in the liability section of a balance
sheet (other than trade accounts payable and accrued expenses (other than
Interest Expense) arising in the ordinary course of business) on the date as of
which Indebtedness is to be determined (excluding, to the extent applicable,
capital stock, surplus, surplus reserves and deferred taxes and other credits);
(b) all guaranties, letter of credit contingent reimbursement obligations and
other contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others (other than endorsements for
collection in the ordinary course of business); and (c) all Indebtedness secured
by any Lien existing on any interest of the Person with respect to which
Indebtedness is being determined in Property owned subject to such Lien whether
or not the Indebtedness secured thereby shall have been assumed; provided, that
the term "Indebtedness" shall not mean or include any Indebtedness in respect of
which monies sufficient to pay and discharge the same in full (either on the
expressed date of maturity thereof or on such earlier date as such Indebtedness
may be duly called for redemption and payment) shall be deposited with a
depository, agency or trustee reasonably acceptable to Agent in trust for the
payment thereof.

         Initial Stockholder means and includes Richard C. Seaver and
Christopher T. Seaver.

         Initial Stockholder Affiliates means (a) any Initial Stockholder; (b) a
spouse, child, lineal descendant, parent or sibling of an Initial Stockholder
and any of their estates and legal representatives (each a "Related Person");
(c) any trust or charitable organization of which any Related Person is a
trustee, director, beneficiary or grantor; and (d) a corporation, partnership,
limited liability company or other similar business entity of which more than
50% of the Voting Stock thereof is controlled, directly or indirectly, by any
Person described in clause (a) or clause (b) of this definition.

         Insurance Requirements Agreement means that certain Insurance
Requirements Agreement of even date herewith between the Borrower and the Agent.

                                       9
<PAGE>   14

         Intercreditor Agreement means that certain Intercreditor Agreement
dated as of June 25, 1998, between the Agent, the Banks, and Noteholder and
approved by the Borrower as amended from time to time.

         Interest Coverage Ratio means the ratio of EBITDA to, without
duplication, cash Interest Expense plus Rent Expense in each case for the four
(4) full fiscal quarters ending on the last day of any fiscal quarter; provided
book losses associated with the sale or disposal of discontinued business lines
occurring on or prior to December 31, 2000, up to a maximum of $5,000,000.00 in
the aggregate, shall not be taken into account in calculating EBITDA.

         Interest Expense means, for any period, total interest expense
(including interest expense attributable to capitalized leases and net costs
under interest rate swap, collar, cap or similar agreements providing interest
rate protection), determined in accordance with GAAP.

         Interest Options means the Base Rate and each Eurodollar Rate, and
"Interest Option" means any of them.

         Interest Payment Date means (a) for Base Rate Borrowings, the last day
of each month prior to the Revolving Loan Maturity Date, and the Revolving Loan
Maturity Date; and (b) for LIBOR Borrowings, the end of the applicable Interest
Period (and if such Interest Period exceeds three months' duration, quarterly,
commencing on the first quarterly anniversary of the first day of such Interest
Period) and the Revolving Loan Maturity Date.

         Interest Period means, for each LIBOR Borrowing, a period commencing on
the date such LIBOR Borrowing began and ending on the numerically corresponding
day which is, subject to availability as set forth in Section 3.3(c)(iii), 1, 3
or 6 months thereafter, as Borrower shall elect in accordance herewith;
provided, (1) unless Agent shall otherwise consent, no Interest Period with
respect to a LIBOR Borrowing shall commence on a date earlier than three (3)
Business Days after this Agreement shall have been fully executed; (2) any
Interest Period with respect to a LIBOR Borrowing which would otherwise end on a
day which is not a LIBOR Business Day shall be extended to the next succeeding
LIBOR Business Day, unless such LIBOR Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding LIBOR
Business Day; (3) any Interest Period with respect to a LIBOR Borrowing which
begins on the last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last LIBOR Business Day of the
appropriate calendar month; (4) no Interest Period for a Loan shall ever extend
beyond the Revolving Loan Maturity Date; and (5) Interest Periods shall be
selected by Borrower in such a manner that the Interest Period with respect to
any portion of the Loans which shall become due shall not extend beyond such due
date.

         Interest Rate Risk Agreement means an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by Borrower for the purpose of reducing Borrower's
exposure to interest rate fluctuations and not for speculative

                                       10
<PAGE>   15

purposes, with a counterparty reasonably acceptable to Agent, as such agreement
may from time to time be amended, modified, restated or supplemented.

         Interest Rate Risk Indebtedness means all obligations and Indebtedness
of Borrower with respect to the program for the hedging of interest rate risk
provided for in any Interest Rate Risk Agreement.

         Investment means the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, transfer of Property (other
than transfers in the ordinary course of business) or capital contribution to,
or the incurring of any liability (other than trade accounts payable arising in
the ordinary course of business), contingently or otherwise, in respect of the
Indebtedness of, any Person.

         Issuer means the issuer (or, where applicable, each issuer) of a Letter
of Credit under this Agreement.

         Legal Requirement means any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.

         Letter of Credit shall have the meaning assigned to such term in
Section 2.2 hereof.

         Letter of Credit Liabilities means, at any time and in respect of any
Letter of Credit, the sum of (i) the amount available for drawings under such
Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit. For the purpose of determining at any time the
amount described in clause (i), in the case of any Letter of Credit payable in a
currency other than Dollars, such amount shall be converted by Agent to Dollars
by any reasonable method, and such converted amount shall be prima facie
evidence of the correctness thereof.

         Leverage Ratio means, as of any day, the ratio of (a) Borrowed Money
Indebtedness to (b) EBITDA for the most recently completed four (4) consecutive
fiscal quarters.

         LIBOR means, for each Interest Period for any LIBOR Borrowing, the rate
per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to
the average of the offered quotations appearing on Telerate Page 3750 (or if
such Telerate Page shall not be available, any successor or similar service as
may be selected by Agent and Borrower) as of 10:00 a.m., Houston, Texas time (or
as soon thereafter as practicable) on the day two LIBOR Business Days prior to
the first day of such Interest Period for deposits in United States dollars
having a term comparable to such Interest Period and in an amount comparable to
the principal amount of the LIBOR Borrowing to which such Interest Period
relates. If none of such Telerate Page 3750 nor any successor or similar service
is available, then "LIBOR" shall mean, with respect to any Interest Period for
any applicable LIBOR Borrowing, the rate of interest per annum, rounded upwards,
if necessary, to the nearest 1/16th of 1%, quoted by Agent at or before 10:00
a.m., Houston, Texas time (or as soon

                                       11
<PAGE>   16

thereafter as practicable), on the date two LIBOR Business Days before the first
day of such Interest Period, to be the arithmetic average of the prevailing
rates per annum at the time of determination and in accordance with the then
existing practice in the applicable market, for the offering to Agent by one or
more prime banks selected by Agent in its sole discretion, in the London
interbank market, of deposits in United States dollars for delivery on the first
day of such Interest Period and having a maturity equal to the length of such
Interest Period and in an amount equal (or as nearly equal as may be) to the
LIBOR Borrowing to which such Interest Period relates. Each determination by
Agent of LIBOR shall be prima facie evidence of the correctness thereof, and may
be computed using any reasonable averaging and attribution method.

         LIBOR Borrowing means each portion of the principal balance of the
Loans at any time bearing interest at a Eurodollar Rate.

         LIBOR Business Day means a Business Day on which transactions in United
States dollar deposits between lenders may be carried on in the London interbank
market.

         Lien means any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions and other title exceptions.

         Loans means the loans provided for by Section 2.1 hereof.

         Loan Documents means, collectively, this Agreement, the Notes, the
Security Documents, the Guaranties, the Master Ratification, Security and Pledge
Agreement dated June 25, 1998, the Master Ratification, Security and Pledge
Agreement effective of even date herewith, the Deed of Trust, the Second Lien
Deed of Trust, all Applications, all instruments, certificates and agreements
now or hereafter executed or delivered by any Obligor to Agent or any Lender
pursuant to any of the foregoing or in connection with the Obligations or any
commitment regarding the Obligations, and all amendments, modifications,
renewals, extensions, increases and rearrangements of, and substitutions for,
any of the foregoing including, without limitation, the Master Ratification,
Security and Pledge Agreement dated of even date herewith.

         Long Term Debt means the Indebtedness owing by the Borrower pursuant to
the Note Agreement and the Senior Notes and any renewals, extensions,
refundings, amendments or modifications from time to time.

         Majority Lenders means Lenders having (i) prior to the Revolving Loan
Termination Date, greater than 66-2/3% of the aggregate amount of Revolving Loan
Commitments and (ii) on and after the Revolving Loan Termination Date, greater
than 66-2/3% of the aggregate amount of outstanding Obligations.

         Margin Percentage means the applicable per annum percentage set forth
at the appropriate intersection in the table shown below, based on the Leverage
Ratio as of the last day of the most

                                       12
<PAGE>   17

recently ended fiscal quarter of Borrower calculated by the Agent as soon as
practicable after receipt by the Agent of all financial reports required under
this Agreement with respect to such fiscal quarter (including a Compliance
Certificate) (provided, that if the Margin Percentage is increased as a result
of the reported Leverage Ratio, such increase shall be retroactive to the date
that Borrower was obligated to deliver such financial reports to the Agent
pursuant to the terms of this Agreement and provided further, that if the Margin
Percentage is decreased as a result of the reported Leverage Ratio, and such
financial reports are delivered to the Agent not more than ten (10) calendar
days after the date required to be delivered pursuant to the terms of this
Agreement, such decrease shall be retroactive to the date that Borrower was
obligated to deliver such financial reports to the Agent pursuant to the terms
of this Agreement) regardless, in each case, of whether such date occurs during
an existent interest period:

<TABLE>
<CAPTION>
                                                                                           Commitment Fee
       Leverage Ratio                 LIBOR Margin               Base Rate Margin        Percentage (unused)

<S>                                   <C>                        <C>                     <C>
< 1.0 x                                    1.25%                         0%                      .25%

> or = to 1.0 x < 1.5 x                    1.50%                         0%                     .375%

> or = to 1.5 x < 2.0 x                    1.75%                         0%                     .375%

> or = to 2.0 x < 2.5 x                    2.00%                         0%                      .50%

> or = to 2.5 x                            2.25%                       .25%                      .50%
</TABLE>

and provided still further that, if, at any time, total borrowings outstanding
hereunder plus all Letter of Credit Liabilities is less than fifty percent (50%)
of the Revolving Loan Commitment, the Commitment Fee Percentage shall equal
 .50%.

         Minimum Advance means $500,000 or an integral multiple of $100,000 in
excess thereof.

         Note Agreement has the meaning ascribed to it in the definition of
Noteholder below.

         Noteholder means, collectively, the holders from time to time of the
6.85% Senior Secured Notes due June 30, 2003 (the "Senior Notes"), issued by the
Borrower pursuant to the Note Purchase Agreement or Agreements dated June 25,
1998 between the Borrower and the purchasers named therein (collectively, as
amended from time to time, the "Note Agreement").

         Notes shall have the meaning assigned to such term in Section 2.6
hereof.

         Obligations means, as at any date of determination thereof, the sum of
the following: (i) the aggregate principal amount of Loans outstanding hereunder
on such date, plus (ii) the aggregate amount of the outstanding Letter of Credit
Liabilities hereunder on such date, plus (iii) all other outstanding
liabilities, obligations and indebtedness of any Obligor under any Loan Document
on such date.

         Obligors means Borrower and each Person now or hereafter executing a
Guaranty.

                                       13
<PAGE>   18

         Organizational Documents means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a trust, the instrument
establishing such trust, and with respect to any other business entity, the
documents relating to its formation, organization and governance; in each case
including any and all modifications thereof as of the date of the Loan Document
referring to such Organizational Document and any and all future modifications
thereof.

         Past Due Rate means, on any day, a rate per annum equal to the lesser
of (i) the Ceiling Rate for that day or (ii) the Base Rate plus five percent
(5%).

         PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

         Permitted Investments means: (a) readily marketable securities issued
or fully guaranteed by the United States of America with maturities of not more
than one year; (b) commercial paper rated "Prime 1" by Moody's Investors
Service, Inc. or AA-1" by Standard and Poor's Ratings Services with maturities
of not more than 180 days; (c) participation interests in Borrowed Money
Indebtedness acquired through a program provided by any Lender, if the maturity
of any such interest does not exceed 180 days, and (d) certificates of deposit
or repurchase obligations issued by (1) any Lender; (2) any U.S. domestic bank
having capital surplus of at least $100,000,000; or (3) any other financial
institution acceptable to Agent, all of the foregoing not having a maturity of
more than one year from the date of issuance thereof.

         Permitted Liens means each of the following: (a) artisans' or
mechanics' Liens arising in the ordinary course of business, and Liens for
taxes, but only to the extent that payment thereof shall not at the time be due
or if due, the payment thereof is being diligently contested in good faith and
adequate reserves computed in accordance with GAAP have been set aside therefor;
(b) Liens in effect on the Closing Date and disclosed to the Lenders in the
financial statements delivered on or prior to the Closing Date pursuant to
Section 6.2 hereof or otherwise in writing before the date hereof, provided that
neither the principal amount of Borrowed Money Indebtedness secured thereby nor
the Property covered thereby shall increase after the Closing Date without the
prior written consent of the Majority Lenders; (c) normal encumbrances and
restrictions on title which do not secure Borrowed Money Indebtedness and which
do not have a material adverse effect on the value or utility of the applicable
Property; (d) Liens in favor of Agent or any Lender under the Loan Documents,
including, without limitation, Liens securing Interest Rate Risk Indebtedness
owed to one or more of the Lenders (but not to any Person which is not, at such
time, a Lender) and Liens securing the Long Term Debt on a pari passu basis with
the Obligations; (e) Liens incurred or deposits made in the ordinary course of
business (1) in connection with workmen's compensation, unemployment insurance,
social security and other like laws, or (2) to secure insurance in the ordinary
course of business, the performance of bids, tenders, contracts, leases,
licenses, statutory obligations, surety, appeal and performance bonds and other
similar obligations incurred in the ordinary course of business, not, in any of
the cases specified in this clause (2), incurred in

                                       14
<PAGE>   19

connection with the borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of Property; (f) attachments, judgments and other
similar Liens arising in connection with court proceedings, provided that the
execution and enforcement of such Liens are effectively stayed and the claims
secured thereby are being actively contested in good faith with adequate
reserves made therefor in accordance with GAAP and would not otherwise cause a
Default or an Event of Default; (g) Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens, incurred in good
faith in the ordinary course of business and securing obligations which are not
yet due or which are being contested in good faith by appropriate proceedings if
adequate reserves with respect thereto are maintained in accordance with GAAP;
(h) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, and restrictions on the use of Property, and
which do not in any case singly or in the aggregate materially impair the
present use or value of the Property subject to any such restriction or
materially interfere with the ordinary conduct of the business of any Obligor;
(i) Liens securing purchase money Indebtedness permitted under Section 8.1
hereof and covering the Property so purchased and improvements or accessions
thereto; (j) capital leases and sale/leaseback transactions permitted under the
other provisions of this Agreement; and (k) extensions, renewals and
replacements of Liens referred to in clauses (a) through (j) of this definition;
provided that any such extension, renewal or replacement Lien shall be limited
to the Property or assets covered by the Lien extended, renewed or replaced and
that the Borrowed Money Indebtedness secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the amount of the
Indebtedness secured by the Lien extended, renewed or replaced.

         Permitted Liens on Collateral means each of the following: (a)
artisans' or mechanics' Liens arising in the ordinary course of business, and
Liens for taxes, but only to the extent that payment thereof shall not at the
time be due or if due, the payment thereof is being diligently contested in good
faith and adequate reserves computed in accordance with GAAP have been set aside
therefor; (b) Liens expressly described in the relevant Security Document; (c)
Liens in favor of Agent or any Lender under the Loan Documents, including,
without limitation, Liens securing Interest Rate Risk Indebtedness owed to one
or more of the Lenders (but not to any Person which is not, at such time, a
Lender); and (d) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens, incurred in good faith in the
ordinary course of business and securing obligations which are not yet due or
which are being contested in good faith by appropriate proceedings if adequate
reserves with respect thereto are maintained in accordance with GAAP.

         Person means any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.

         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 and is either (a) maintained by Borrower or any member of the Controlled
Group for employees of Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.

                                       15
<PAGE>   20

         Pledge means the security agreement, in Proper Form, in favor of the
Agent in connection with the Obligations, covering the investment securities
described therein.

         Prime Rate means, on any day, the prime rate for that day as determined
from time to time by Bank One. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate or a favored rate, and Bank One,
Agent and each Lender disclaims any statement, representation or warranty to the
contrary. Bank One, Agent or any Lender may make commercial loans or other loans
at rates of interest at, above or below the Prime Rate.

         Principal Office means the principal office of Agent, presently located
at 910 Travis, Houston, Harris County, Texas 77002.

         Proper Form means in form and substance reasonably satisfactory to
Agent.

         Property means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.

         Quarterly Dates means the last day of each March, June, September and
December, provided that if any such date is not a Business Day, then the
relevant Quarterly Date shall be the immediately preceding Business Day.

         Quarterly Financial Statements means the quarterly financial statements
of a Person, which statements shall include a balance sheet as of the end of
such fiscal quarter and an income statement and a statement of cash flows for
such fiscal quarter and for the fiscal year to date, subject to normal year-end
adjustments, all setting forth in comparative form the corresponding figures as
of the end of and for the corresponding fiscal quarter of the preceding year,
prepared in accordance with GAAP in all material respects except that such
statements are condensed and exclude detailed footnote disclosures and certified
by the chief financial officer or other authorized officer of such Person as
fairly presenting, in all material respects, the financial condition of such
person as of such date. Quarterly Financial Statements shall also include
unaudited consolidating financial statements for the applicable Person, in
Proper Form, certified by the chief financial officer or other authorized
officer of such Person as true, correct and complete in all material respects.

         Rate Designation Date means that Business Day which is (a) in the case
of Base Rate Borrowings, 11:00 a.m., Houston, Texas time, on the date of such
borrowing and (b) in the case of LIBOR Borrowings, 11:00 a.m., Houston, Texas
time, on the date three LIBOR Business Days preceding the first day of any
proposed Interest Period.

         Rate Designation Notice means a written notice substantially in the
form of Exhibit 1.01A.

         Regulation D means Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and includes any successor or
other regulation relating to reserve requirements applicable to member banks of
the Federal Reserve System.

                                       16
<PAGE>   21

         Reimbursement Obligations means, as at any date, the obligations of
Borrower then outstanding, or which may thereafter arise, in respect of Letters
of Credit under this Agreement, to reimburse the applicable Issuers for the
amount paid by such Issuers in respect of any drawing under such Letters of
Credit, which obligations shall at all times be payable in Dollars
notwithstanding any such Letter of Credit being payable in a currency other than
Dollars.

         Rent Expense means, for any period, any rental or lease expense of
Borrower and its Subsidiaries (other than any such expense in respect of any
capitalized lease) computed on a consolidated basis in accordance with GAAP.

         Request for Extension of Credit means a request for extension of credit
duly executed on behalf of Borrower, appropriately completed and substantially
in the form of Exhibit 1.01B attached hereto.

         Requirements of Environmental Law means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees; or (vi) regulation of the manufacture,
processing, distribution in commerce, use, discharge or storage of Hazardous
Substances by Borrower or any of its Subsidiaries.

         Revolving Loan Availability Period means, for each Loan Lender, the
period from and including the Closing Date to (but not including) the Revolving
Loan Termination Date.

         Revolving Loan Commitment means $25,000,000.00.

         Revolving Loan Commitment Percentage means, as to any Lender, the
percentage set forth opposite such Lender's name on the signature pages hereof
under the caption "Revolving Loan Commitment Percentage" or otherwise provided
for in an Assignment and Acceptance Agreement.

         Revolving Loan Maturity Date means March 31, 2003.

         Revolving Loan Termination Date means the earlier of (a) the Revolving
Loan Maturity Date or (b) the date specified by Agent in accordance with Section
9.1 hereof.

         Second Lien Deed of Trust means that certain Second Lien Deed of Trust
and Security Agreement (With Assignment of Rents) dated June 25, 1998 from the
Borrower to Christopher T. Klimko, trustee for the benefit of the Agent, upon
and covering the same real property described in

                                       17
<PAGE>   22

the Deed of Trust, as amended by the Modification of Deed of Trust and Extension
Agreement dated of even date herewith.

         Secretary's Certificate means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation as to (a) the resolutions
of the Board of Directors of such corporation authorizing the execution,
delivery and performance of the documents to be executed by such corporation;
(b) the incumbency and signature of the officer of such corporation executing
such documents on behalf of such corporation; and (c) the Organizational
Documents of such corporation.

         Security Agreement means the security agreement, in Proper Form, in
favor of the Agent in connection with the Obligations, covering the Borrower's
Accounts, Equipment, Inventory, certain General Intangibles and the other
Property described therein.

         Security Documents means this Agreement, the Deed of Trust, the
Environmental Risk Agreement, the Security Agreement, the Pledge, the Insurance
Requirements Agreement and any and all other agreements, deed of trust,
mortgages, chattel mortgages, security agreements, pledges, guaranties,
assignments of production or proceeds of production, assignments of income,
assignments of contract rights, assignments of partnership interest, assignments
of royalty interests, assignments of performance, completion or surety bonds,
standby agreements, subordination agreements, undertakings and other instruments
and Financing Statements now or hereafter executed and delivered by any Person
(other than solely by the Lender and/or any other creditor participating in the
Obligation or any collateral or security therefor) in connection with, or as
security for the payment or performance of any Obligation.

         Senior Notes has the meaning ascribed to it in the definition of
Noteholder.

         Stated Rate means the effective weighted per annum rate of interest
applicable to the Loans; provided, that if on any day such rate shall exceed the
Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling Rate on
that day and on each day thereafter until the total amount of interest accrued
at the Stated Rate on the unpaid principal balances of the Notes plus the
Additional Interest equals the total amount of interest which would have accrued
if there had been no Ceiling Rate. Without notice to Borrower or any other
Person, the Stated Rate shall automatically fluctuate upward and downward in
accordance with the provisions of this definition.

         Subordinated Indebtedness means all Indebtedness of a Person which has
been subordinated on terms and conditions reasonably satisfactory to the
Majority Lenders, in their sole discretion, to all Indebtedness of such Person
to Lenders, whether now existing or hereafter incurred. Indebtedness shall not
be considered as "Subordinated Indebtedness" unless and until Agent shall have
received copies of the documentation evidencing or relating to such Indebtedness
together with a subordination agreement, in Proper Form, duly executed by the
holder or holders of such Indebtedness and evidencing the terms and conditions
of subordination reasonably required by the Majority Lenders.

                                       18
<PAGE>   23

         Subsidiary means, as to a particular parent, any entity of which more
than 50% of the equity rights (whether outstanding capital stock or otherwise)
is at the time directly or indirectly owned by, such parent.

         Tangible Net Worth shall mean total assets (valued at cost less normal
depreciation), less (a) all intangibles and (b) all liabilities (excluding
contingent and indirect liabilities), all determined in accordance with GAAP.
The term "intangibles" shall include, without limitation, (1) deferred charges;
(2) the amount of any write-up in the book value of any assets contained in any
balance sheet resulting from revaluation thereof or any write-up in excess of
the cost of such assets acquired; and (3) the aggregate of all amounts appearing
on the assets side of any such balance sheet for franchises, licenses, permits,
patents, patent applications, copyrights, trademarks, trade names, service
marks, goodwill, treasury stock, experimental or organizational expenses and
other like intangibles. The term "liabilities" shall include, without
limitation, (1) Indebtedness secured by Liens on Property of the Person with
respect to which Tangible Net Worth is being computed, whether or not such
Person is liable for the payment thereof; (2) deferred liabilities; and (3)
capital lease obligations.

         Taxes shall have the meaning ascribed to it in Section 4.1(d).

         Title Insurance Policies means policies of title insurance, each in
Proper Form, in a face amount satisfactory to the Agent, issued in favor of the
Agent by a title insurance company satisfactory to the Agent and insuring that
title to some or all of the real estate (as designated by the Agent) covered by
the Deed of Trust is vested in the Borrower, free and clear of any material
Lien, objection, exception or requirement, and that the relevant Deed of Trust
creates a valid first and prior Lien on all of the real estate covered thereby,
subject only to such exceptions as may be reasonably acceptable to the Agent.
Each such policy shall (a) contain a complete and accurate description of the
relevant Deed of Trust; (b) specify the recording and filing information
applicable to it; and (c) describe the real estate covered thereby identically
to the description thereof in such Deed of Trust.

         Total Capitalization means the sum of, without duplication, the
Borrowed Money Indebtedness of Borrower and its Subsidiaries, on a consolidated
basis, and preferred stock and the stockholders' equity (including paid-in
capital and retained earnings) of Borrower and its Subsidiaries, determined on a
consolidated basis and in accordance with GAAP.

         Unfunded Liabilities means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent actuarial valuation report for such
Plan, but only to the extent that such excess represents a potential liability
of any member of the Controlled Group to the PBGC or a Plan under Title IV of
ERISA. With respect to multi-employer Plans, the term "Unfunded Liabilities"
shall also include contingent liability for withdrawal liability under Section
4201 of ERISA to all multi-employer Plans to which Borrower or any member of a
Controlled Group for employees of Borrower contributes in the event of complete
withdrawal from such plans.

                                       19
<PAGE>   24

         Voting Stock means, with respect to any Person, Capital Stock of any
class or classes of a corporation, an association or another business entity the
holders of which are ordinarily, in the absence of contingencies, entitled to
vote in the election of corporate directors (or individuals performing similar
functions) of such Person or which permit the holders thereof to control the
management of such Person, including general partnership interests in a
partnership and membership interests in a limited liability company.

         Wholly-Owned Subsidiary means any Subsidiary to the extent (i) all of
the ownership interests in such Subsidiary, other than any director's qualifying
shares mandated by applicable law, is owned directly or indirectly by Borrower
or (ii) such Subsidiary is organized in a foreign jurisdiction and is required
by the applicable laws and regulations of such foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or individual or
corporate citizens of such foreign jurisdiction in order for such Subsidiary to
transact business in such foreign jurisdiction, provided that Borrower, directly
or indirectly, owns the remaining ownership interest in such Subsidiary.

         1.2 Miscellaneous. The words "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement.

2.       Commitments and Loans.

         2.1 Loans. Each Lender severally agrees, subject to all of the terms
and conditions of this Agreement (including, without limitation, Sections 5.1
and 5.2 hereof), from time to time on or after the Closing Date and during the
Revolving Loan Availability Period, to make Loans to Borrower in an aggregate
principal amount at any one time outstanding up to but not exceeding such
Lender's Revolving Loan Commitment Percentage of the Revolving Loan Commitment
minus such Lender's percentage of all then-outstanding Letter of Credit
Liabilities (excluding Letter of Credit Liabilities which are subject to Cover).
Subject to the conditions in this Agreement, any such Loan repaid prior to the
Revolving Loan Termination Date may be reborrowed pursuant to the terms of this
Agreement; provided, that any and all such Loans shall be due and payable in
full at the end of the Revolving Loan Availability Period. The aggregate of all
Loans to be made by the Lenders in connection with a particular borrowing shall
be equal to a Minimum Advance.

         2.2 Letters of Credit.

         (a) Letters of Credit. Subject to the terms and conditions of this
Agreement, and on the condition that aggregate Letter of Credit Liabilities
shall never exceed $5,000,000, Borrower shall have the right to, in addition to
Loans provided for in Section 2.1 hereof, utilize the Revolving Loan Commitments
from time to time during the Revolving Loan Availability Period by obtaining the
issuance of standby letters of credit for the account of Borrower if Borrower
shall so request in the notice referred to in Section 2.2(b)(i) hereof (such
standby letters of credit as any of them may be amended, supplemented, extended
or confirmed from time to time, being herein collectively called

                                       20
<PAGE>   25

the "Letters of Credit"). Upon the date of the issuance of a Letter of Credit,
the applicable Issuer shall be deemed, without further action by any party
hereto, to have sold to each Lender, and each such Lender shall be deemed,
without further action by any party hereto, to have purchased from the
applicable Issuer, a participation, to the extent of such Lender's Revolving
Loan Commitment Percentage, in such Letter of Credit and the related Letter of
Credit Liabilities, which participation shall terminate on the earlier of the
expiration date of such Letter of Credit or the Revolving Loan Termination Date.
Any Letter of Credit that shall have an expiration date after the end of the
Revolving Loan Availability Period shall be subject to Cover or backed by a
standby letter of credit in form and substance, and issued by a Person,
acceptable to Agent in its sole discretion. Bank One or, with the prior approval
of Borrower and Agent, another Lender shall be the Issuer of each Letter of
Credit.

         (b) Additional Provisions. The following additional provisions shall
apply to each Letter of Credit:

                  (i) Borrower shall give Agent notice requesting each issuance
         of a Letter of Credit hereunder as provided in Section 4.3 hereof and
         shall furnish such additional information regarding such transaction as
         Agent may reasonably request. Upon receipt of such notice, Agent shall
         promptly notify each Lender of the contents thereof and of such
         Lender's Revolving Loan Commitment Percentage of the amount of such
         proposed Letter of Credit.

                  (ii) No Letter of Credit may be issued if after giving effect
         thereto the sum of (A) the aggregate outstanding principal amount of
         Loans plus (B) the aggregate Letter of Credit Liabilities would exceed
         the Revolving Loan Commitment. On each day during the period commencing
         with the issuance of any Letter of Credit and until such Letter of
         Credit shall have expired or been terminated, the Revolving Loan
         Commitment of each Lender shall be deemed to be utilized for all
         purposes hereof in an amount equal to such Lender's Revolving Loan
         Commitment Percentage of the amount then available for drawings under
         such Letter of Credit (or any unreimbursed drawings under such Letter
         of Credit).

                  (iii) Upon receipt from the beneficiary of any Letter of
         Credit of any demand for payment thereunder, Agent shall promptly
         notify Borrower and each Lender as to the amount to be paid as a result
         of such demand and the payment date therefor. If at any time prior to
         the earlier of the expiration date of a Letter of Credit or the
         Revolving Loan Termination Date any Issuer shall have made a payment to
         a beneficiary of a Letter of Credit in respect of a drawing under such
         Letter of Credit, each Lender will pay to Agent immediately upon demand
         by such Issuer at any time during the period commencing after such
         payment until reimbursement thereof in full by Borrower, an amount
         equal to such Lender's Revolving Loan Commitment Percentage of such
         payment, together with interest on such amount for each day from the
         date of demand for such payment (or, if such demand is made after 11:00
         a.m. Houston time on such date, from the next succeeding Business Day)
         to the date of payment by such Lender of such amount at a rate of
         interest per annum equal to the Federal Funds Rate for such period. To
         the extent that it is ultimately determined that Borrower is

                                       21
<PAGE>   26

         relieved of its obligation to reimburse the applicable Issuer because
         of such Issuer's gross negligence or willful misconduct in determining
         that documents received under any applicable Letter of Credit comply
         with the terms thereof or otherwise, the applicable Issuer shall be
         obligated to refund to the paying Lenders all amounts paid to such
         Issuer to reimburse Issuer for the applicable drawing under such Letter
         of Credit.

                  (iv) Borrower shall be irrevocably and unconditionally
         obligated forthwith to reimburse Agent, on the date on which Agent
         notifies Borrower of the date and amount of any payment by the Issuer
         of any drawing under a Letter of Credit, for the amount paid by any
         Issuer upon such drawing, without presentment, demand, protest or other
         formalities of any kind, all of which are hereby waived. Such
         reimbursement may, subject to satisfaction of the conditions in
         Sections 5.1 and 5.2 hereof and to the Revolving Loan Commitment (after
         adjustment in the same to reflect the elimination of the corresponding
         Letter of Credit Liability), be made by the borrowing of Loans. Agent
         will pay to each Lender such Lender's Revolving Loan Commitment
         Percentage of all amounts received from Borrower for application in
         payment, in whole or in part, of the Reimbursement Obligation in
         respect of any Letter of Credit, but only to the extent such Lender has
         made payment to Agent in respect of such Letter of Credit pursuant to
         clause (iii) above.

                  (v) Borrower will pay to Agent at the Principal Office for the
         account of each Lender a letter of credit fee with respect to each
         Letter of Credit equal to the greater of (x) $250 or (y) the Margin
         Percentage for LIBOR Borrowings per annum, never to exceed 1.75% per
         annum, multiplied by the daily average amount available for drawings
         under each Letter of Credit (and computed on the basis of the actual
         number of days elapsed in a year composed of 360 days), in each case
         for the period from and including the date of issuance of such Letter
         of Credit to and including the date of expiration or termination
         thereof, such fee to be due and payable in advance on the date of the
         issuance thereof. Agent will pay to each Lender, promptly after
         receiving any payment in respect of letter of credit fees referred to
         in this clause (v), an amount equal to the product of such Lender's
         Revolving Loan Commitment Percentage times the amount of such fees. In
         addition to and cumulative of the above described fees, Borrower shall
         pay to Agent, for the account of the applicable Issuer, in advance on
         the date of the issuance of the applicable Letter of Credit, a fee in
         an amount equal to 1/8% of the face amount of the applicable Letter of
         Credit (such fee to be retained by the applicable Issuer for its own
         account).

                  (vi) The issuance by the applicable Issuer of each Letter of
         Credit shall, in addition to the conditions precedent set forth in
         Section 5 hereof, be subject to the conditions precedent (A) that such
         Letter of Credit shall be in such form and contain such terms as shall
         be reasonably satisfactory to Agent, and (B) that Borrower shall have
         executed and delivered such Applications and other instruments and
         agreements relating to such Letter of Credit as Agent shall have
         reasonably requested and are not inconsistent with the terms of this
         Agreement. In the event of a conflict between the terms of this
         Agreement and the terms of any Application, the terms hereof shall
         control.

                                       22
<PAGE>   27

                  (vii) Issuer will send to Borrower and each Lender,
         immediately upon issuance of any Letter of Credit issued by Issuer or
         any amendment thereto, a true and correct copy of such Letter of Credit
         or amendment.

         (c) Indemnification; Release. Borrower hereby indemnifies and holds
harmless Agent, each Lender and each Issuer from and against any and all claims
and damages, losses, liabilities, costs or expenses which Agent, such Lender or
such Issuer may incur (or which may be claimed against Agent, such Lender or
such Issuer by any Person whatsoever), REGARDLESS OF WHETHER CAUSED IN WHOLE OR
IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, in connection with
the execution and delivery of any Letter of Credit or transfer of or payment or
failure to pay under any Letter of Credit; provided that Borrower shall not be
required to indemnify any party seeking indemnification for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of the party seeking
indemnification, or (ii) the failure by the party seeking indemnification to pay
under any Letter of Credit after the presentation to it of a request required to
be paid under applicable law. Borrower agrees not to hold Agent, each Lender and
each Issuer that has performed its obligations hereunder for any claim, cause of
action, damage, loss, liability, reasonable costs or expenses which may now
exist or may hereafter arise, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART
BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, by reason of or in
connection with the failure of any other Lender to fulfill or comply with its
obligations to Agent, such Lender or such Issuer, as the case may be, hereunder
(but nothing herein contained shall affect any rights Borrower may have against
such defaulting Lender). Nothing in this Section 2.2(c) is intended to limit the
obligations of Borrower under any other provision of this Agreement or the
obligations of Agent and each Lender under the last sentence of Section 11.4
hereof.

         2.3 Terminations or Reductions of Commitments.

         (a) Mandatory. On the Revolving Loan Termination Date, all Revolving
Loan Commitments shall be terminated in their entirety.

         (b) No Reinstatement. No termination or reduction of the Revolving Loan
Commitments may be reinstated without the written approval of Agent and the
Lenders.

         2.4 Commitment Fees.

         (a) Borrower shall pay to Agent for the account of each Lender
revolving loan commitment fees for the period from the Closing Date to and
including the Revolving Loan Termination Date at a rate per annum equal to the
Commitment Fee Percentage. Such revolving loan commitment fees shall be computed
(on the basis of the actual number of days elapsed in a year composed of 360
days) on each day and shall be based on the excess of (x) the aggregate amount
of each Lender's Revolving Loan Commitment for such day over (y) the sum of (i)
the aggregate unpaid principal balance of such Lender's Note on such day plus
(ii) such Lender's Revolving Loan Percentage of the aggregate Letter of Credit
Liabilities for such day. Accrued revolving loan

                                       23
<PAGE>   28

commitment fees shall be payable in arrears on the Quarterly Dates prior to the
Revolving Loan Termination Date and on the Revolving Loan Termination Date.

         (b) All past due fees payable under this Section shall bear interest at
the Past Due Rate.

         2.5 Several Obligations. The failure of any Lender to make any Loan to
be made by it on the date specified therefor shall not relieve any other Lender
of its obligation to make its Loan on such date, but neither Agent nor any
Lender shall be responsible or liable for the failure of any other Lender to
make a Loan to be made by such other Lender or to participate in, or co-issue,
any Letter of Credit. Notwithstanding anything contained herein to the contrary,
(a) no Lender shall be required to make or maintain Loans at any time
outstanding if as a result the total Obligations to such Lender shall exceed the
lesser of (1) such Lender's Revolving Loan Commitment Percentage of all
Obligations and (2) such Lender's Revolving Loan Commitment Percentage of the
Revolving Loan Commitment and (b) if a Lender fails to make a Loan as and when
required hereunder, then upon each subsequent event which would otherwise result
in funds being paid to the defaulting Lender, the amount which would have been
paid to the defaulting Lender shall be divided among the non-defaulting Lenders
ratably according to their respective shares of the outstanding Revolving Loan
Commitment Percentages until the Obligations of each Lender (including the
defaulting Lender) are equal to such Lender's Revolving Loan Commitment
Percentage of the total Obligations.

         2.6 Notes. The Loans made by each Lender shall be evidenced by a single
Note of Borrower in substantially the form of Exhibit 2.6 hereto payable to the
order of such Lender in a principal amount equal to the Revolving Loan
Commitment of such Lender, and otherwise duly completed. The promissory notes
described in this Section are each, together with all renewals, extensions,
modifications and replacements thereof and substitutions therefor, called a
"Note" and collectively called the "Notes". Each Lender is hereby authorized by
Borrower to endorse on the schedule (or a continuation thereof) that may be
attached to each Note of such Lender, to the extent applicable, the date,
amount, type of and the applicable period of interest for each Loan made by such
Lender to Borrower hereunder, and the amount of each payment or prepayment of
principal of such Loan received by such Lender, provided, that any failure by
such Lender to make any such endorsement shall not affect the obligations of
Borrower under such Note or hereunder in respect of such Loan.

         2.7 Use of Proceeds. The proceeds of the Loans shall be used to
refinance Indebtedness outstanding under the 1998 Loan Agreement, support the
issuance of Letters of Credit, for working capital and general corporate
purposes. Neither Agent nor any Lender shall have any responsibility as to the
use of any Letter of Credit or any proceeds of the Loans. The Borrower
represents and warrants to the Lenders and the Agent that all Loans will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter 1D or in the Texas Finance Code.

                                       24
<PAGE>   29

3.       Borrowings, Payments, Prepayments and Interest Options.

         3.1 Borrowings. Borrower shall give Agent a Request for Extension of
Credit to be made hereunder as provided in Section 4.3 hereof and Agent shall
promptly notify each Lender of such request. Not later than 11:00 a.m. Houston
time on the date specified for each such borrowing hereunder, each Lender shall
make available the amount of the Loan, if any, to be made by it on such date to
Agent at its Principal Office, in immediately available funds, for the account
of Borrower. Such amounts received by Agent will be held in an account
maintained by Borrower with Agent. The amounts so received by Agent shall,
subject to the terms and conditions of this Agreement, be made available to
Borrower by wiring or otherwise transferring, in immediately available funds,
such amount to an account reasonably designated by Borrower.

         3.2 Prepayments.

         (a) Optional Prepayments. Except as provided in Section 3.3 hereof,
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, any Loans at any time or from
time to time, provided that Borrower shall give Agent notice of each such
prepayment as provided in Section 4.3 hereof. Each optional prepayment on a Loan
shall be in an amount equal to a Minimum Advance.

         (b) Borrower shall from time to time on demand by Agent prepay the
Loans, provide Cover for Letter of Credit Liabilities or both in such amounts as
shall be necessary so that at all times the aggregate outstanding amount of all
Obligations (excluding Letter of Credit Liabilities which are subject to Cover)
shall be less than or equal to the Revolving Loan Commitment.

         (c) Interest Payments. Accrued and unpaid interest on the unpaid
principal balance of the Loans shall be due and payable on the Interest Payment
Dates.

         (d) Payments and Interest on Reimbursement Obligations. Borrower will
pay to Agent for the account of each Lender the amount of each Reimbursement
Obligation on the date on which Agent notifies Borrower of the date and amount
of the applicable payment by the Issuer of any drawing under a Letter of Credit.
The amount of any Reimbursement Obligation may, if the applicable conditions
precedent specified in Sections 5.1 and 5.2 hereof have been satisfied, be paid
with the proceeds of Loans. Subject to Section 11.7 hereof, Borrower will pay to
Agent for the account of each Lender interest at the applicable Past Due Rate on
any Reimbursement Obligation and on any other amount payable by Borrower
hereunder to or for the account of such Lender (but, if such amount is interest,
only to the extent legally allowed), which shall not be paid in full within five
(5) days after the date due (whether at stated maturity, by acceleration or
otherwise), for the period commencing on the expiration of such five (5) day
period until the same is paid in full.

                                       25
<PAGE>   30

         3.3 Interest Options

         (a) Options Available. The outstanding principal balance of the Notes
shall bear interest at the Base Rate; provided, that (1) all past due amounts,
both principal and accrued interest, shall bear interest at the Past Due Rate,
and (2) subject to the provisions hereof, Borrower shall have the option of
having all or any portion of the principal balances of the Notes from time to
time outstanding bear interest at a Eurodollar Rate. The records of Agent and
each of the Lenders with respect to Interest Options, Interest Periods and the
amounts of Loans to which they are applicable shall be prima facie evidence of
the correctness thereof. Interest on the Loans shall be calculated at the Base
Rate except where it is expressly provided pursuant to this Agreement that a
Eurodollar Rate or the Past Due Rate is to apply. Interest on the amount of each
advance against the Notes shall be computed on the amount of that advance and
from the date it is made. Notwithstanding anything in this Agreement to the
contrary, for the full term of the Notes the interest rate produced by the
aggregate of all sums paid or agreed to be paid to the holders of the Notes for
the use, forbearance or detention of the debt evidenced thereby (including all
interest on the Notes at the Stated Rate plus the Additional Interest) shall not
exceed the Ceiling Rate.

         (b) Designation and Conversion. Borrower shall have the right to
designate or convert its Interest Options in accordance with the provisions
hereof. So long as no Event of Default has occurred and is continuing and
subject to the last sentence of Section 3.3(a) and the provisions of Section
3.3(c), Borrower may elect to have a Eurodollar Rate apply or continue to apply
to all or any portion of the principal balance of the Notes. Each change in
Interest Options shall be a conversion of the rate of interest applicable to the
specified portion of the Loans, but such conversion shall not change the
respective outstanding principal balances of the Notes. The Interest Options
shall be designated or converted in the manner provided below:

         (i)      Borrower shall give Agent telephonic notice, promptly
                  confirmed by a Rate Designation Notice (and Agent shall
                  promptly inform each Lender thereof). Each such telephonic and
                  written notice shall specify the amount of the Loan which is
                  the subject of the designation; the amount of borrowings into
                  which such borrowings are to be converted or for which an
                  Interest Option is designated; the proposed date for the
                  designation or conversion and the Interest Period or Periods,
                  if any, selected by Borrower. Such telephonic notice shall be
                  irrevocable and shall be given to Agent no later than the
                  applicable Rate Designation Date.

         (ii)     No more than five (5) LIBOR Borrowings shall be in effect with
                  respect to the Loans at any time.

         (iii)    Each designation or conversion of a LIBOR Borrowing shall
                  occur on a LIBOR Business Day.

         (iv)     Except as provided in Section 3.3(c) hereof, no LIBOR
                  Borrowing shall be converted to a Base Rate Borrowing or
                  another LIBOR Borrowing on any day other than the last day of
                  the applicable Interest Period.

                                       26
<PAGE>   31

         (v)      Each request for a LIBOR Borrowing shall be in the amount
                  equal to a Minimum Advance.

         (vi)     Each designation of an Interest Option with respect to the
                  Notes shall apply to all of the Notes ratably in accordance
                  with their respective outstanding principal balances. If any
                  Lender assigns an interest in any of its Notes when any LIBOR
                  Borrowing is outstanding with respect thereto, then such
                  assignee shall have its ratable interest in such LIBOR
                  Borrowing.

         (c)      Special Provisions Applicable to LIBOR Borrowings.

         (i)      Options Unlawful. If the adoption of any applicable Legal
                  Requirement after the Closing Date or any change after the
                  Closing Date in any applicable Legal Requirement or in the
                  interpretation or administration thereof by any Governmental
                  Authority or compliance by any Lender with any request or
                  directive (whether or not having the force of law) issued
                  after the Closing Date by any central bank or other
                  Governmental Authority shall at any time make it unlawful or
                  impossible for any Lender to permit the establishment of or to
                  maintain any LIBOR Borrowing, the commitment of such Lender to
                  establish or maintain such LIBOR Borrowing shall forthwith be
                  canceled and Borrower shall forthwith, upon demand by Agent to
                  Borrower, (1) convert the LIBOR Borrowing of such Lender with
                  respect to which such demand was made to a Base Rate
                  Borrowing; (2) pay all accrued and unpaid interest to date on
                  the amount so converted; and (3) pay any amounts required to
                  compensate each Lender for any additional cost or expense
                  which any Lender may incur as a result of such adoption of or
                  change in such Legal Requirement or in the interpretation or
                  administration thereof and any Funding Loss which any Lender
                  may incur as a result of such conversion. If, when Agent so
                  notifies Borrower, Borrower has given a Rate Designation
                  Notice specifying a LIBOR Borrowing but the selected Interest
                  Period has not yet begun, as to the applicable Lender such
                  Rate Designation Notice shall be deemed to be of no force and
                  effect, as if never made, and the balance of the Loans made by
                  such Lender specified in such Rate Designation Notice shall
                  bear interest at the Base Rate until a different available
                  Interest Option shall be designated in accordance herewith.

         (ii)     Increased Cost of Borrowings. If the adoption after the
                  Closing Date of any applicable Legal Requirement or any change
                  after the Closing Date in any applicable Legal Requirement or
                  in the interpretation or administration thereof by any
                  Governmental Authority or compliance by any Lender with any
                  request or directive (whether or not having the force of law)
                  issued after the Closing Date by any central bank or
                  Governmental Authority shall at any time as a result of any
                  portion of the principal balances of the Notes being
                  maintained on the basis of a Eurodollar Rate:

                                       27
<PAGE>   32

                  (1)      subject any Lender to any Taxes, or any deduction or
                           withholding for any Taxes, on or from any payment due
                           under any LIBOR Borrowing or other amount due
                           hereunder, other than income and franchise taxes (or
                           taxes in lieu thereof) of the United States or its
                           political subdivisions or such other jurisdiction in
                           which the applicable Lender has its principal office
                           or applicable lending office; or

                  (2)      change the basis of taxation of payments due from
                           Borrower to any Lender under any LIBOR Borrowing
                           (otherwise than by a change in the rate of taxation
                           of the overall net income of such Lender); or

                  (3)      impose, modify, increase or deem applicable any
                           reserve requirement (excluding that portion of any
                           reserve requirement included in the calculation of
                           the applicable Eurodollar Rate), special deposit
                           requirement or similar requirement (including, but
                           not limited to, state law requirements and Regulation
                           D) against assets of any Lender, or against deposits
                           with any Lender, or against loans made by any Lender,
                           or against any other funds, obligations or other
                           property owned or held by any Lender; or

                  (4)      impose on any Lender any other condition regarding
                           any LIBOR Borrowing;

and the result of any of the foregoing is to increase the cost to any Lender of
agreeing to make or of making, renewing or maintaining such LIBOR Borrowing, or
reduce the amount of principal or interest received by any Lender, then, within
15 Business Days after demand by Agent (accompanied by a statement setting forth
in reasonable detail the applicable Lender's basis therefor), Borrower shall pay
to Agent additional amounts which shall compensate each Lender for such
increased cost or reduced amount. The determination by any Lender of the amount
of any such increased cost, increased reserve requirement or reduced amount
shall be prima facie evidence of the correctness thereof. Borrower shall have
the right, if it receives from Agent any notice referred to in this paragraph,
upon three Business Days' notice to Agent (which shall notify each affected
Lender), either (i) to repay in full (but not in part) any borrowing with
respect to which such notice was given, together with any accrued interest
thereon, or (ii) to convert the LIBOR Borrowing which is the subject of the
notice to a Base Rate Borrowing; provided, that any such repayment or conversion
shall be accompanied by payment of (x) the amount required to compensate each
Lender for the increased cost or reduced amount referred to in the preceding
paragraph; (y) all accrued and unpaid interest to date on the amount so repaid
or converted; and (z) any Funding Loss which any Lender may incur as a result of
such repayment or conversion. Each Lender will notify Borrower through Agent of
any event occurring after the date of this Agreement which will entitle such
Lender to compensation pursuant to this Section as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation, and
(if so requested by Borrower through Agent) will designate a different lending
office of such Lender for the applicable LIBOR Borrowing or will take such other
action as Borrower may reasonable request if such designation or action is
consistent with the internal policy of such Lender and legal and regulatory
restrictions, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be

                                       28
<PAGE>   33

disadvantageous to such Lender (provided that such Lender shall have no
obligation so to designate a different lending office which is located in the
United States of America).

         (iii)    Inadequacy of Pricing and Rate Determination. If, for any
                  reason with respect to any Interest Period, Agent (or, in the
                  case of clause 3 below, the applicable Lender) shall have
                  determined (which determination shall be prima facie evidence
                  of the correctness thereof) that:

                  (1)      Agent is unable through its customary general
                           practices to determine any applicable Eurodollar
                           Rate, or

                  (2)      by reason of circumstances affecting the applicable
                           market, generally, Agent is not being offered
                           deposits in United States dollars in such market, for
                           the applicable Interest Period and in an amount equal
                           to the amount of any applicable LIBOR Borrowing
                           requested by Borrower, or

                  (3)      as a result of LIBOR market conditions generally, any
                           applicable Eurodollar Rate will not adequately and
                           fairly reflect the cost to any Lender of making and
                           maintaining such LIBOR Borrowing hereunder for any
                           proposed Interest Period,

then Agent shall give Borrower notice thereof and thereupon, (A) any Rate
Designation Notice previously given by Borrower designating the applicable LIBOR
Borrowing which has not commenced as of the date of such notice from Agent shall
be deemed for all purposes hereof to be of no force and effect, as if never
given, and (B) until Agent shall notify Borrower that the circumstances giving
rise to such notice from Agent no longer exist, each Rate Designation Notice
requesting the applicable Eurodollar Rate shall be deemed a request for a Base
Rate Borrowing, and any applicable LIBOR Borrowing then outstanding shall be
converted, without any notice to or from Borrower, upon the termination of the
Interest Period then in effect with respect to it, to a Base Rate Borrowing.

         (iv)     Funding Losses. Borrower shall indemnify each Lender against
                  and hold each Lender harmless from any Funding Loss. This
                  indemnity shall survive the payment of the Notes. A
                  certificate of such Lender (explaining in reasonable detail
                  the amount and calculation of the amount claimed) as to any
                  additional amounts payable pursuant to this paragraph
                  submitted to Borrower shall be prima facie evidence of the
                  correctness thereof.

         (d) Funding Offices; Adjustments Automatic; Calculation Year. Any
Lender may, if it so elects, fulfill its obligation as to any LIBOR Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to or for the account of any branch office or affiliate
of such Lender; provided, that in such event for the purposes of this Agreement
such Loan shall be deemed to have been made by such Lender and the obligation of
Borrower to repay such Loan shall nevertheless be to such Lender and shall be
deemed held by it for

                                       29
<PAGE>   34

the account of such branch or affiliate. Without notice to Borrower or any other
Person, each rate required to be calculated or determined under this Agreement
shall automatically fluctuate upward and downward in accordance with the
provisions of this Agreement. Interest at the Prime Rate shall be computed on
the basis of the actual number of days elapsed in a year consisting of 365 or
366 days, as the case may be. All other interest required to be calculated or
determined under this Agreement shall be computed on the basis of the actual
number of days elapsed in a year consisting of 360 days, unless the Ceiling Rate
would thereby be exceeded, in which event, to the extent necessary to avoid
exceeding the Ceiling Rate, the applicable interest shall be computed on the
basis of the actual number of days elapsed in the applicable calendar year in
which accrued.

         (e) Funding Sources. Notwithstanding any provision of this Agreement to
the contrary, each Lender shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if each Lender had actually funded and maintained each LIBOR
Borrowing during each Interest Period through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.

4.       Payments; Pro Rata Treatment; Computations, Etc.

         4.1      Payments.

         (a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
Borrower hereunder, under the Notes and under the other Loan Documents shall be
made in Dollars, in immediately available funds, to Agent at the Principal
Office (or in the case of a successor Agent, at the principal office of such
successor Agent in the United States), not later than 11:00 a.m. Houston time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day). Agent, or any Lender for whose account any such payment is made,
may (but shall not be obligated to) debit the amount of any such payment which
is not made by such time to any ordinary deposit account of Borrower with Agent
or such Lender, as the case may be, in the event that Borrower has not otherwise
paid Agent all amounts that are due.

         (b) Borrower shall, at the time of making each payment hereunder, under
any Note or under any other Loan Document, specify to Agent the Loans or other
amounts payable by Borrower hereunder or thereunder to which such payment is to
be applied. Each payment received by Agent hereunder, under any Note or under
any other Loan Document for the account of a Lender shall be paid promptly to
such Lender, in immediately available funds. If Agent fails to send to any
Lender the applicable amount by the close of business on the date any such
payment is received by Agent if such payment is received prior to 11:00 a.m.
Houston time (or on the next succeeding Business Day with respect to payments
which are received after 11:00 a.m. Houston time), Agent shall pay to the
applicable Lender interest on such amount from such date at the Federal Funds
Rate. Borrower, the Lenders and Agent acknowledge and agree that this provision
and each other provision

                                       30
<PAGE>   35

of this Agreement or any of the other Loan Documents relating to the application
of amounts in payment of the Obligations shall be subject to the provisions of
Section 4.2(d) regarding pro rata application of amounts after an Event of
Default shall have occurred and be continuing.

         (c) If the due date of any payment hereunder or under any Note falls on
a day which is not a Business Day, the due date for such payments (except as
otherwise provided in Section 3.3 hereof) shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.

         (d) All payments by Borrower hereunder or under any other Loan Document
shall be made free and clear of and without deduction for or on account of any
present or future income, stamp, or other taxes, fees, duties, withholding or
other charges of any nature whatsoever imposed by any taxing authority excluding
in the case of each Lender taxes imposed on or measured by its net income or
franchise taxes (or taxes in lieu thereof) imposed by the jurisdiction in which
it is organized or through which it acts for purposes of this Agreement (such
non-excluded items being hereinafter referred to as "Taxes"). If as a result of
any change in law (or the interpretation thereof having the force of law) after
the date that the applicable Lender became a "Lender" under this Agreement any
withholding or deduction from any payment to be made to, or for the account of,
a Lender by Borrower hereunder or under any other Loan Document is required in
respect of any Taxes pursuant to any applicable law, rule, or regulation, then
Borrower will (i) pay to the relevant authority the full amount required to be
so withheld or deducted; (ii) to the extent available, promptly forward to Agent
an official receipt or other documentation reasonably satisfactory to Agent
evidencing such payment to such authority; and (iii) pay to Agent, for the
account of each affected Lender, such additional amount or amounts as are
necessary to ensure that the net amount actually received by such Lender will
equal the full amount such Lender would have received had no such withholding or
deduction been required. Each Lender shall determine such additional amount or
amounts payable to it (which determination shall be prima facie evidence of the
correctness thereof). If a Lender becomes aware that any such withholding or
deduction from any payment to be made by Borrower hereunder or under any other
Loan Document is required, then such Lender shall promptly notify Agent and
Borrower thereof stating the reasons therefor and the additional amount required
to be paid under this Section. Each Lender shall execute and deliver to Agent
and Borrower such forms as it may be required to execute and deliver pursuant to
Section 11.13 hereof. To the extent that any such withholding or deduction
results from the failure of a Lender to provide a form required by Section 11.13
hereof (unless such failure is due to some prohibition under applicable Legal
Requirements), Borrower shall have no obligation to pay the additional amount
required by clause (iii) above. Anything in this Section notwithstanding, if any
Lender elects to require payment by Borrower of any material amount under this
Section, Borrower may, within 60 days after the date of receiving notice thereof
and so long as no Default shall have occurred and be continuing, elect to
terminate such Lender as a party to this Agreement; provided that, concurrently
with such termination Borrower shall (i) if Agent and each of the other Lenders
shall consent, pay that Lender all principal, interest and fees and other
amounts owed to such Lender through such date of termination or (ii) have
arranged for another financial institution approved by Agent (such approval not
to be unreasonably withheld) as of such date, to become a substitute Lender for
all purposes under this Agreement in the manner provided in Section 11.6;
provided, further, that, prior to

                                       31
<PAGE>   36

substitution for any Lender, Borrower shall have given written notice to Agent
of such intention and the Lenders shall have the option, but no obligation, for
a period of 60 days after receipt of such notice, to increase their Commitments
in order to replace the affected Lender in lieu of such substitution.

         4.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Lenders under Section 2.1 hereof shall be made
ratably from the Lenders in accordance with their respective Revolving Loan
Commitments; (b) each payment of revolving loan commitment fees shall be made
for the account of the Lenders, and each termination or reduction of the
Revolving Loan Commitments of the Lenders under Section 2.3 hereof shall be
applied, pro rata, according to the Lenders' respective Revolving Loan
Commitments; (c) each payment by Borrower of principal of or interest on the
Loans shall be made to Agent for the account of the Lenders pro rata in
accordance with the respective unpaid principal amounts of such Loans held by
the Lenders; and (d) the Lenders (other than the applicable Issuer) shall
purchase from the applicable Issuer participations in each Letter of Credit to
the extent of their respective Revolving Loan Commitment Percentages.

         4.3 Certain Actions, Notices, Etc. Notices to Agent of any termination
or reduction of Revolving Loan Commitments and of borrowings and optional
prepayments of Loans and requests for issuances of Letters of Credit shall be
irrevocable and shall be effective only if received by Agent not later than
11:00 a.m. Houston time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing and/or prepayment specified below:

<TABLE>
<CAPTION>
                                                                   Number of Business Days
                                                                        Prior Notice
                                                                   -----------------------

<S>                                                               <C>
Termination or Reduction of Revolving Loan Commitments                        5

Loan repayment                                                            Same day

Borrowing at the Base Rate                                                Same day

Letter of Credit issuance                                                     2

Prepayments required pursuant to Section 3.2(b)                           Same day

Selection of a Eurodollar Rate                                      3 LIBOR Business Days
</TABLE>

Each such notice of termination or reduction shall specify the amount of the
applicable Revolving Loan Commitment to be terminated or reduced. Each such
notice of borrowing or prepayment shall specify the amount of the Loans to be
borrowed or prepaid and the date of borrowing or prepayment (which shall be a
Business Day). Agent shall promptly notify the affected Lenders of the contents
of each such notice.

                                       32
<PAGE>   37

         4.4 Non-Receipt of Funds by Agent. Unless Agent shall have been
notified by a Lender or Borrower (the "Payor") prior to the date on which such
Lender is to make payment to Agent of the proceeds of a Loan (or funding of a
drawing under a Letter of Credit or reimbursement with respect to any drawing
under a Letter of Credit) to be made by it hereunder or Borrower is to make a
payment to Agent for the account of one or more of the Lenders, as the case may
be (such payment being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Payor does not intend to make the Required
Payment to Agent, Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to Agent, the recipient of such
payment (or, if such recipient is the beneficiary of a Letter of Credit,
Borrower and, if Borrower fails to pay the amount thereof to Agent forthwith
upon demand, the Lenders ratably in proportion to their respective Revolving
Loan Commitment Percentages) shall, on demand, pay to Agent the amount made
available by Agent, together with interest thereon in respect of the period
commencing on the date such amount was so made available by Agent until the date
Agent recovers such amount at a rate per annum equal to the Federal Funds Rate
for such period.

         4.5 Sharing of Payments, Etc. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, on any
Reimbursement Obligation or on any other Obligation then due to such Lender
hereunder, through the exercise of any right of set-off (including, without
limitation, any right of setoff or lien granted under Section 9.2 hereof),
banker's lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Lenders participations in the Loans made, or
Reimbursement Obligations or other Obligations held, by the other Lenders in
such amounts, and make such other adjustments from time to time as shall be
equitable to the end that all the Lenders shall share the benefit of such
payment (net of any expenses which may be incurred by such Lender in obtaining
or preserving such benefit) pro rata in accordance with the unpaid Obligations
then due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in the Loans made, or Reimbursement
Obligations or other Obligations held, by other Lenders may exercise all rights
of set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans, or
Reimbursement Obligations or other Obligations in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of Borrower.

5.       Conditions Precedent.

         5.1 Initial Loans and Letters of Credit. The obligation of each Lender
or each Issuer to make its initial Loans or issue or participate in a Letter of
Credit (if such Letter of Credit is issued prior to the funding of the initial
Loans) hereunder is subject to the following conditions precedent, each of which
shall have been fulfilled or waived to the reasonable satisfaction of Agent. The
parties

                                       33
<PAGE>   38

hereto acknowledge that certain of said conditions were fulfilled at the time of
execution of the 1998 Loan Agreement, and to the extent agreed by Agent and
Borrower, said conditions need not be duplicated. Until such time as each of
said conditions is fulfilled, the 1998 Loan Agreement shall remain in effect and
upon fulfillment of said conditions, this Agreement shall automatically become
effective and shall, at such time, amend, restate and supercede the 1998 Loan
Agreement.

         (a) Authorization and Status. Agent shall have received from the
appropriate Governmental Authorities certified copies of the Organizational
Documents (other than by-laws) of each Obligor, and evidence satisfactory to
Agent of all action taken by each Obligor authorizing the execution, delivery
and performance of the Loan Documents and all other documents related to this
Agreement to which it is a party (including, without limitation, a certificate
of the secretary of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby and attaching a copy of its bylaws), together with such certificates as
may be appropriate to demonstrate the qualification and good standing of and
payment of taxes by each Obligor in the jurisdiction of its organization and in
each other jurisdiction where the failure in which to qualify would have a
material adverse effect on the business, condition (financial or otherwise),
operations or Properties of any Obligor.

         (b) Incumbency. Each Obligor shall have delivered to Agent a
certificate in respect of the name and signature of each of the officers (i) who
is authorized to sign on its behalf the applicable Loan Documents related to any
Loan or the issuance of any Letter of Credit and (ii) who will, until replaced
by another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with any Loan or the issuance of any Letter
of Credit. Agent and each Lender may conclusively rely on such certificates
until they receive notice in writing from the applicable Obligor to the
contrary.

         (c) Notes. Agent shall have received the appropriate Notes of Borrower
for each Lender, duly completed and executed, including that certain note in the
original principal amount of $10,000,000.

         (d) Loan Documents. Each Obligor shall have duly executed and delivered
the other Loan Documents to which it is a party (including the execution of a
Guaranty by each domestic Subsidiary of the Borrower if requested in accordance
with Section 7.11 hereof) in such number of copies as Agent shall have
requested. Each such Loan Document shall be in substantially the form furnished
to the Lenders prior to their execution of this Agreement, together with such
changes therein as Agent may approve.

         (e) Fees and Expenses. Borrower shall have paid to Agent all unpaid
fees in the amounts previously agreed upon in writing among Borrower and Agent;
and shall have in addition paid to Agent all amounts payable under Section 11.3
hereof, on or before the date of this Agreement, except for amounts which Agent,
in its sole discretion, agrees may be paid at a later date.

                                       34
<PAGE>   39

         (f) Insurance. Borrower shall have delivered to Agent certificates of
insurance reasonably satisfactory to Agent evidencing the existence of all
insurance required to be maintained by each Obligor by this Agreement and the
Security Documents.

         (g) Opinions of Counsel. Agent shall have received such opinions of
counsel to Obligors as Agent shall reasonably request with respect to Obligors
and the Loan Documents.

         (h) Consents. Agent shall have received evidence satisfactory to the
Lenders that all material consents of each Governmental Authority and of each
other Person, if any, reasonably required in connection with (a) the Loans and
the Letters of Credit and (b) the execution, delivery and performance of this
Agreement and the other Loan Documents have been satisfactorily obtained.

         (i) Borrower shall have received at least $30,000,000 net proceeds from
an initial public offering of Borrower's stock.

         (j) Lien Priority. The Borrower shall have delivered to the Agent the
Title Insurance Policies and such other evidence as to the priority of the
Agent's Liens on the Collateral as the Agent or any Lender may reasonably
request.

         (k) Modifications to Deeds of Trust. The Borrower shall have delivered
to the Agent modifications to the Deed of Trust and the Second Lien Deed of
Trust, reflecting the Revolving Loan Maturity Date and containing such other
provisions and in a form satisfactory to Agent.

         (l) Other Documents. Agent shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agent may reasonably request, including, without
limitation, P(9)b.3 modification endorsements to the existing title policy
insuring the Deed of Trust.

         5.2 All Loans and Letters of Credit. The obligation of each Lender to
make any Loan to be made by it hereunder or to issue or participate in any
Letter of Credit is subject to (a) the accuracy, in all material respects, on
the date of such Loan or such issuance of all representations and warranties of
each Obligor contained in this Agreement and the other Loan Documents (other
than those which became inaccurate because of transactions permitted under the
Loan Documents and consummated after the date of the relevant representation);
(b) Agent shall have received the following, all of which shall be duly executed
and in Proper Form: (1) a Request for Extension of Credit as to the Loan or the
Letter of Credit, as the case may be, no later than 11:00 a.m. Houston time on
the Business Day on which such Request for Extension of Credit must be given
under Section 4.3 hereof, (2) in the case of a Letter of Credit, an Application,
and (3) such other documents as Agent may reasonably require; (c) prior to the
making of such Loan or the issuance of such Letter of Credit, there shall have
occurred no material adverse change in the assets, liabilities, financial
condition, business or affairs of Borrower and the Obligors, on a consolidated
basis; (d) no Default or Event of Default shall have occurred and be continuing;
(e) the making of such Loan or the issuance of such Letter of Credit shall not
be illegal or prohibited by any Legal Requirement; and (f) Borrower shall have
paid all fees and expenses of the type described in Section 11.3 hereof and

                                       35
<PAGE>   40

all other fees owed to Agent or any Lender under the Loan Documents which are
due and payable, in each case, prior to or on the date of such Loan or such
issuance. The submission by Borrower of a Request for Extension of Credit shall
be deemed to be a representation and warranty that the conditions precedent to
the applicable Loan or Letter of Credit have been satisfied.

6.       Representations and Warranties.

         To induce the Lenders to enter into this Agreement and to make the
Loans and issue or participate in the Letters of Credit, Borrower represents and
warrants (such representations and warranties to survive any investigation and
the making of the Loans and the issuance of any Letters of Credit) to the
Lenders and Agent as follows:

         6.1 Organization. Each Obligor (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization; (b)
has all necessary power and authority to conduct its business as presently
conducted, and (c) is duly qualified to do business and in good standing in the
jurisdiction of its organization and in all jurisdictions in which the failure
to so qualify would reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations or Properties of
any Obligor.

         6.2 Financial Statements. Borrower has furnished to Agent (i) audited
financial statements (including a balance sheet) as to Borrower which fairly
present in all material respects, in accordance with GAAP, the consolidated
financial condition and the results of operations of Borrower as at the end of
Borrower's fiscal year ended December 31, 1999, (ii) unaudited consolidating
financial statements (including a balance sheet) as to Borrower which fairly
present in all material respects, in accordance with GAAP, the financial
condition and the results of operations of Borrower, on a consolidating basis,
as at the end of Borrower's fiscal year ended December 31, 1999 and (iii)
unaudited financial statements (including a balance sheet) as to Borrower which
fairly present in all material respects, in accordance with GAAP, the
consolidated financial condition and the results of operations of Borrower as at
the end of Borrower's fiscal quarter ended June 30, 2000. No events, conditions
or circumstances have occurred from the date that the financial statements were
delivered to Agent through the Closing Date which would cause said financial
statements to be misleading in any material respect. There are no material
instruments or liabilities which should be reflected in such financial
statements provided to Agent which are not so reflected.

         6.3 Enforceable Obligations; Authorization. The Loan Documents are
legal, valid and binding obligations of each applicable Obligor, enforceable in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency and other similar laws and judicial decisions affecting creditors'
rights generally and by general equitable principles. The execution, delivery
and performance of the Loan Documents by the Obligors party thereto (a) have all
been duly authorized by all necessary action on the part of the Obligors; (b)
are within the power and authority of each applicable Obligor; (c) do not and
will not contravene or violate any Legal Requirement applicable to any
applicable Obligor or the Organizational Documents of any applicable Obligor,
the contravention or violation of which would reasonably be expected to have a
material adverse effect

                                       36
<PAGE>   41

on the business, condition (financial or otherwise), operations or Properties of
any Obligor; (d) do not and will not result in the breach of, or constitute a
default under, any material agreement or instrument by which any Obligor or any
of its Property may be bound; and (e) do not and will not result in the creation
of any Lien upon any Property of any Obligor, except in favor of Agent or as
expressly contemplated therein. All necessary permits, registrations and
consents for such making and performance have been obtained.

         6.4 Other Debt. Neither Borrower nor any of its Subsidiaries is in
default in the payment of any other Indebtedness or under any agreement,
mortgage, deed of trust, security agreement or lease to which it is a party and
which default would reasonably be expected to have a material adverse effect on
(a) the business, condition (financial or otherwise), operations or Properties
of any Obligor; (b) the business, condition (financial or otherwise), operations
or Properties of Borrower and its Subsidiaries taken as a whole; or (c) the
ability of any Obligor to perform its respective obligations under any Loan
Document to which it is a party.

         6.5 Litigation. There is no litigation or administrative proceeding, to
the knowledge of any executive officer of any Obligor, pending or threatened
against, nor any outstanding judgment, order or decree against, any Obligor
before or by any Governmental Authority which does or would reasonably be
expected to have a material adverse effect on (a) the business, condition
(financial or otherwise), operations or Properties of any Obligor; (b) the
business, condition (financial or otherwise), operations or Properties of
Borrower and its Subsidiaries taken as a whole; or (c) the ability of any
Obligor to perform its respective obligations under any Loan Document to which
it is a party. No Obligor is in default with respect to any judgment, order or
decree of any Governmental Authority where such default would have a material
adverse effect on the business, condition (financial or otherwise), operations
or Properties of any Obligor. No Subsidiary of Borrower is in default with
respect to any judgment, order or decree of any Governmental Authority where
such default would have a material adverse effect on the business, condition
(financial or otherwise), operations or Properties of Borrower and its
Subsidiaries taken as a whole.

         6.6 Title. Borrower and each of its Subsidiaries has good and
marketable title to its material Property, free and clear of all Liens except
Permitted Liens. The Liens of the Security Documents will constitute valid and
perfected first and prior Liens on the Collateral, subject to no other Liens
whatsoever other than Permitted Liens on Collateral.

         6.7 Taxes. Borrower and each of its Subsidiaries has filed all tax
returns required to have been filed and paid all taxes shown thereon to be due,
except those for which extensions have been obtained or those which are being
contested in good faith.

         6.8 Regulations G, U and X. None of the proceeds of any Loan will be
used for the purpose of purchasing or carrying directly or indirectly any margin
stock or for any other purpose would constitute this transaction a "purpose
credit" within the meaning of Regulations G, U and X of the Board of Governors
of the Federal Reserve System, as any of them may be amended from time to time.

                                       37
<PAGE>   42

         6.9 Subsidiaries. As of the Closing Date, Borrower has no Subsidiaries
other than those set forth on Exhibit 6.9 hereto.

         6.10 No Untrue or Misleading Statements. No representation or warranty
made by Borrower in any Loan Document or in any document, instrument or other
writing furnished to the Lenders by or on behalf of any Obligor in connection
with the transactions contemplated in any Loan Document does or will contain any
untrue material statement of fact or will omit to state any such fact (of which
any executive officer of any Obligor has knowledge) necessary to make the
representations, warranties and other statements contained herein or in such
other document, instrument or writing not misleading in any material respect.

         6.11 ERISA. With respect to each Plan, Borrower and each member of the
Controlled Group have fulfilled their obligations under Title IV of ERISA and
the minimum funding standards of ERISA and the Code. No event has occurred which
could result in a liability of Borrower or any member of the Controlled Group to
the PBGC or a Plan (other than to make contributions in the ordinary course)
that would reasonably be expected to have a material adverse effect on the
Properties, liabilities, condition (financial or otherwise), business or
operations of any Obligor. There have not been any nor are there now existing
any events or conditions that would cause the Lien provided under Section 4068
of ERISA to attach to any Property of Borrower or any member of the Controlled
Group. No "prohibited transaction" has occurred with respect to any Plan.

         6.12 Investment Company Act. No Obligor is an investment company within
the meaning of the Investment Company Act of 1940, as amended, or, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act.

         6.13 Public Utility Holding Company Act. No Obligor is an "affiliate"
or a "subsidiary company" of a "public utility company," or a "holding company,"
or an "affiliate" or a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.

         6.14 Solvency. None of Borrower, any Obligor, or Borrower and its
Subsidiaries, on a consolidated basis, is "insolvent," as such term is used and
defined in (i) the Bankruptcy Code and (ii) the fraudulent conveyance statutes
of the State of Texas.

         6.15 Fiscal Year. The fiscal year of each Obligor ends on December 31.

         6.16 Compliance. Each Obligor is in compliance with all Legal
Requirements applicable to it, except to the extent that the failure to comply
therewith would not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations or Properties of
any Obligor or the ability of any Obligor to perform its obligations under this
Agreement or the Loan Documents to which it is a party. Each Subsidiary of
Borrower is in compliance with all Legal Requirements applicable to it, except
to the extent that the failure to comply therewith would not reasonably be
expected to have a material adverse effect on the

                                       38
<PAGE>   43

business, condition (financial or otherwise), operations or Properties of
Borrower and its Subsidiaries taken as a whole.

         6.17 Environmental Matters.

         (a) Each Obligor has, to the best knowledge of its executive officers,
obtained and maintained in effect all Environmental Permits (or the applicable
Person has initiated the necessary steps to transfer the Environmental Permits
into its name or obtain such permits), the failure to obtain which would
reasonably be expected to have a material adverse effect on the Properties,
liabilities, condition (financial or otherwise), business or operations of such
Obligor. Each Obligor and its Properties, business and operations have been and
are, to the best knowledge of its executive officers, in compliance with all
applicable Requirements of Environmental Law and Environmental Permits the
failure to comply with which would reasonably be expected to have a material
adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of such Obligor. Each Obligor and its
Properties, business and operations are not subject to any (A) Environmental
Claims or (B) to the best knowledge of its executive officers (after making
reasonable inquiry of the personnel and records of such Obligor), Environmental
Liabilities, in either case direct or contingent, arising from or based upon any
act, omission, event, condition or circumstance occurring or existing on or
prior to the date hereof which would reasonably be expected to have a material
adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of such Obligor. None of the officers of any
Obligor has received any notice of any violation or alleged violation of any
Requirements of Environmental Law or Environmental Permit or any Environmental
Claim in connection with its Properties, liabilities, condition (financial or
otherwise), business or operations which would reasonably be expected to have a
material adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of such Obligor. Borrower does not know of
any event or condition with respect to currently enacted Requirements of
Environmental Laws presently scheduled to become effective in the future with
respect to any of the Properties of any Obligor which would reasonably be
expected to have a material adverse effect on the Properties, liabilities,
condition (financial or otherwise), business or operations of such Obligor, for
which such Obligor has not made good faith provisions in its business plan and
projections of financial performance.

         (b) Each Subsidiary of Borrower has, to the best knowledge of such
Subsidiary's executive officers, obtained and maintained in effect all
Environmental Permits (or the applicable Person has initiated the necessary
steps to transfer the Environmental Permits into its name or obtain such
permits), the failure to obtain which would reasonably be expected to have a
material adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of Borrower and its Subsidiaries taken as a
whole. Each Subsidiary of Borrower and such Subsidiary's Properties, business
and operations have been and are, to the best knowledge of such Subsidiary's
executive officers, in compliance with all applicable Requirements of
Environmental Law and Environmental Permits the failure to comply with which
would reasonably be expected to have a material adverse effect on the
Properties, liabilities, condition (financial or otherwise), business or
operations of Borrower and its Subsidiaries taken has a whole. Each Subsidiary
of Borrower and such Subsidiary's Properties, business and operations are not
subject to any (A) Environmental

                                       39
<PAGE>   44

Claims or (B) to the best knowledge of its executive officers (after making
reasonable inquiry of the personnel and records of such Obligor), Environmental
Liabilities, in either case direct or contingent, arising from or based upon any
act, omission, event, condition or circumstance occurring or existing on or
prior to the date hereof which would reasonably be expected to have a material
adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of Borrower and its Subsidiaries taken as a
whole. None of the officers of any Subsidiary of Borrower has received any
notice of any violation or alleged violation of any Requirements of
Environmental Law or Environmental Permit or any Environmental Claim in
connection with its Properties, liabilities, condition (financial or otherwise),
business or operations which would reasonably be expected to have a material
adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of Borrower and its Subsidiaries taken as a
whole. Borrower does not know of any event or condition with respect to
currently enacted Requirements of Environmental Laws presently scheduled to
become effective in the future with respect to any of the Properties of any
Subsidiary of Borrower which would reasonably be expected to have a material
adverse effect on the Properties, liabilities, condition (financial or
otherwise), business or operations of Borrower and its Subsidiaries taken as a
whole, for which Borrower has not made good faith provisions in its business
plan and projections of financial performance for Borrower and its Subsidiaries
taken as a whole.

         7. Affirmative Covenants.

         Borrower covenants and agrees with Agent and the Lenders that prior to
the termination of this Agreement it will do or cause to be done, and cause each
of its Subsidiaries (unless limited by the language of the applicable provision
to less than all of such Subsidiaries) to do or cause to be done, each and all
of the following:

         7.1 Taxes, Existence, Regulations, Property, Etc. At all times (a) pay
when due all taxes and governmental charges of every kind upon it or against its
income, profits or Property, unless and only to the extent that the same shall
be contested diligently in good faith and adequate reserves in accordance with
GAAP have been established therefor; (b) do all things necessary to preserve its
existence, qualifications, rights and franchises in all jurisdictions where such
failure to qualify would reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise), operations or
Properties of (1) any Obligor or (2) Borrower and its Subsidiaries taken as a
whole; (c) comply with all applicable Legal Requirements (including without
limitation Requirements of Environmental Law) in respect of the conduct of its
business and the ownership of its Property, the noncompliance with which would
reasonably be expected to have a material adverse effect on (1) the business,
condition (financial or otherwise), operations or Properties of (A) any Obligor;
or (B) Borrower and its Subsidiaries taken as a whole, or (2) the ability of any
Obligor to perform its obligations under any Loan Document to which it is a
party; and (d) cause its Property to be protected, maintained and kept in good
repair and make all replacements and additions to such Property as may be
reasonably necessary to conduct its business properly and efficiently.

         7.2 Financial Statements and Information. Furnish to Agent and each
Lender each of the following: (a) as soon as available and in any event within
120 days after the end of each applicable

                                       40
<PAGE>   45

fiscal year, beginning with the fiscal year ending on December 31, 2000, Annual
Financial Statements of Borrower; (b) as soon as available and in any event
within 45 days after the end of each fiscal quarter (other than the last fiscal
quarter) of each applicable fiscal year, Quarterly Financial Statements of
Borrower; (c) concurrently with the financial statements provided for in
Sections 7.2(a) and 7.2(b) hereof, such schedules, computations and other
information, in reasonable detail, as may be required by Agent to demonstrate
compliance with the covenants set forth herein or reflecting any non-compliance
therewith as of the applicable date, all certified and signed by the president,
the chief financial officer or the treasurer of Borrower (or other authorized
officer approved by Agent) as true and correct in all material respects to the
best knowledge of such officer and, commencing with the quarterly financial
statement prepared as of September 30, 2000, a compliance certificate
("Compliance Certificate") in the form of Exhibit 7.2 hereto, duly executed by
such authorized officer; (d) by January 31 of each fiscal year, Borrower's
annual business plan for such fiscal year (including its balance sheet and
income and cash flow projections for such fiscal year); and (e) such other
information relating to the condition (financial or otherwise), operations,
prospects or business of Borrower or any of its Subsidiaries as from time to
time may be reasonably requested by Agent.

         7.3 Financial Tests. Borrower will have and maintain:

                  (a) Tangible Net Worth - Tangible Net Worth, at any time
         during the term hereof, of not less than the sum of:

                           (1)      the greater of: (i) $95,000,000 or (ii) the
                                    sum of: (A) $65,971,000.00 (namely, 80% of
                                    the Tangible Net Worth, as of June 30, 2000)
                                    plus (B) 80% of the net proceeds realized by
                                    the Borrower from the initial public
                                    offering of its stock on the Effective Date,
                                    plus

                           (2)      50% of the net income (if positive) of
                                    Borrower and its Subsidiaries, on a
                                    consolidated basis, for each Computation
                                    Period, commencing with the Computation
                                    Period ending December 31, 2000, plus

                           (3)      100% of the net proceeds (whether cash or
                                    non-cash) realized from the issuance after
                                    the Effective Date of any equity securities
                                    by Borrower or its Subsidiaries to any
                                    Person other than the Borrower or another
                                    Subsidiary.

                  For purposes of this Section 7.3(a), the term "Computation
                  Period" shall mean (i) the period from July 1, 2000 through
                  December 31, 2000 and (ii) each fiscal year of the Borrower
                  commencing with the fiscal year ending December 31, 2001.

                  (b) Debt to Capitalization Ratio - a Debt to Capitalization
         Ratio of not greater than 45% at any time during the term hereof.

                                       41
<PAGE>   46

                  (c) Interest Coverage Ratio - an Interest Coverage Ratio of
         not less than the amount set forth for the period ending below:

<TABLE>
<S>                                                                        <C>
                      From December 31, 1999 through December 31, 2000     2.0 - 1.0
                      After December 31, 2000                              2.5 - 1.0
</TABLE>

                  (d) A Leverage Ratio of not greater than 3.0 to 1.0 at any
         time during the term hereof.

         7.4 Inspection. Subject to Section 11.16 hereof, permit Agent and each
Lender upon 3 days' prior notice (unless a Default or an Event of Default has
occurred which is continuing, in which case no prior notice is required) to
inspect its Property, to examine its files, books and records, except privileged
communication with legal counsel and classified governmental material, and make
and take away copies thereof, and to discuss its affairs with its officers and
accountants, all during normal business hours and at such intervals and to such
extent as Agent or such Lender may reasonably desire.

         7.5 Further Assurances. Promptly execute and deliver, at Borrower's
expense, any and all other and further instruments which may be reasonably
requested by Agent to cure any defect in the execution and delivery of any Loan
Document in order to effectuate the transactions contemplated by the Loan
Documents.

         7.6 Books and Records. Maintain books of record and account which
permit financial statements to be prepared in accordance with GAAP.

         7.7 Insurance. Borrower will (and will cause each of its Subsidiaries
to) maintain insurance with such insurers, on such of its Property, with
responsible companies in such amounts, with such deductibles and against such
risks as are usually carried by owners of similar businesses and properties in
the same general areas in which the applicable Corporation operates or as Agent
may otherwise reasonably require, and furnish Agent satisfactory evidence
thereof promptly upon request therefor. Agent shall be provided with copies of
the policies of insurance and a certificate of the insurer that the insurance
required by this Section may not be canceled, reduced or affected in any
material manner without thirty (30) days' prior written notice to Agent. These
insurance provisions are cumulative of the insurance provisions of the Security
Documents.

         7.8 Notice of Certain Matters. Give Agent written notice of the
following promptly after any executive officer of Borrower shall become aware of
the same:

         (a) the issuance by any court or governmental agency or authority of
any injunction, order or other restraint prohibiting, or having the effect of
prohibiting, the performance of this Agreement, any other Loan Document, or the
making of the Loans or the initiation of any litigation, or any claim or
controversy which would reasonably be expected to result in the initiation of
any litigation, seeking any such injunction, order or other restraint;

                                       42
<PAGE>   47

         (b) the filing or commencement of any action, suit or proceeding,
whether at law or in equity or by or before any court or any Governmental
Authority involving claims in excess of $5,000,000 against Borrower or any of
its Subsidiaries or which may reasonably be expected to result in a Default
hereunder; and

         (c) any Event of Default or Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with the respect
thereto.

Borrower will also notify Agent in writing at least 30 days prior to the date
that any Obligor changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records.

         7.9 Capital Adequacy. If any Lender shall have determined that the
adoption or effectiveness after the Closing Date (whether or not previously
announced) of any applicable law, rule, regulation or treaty regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof after the Closing Date by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender with any request or directive after the Closing Date
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency has or would have the
effect of reducing the rate of return on such Lender's capital as a consequence
of its obligations hereunder or under the Letters of Credit, the Notes or other
Obligations held by it to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, upon satisfaction of the
conditions precedent set forth in this Section, after demand by such Lender
(with a copy to Agent) as provided below, pay (subject to Section 11.7 hereof)
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction. The certificate of any Lender setting forth such amount or
amounts as shall be necessary to compensate it and the basis thereof and reasons
therefor shall be delivered as soon as practicable to Borrower and shall be
prima facie evidence of the correctness thereof. Borrower shall pay the amount
shown as due on any such certificate within five (5) Business Days after the
delivery of such certificate. In preparing such certificate, a Lender may employ
such assumptions and allocations of costs and expenses as it shall in good faith
deem reasonable and may use any reasonable averaging and attribution method.

         7.10 ERISA Information and Compliance. Promptly furnish to Agent (i)
immediately upon receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA and any notice from the PBGC under Title IV of
ERISA of an intent to terminate or appoint a trustee to administer any Plan,
(ii) if requested by Agent, promptly after the filing thereof with the United
States Secretary of Labor or the PBGC or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (iii) immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, for which
the disclosure requirements of Regulation Section 2615.3 promulgated by the PBGC
have not been waived, or of any "prohibited transaction," as such term is
defined in Section 4975 of the Code, in connection with any Plan or any trust
created thereunder, a written

                                       43
<PAGE>   48

notice signed by the President or the principal financial officer of Borrower or
the applicable member of the Controlled Group specifying the nature thereof,
what action Borrower or the applicable member of the Controlled Group is taking
or proposes to take with respect thereto, and, when known, any action taken by
the PBGC, the Internal Revenue Service or the Department of Labor with respect
thereto, (iv) promptly after the filing or receiving thereof by Borrower or any
member of the Controlled Group of any notice of the institution of any
proceedings or other actions which may result in the termination of any Plan,
and (v) each request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or Section 412 of
the Code promptly after the request is submitted by Borrower or any member of
the Controlled Group to the Secretary of the Treasury, the Department of Labor
or the Internal Revenue Service, as the case may be. To the extent required
under applicable statutory funding requirements, Borrower will fund, or will
cause the applicable member of the Controlled Group to fund, all current service
pension liabilities as they are incurred under the provisions of all Plans from
time to time in effect, and comply with all applicable provisions of ERISA, in
each case, except to the extent that failure to do the same would not reasonably
be expected to have a material adverse effect on the business, condition
(financial or otherwise), operations or Properties of any Obligor. Borrower
covenants that it shall and shall cause each member of the Controlled Group to
(1) make contributions to each Plan in a timely manner and in an amount
sufficient to comply with the contribution obligations under such Plan and the
minimum funding standards requirements of ERISA; (2) prepare and file in a
timely manner with respect to each Plan all notices and reports required under
the terms of ERISA including but not limited to annual reports; and (3) pay in a
timely manner all required PBGC premiums, in each case, except to the extent
that failure to do the same would not reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), operations
or Properties of any Obligor.

         7.11 New Subsidiaries. Borrower will promptly notify the Agent of the
creation of any Subsidiary under the laws of the United States or any state or
territory thereof ("Domestic Subsidiary") and any Subsidiary under the laws of
any foreign jurisdiction ("Foreign Subsidiary"), and will: (i) in the case of
any Domestic Subsidiary, deliver to the Agent a stock certificate and stock
power evidencing all of the ownership of such Domestic Subsidiary held by
borrower (or any of Borrower's other Subsidiaries) and in the case of any
Foreign Subsidiary, deliver to the Agent a stock certificate and stock power
evidencing sixty-five percent (65%) of the ownership of such Foreign Subsidiary
held by Borrower (or any of Borrower's other Subsidiaries) and (ii) execute such
additional documents or modifications to the Loan Documents as required to
insure Agent holds a perfected security interest in such stock and, upon request
by the Agent, will cause any such Subsidiary to execute a Guaranty guarantying
the Obligations.

         8. Negative Covenants.

         Borrower covenants and agrees with Agent and the Lenders that prior to
the termination of this Agreement it will not, and will not suffer or permit any
of its Subsidiaries to, do any of the following:

                                       44
<PAGE>   49

         8.1 Borrowed Money Indebtedness. Create, incur, suffer or permit to
exist, or assume or guarantee, directly or indirectly, or become or remain
liable with respect to any Borrowed Money Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following: (a)
Indebtedness under this Agreement and the other Loan Documents, (b) the Long
Term Debt and (c) other Indebtedness allowed by Noteholder under the documents
governing the Long Term Debt.

         8.2 Liens. Create or suffer to exist any Lien upon any of its Property
now owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign, pledge
or otherwise transfer any of its Accounts or General Intangibles other than
those existing as of the Closing Date and described on Exhibit 8.2; provided,
however, that Borrower and any of its Subsidiaries may create or suffer to exist
Permitted Liens and engage in transactions permitted by Section 8.4 hereof.

         8.3 Contingent Liabilities. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person except for (a) the endorsement of
checks or other negotiable instruments in the ordinary course of business; (b)
obligations disclosed to Agent in the financial statements delivered on or prior
to the Closing Date pursuant to Section 6.2 hereof (but not increases of such
obligations after the Closing Date), and (c) those liabilities permitted under
Section 8.1 hereof.

         8.4 Mergers, Consolidations and Dispositions of Assets. In any single
transaction or series of transactions, directly or indirectly: (a) liquidate or
dissolve; (b) be a party to any merger or consolidation unless and so long as
(i) no Default or Event of Default has occurred that is then continuing, (ii)
immediately thereafter and giving effect thereto, no event will occur and be
continuing which constitutes a Default, (iii) an Obligor is the surviving
Person; (iv) the surviving Person ratifies and assumes each Loan Document to
which any party to such merger was a party, and (v) Agent is given at least ten
days' prior notice of such merger or consolidation; (c) sell, convey or lease
all or any part of its assets, except for (1) sales of Inventory in the ordinary
course of business; (2) dispositions of assets, including Collateral, having an
aggregate net book value (such net book value being determined immediately after
the consummation of each such disposition) during the then current fiscal year
of the Company of no more than 15% of the Total Capitalization of the Company
and the Subsidiaries minus all intangibles, as such term is defined in the
definition of Tangible Net Worth, determined as of the last day of the then most
recently ended twelve (12) month period, with the first twelve (12) month period
beginning on the Effective Date, provided, however, that the aggregate net book
value of all assets (other than (x) the real property located in Humble, Texas
subject to the Deed of Trust and the Second Lien Deed of Trust, and (y) the
California real property that has been released from the Lien of the Security
Documents) sold in accordance with the terms of this subsection (c)(2) hereof
during the term of this Agreement shall not exceed Twenty Million and No/100
Dollars ($20,000,000) and further provided that, if requested by the Borrower in
connection with any such sale and after receipt by the Agent of a letter from
the Noteholders (as said term is defined in the Collateral Agency Agreement)
confirming that the Borrower is entitled to the net proceeds of the sale of such
assets, which letter is substantially in the form of that attached

                                       45
<PAGE>   50

hereto as Exhibit 8.4 or in a form reasonably satisfactory to the Agent, the
Agent, in its capacity as Agent and as Collateral Agent under the Collateral
Agency Agreement, shall execute releases as are reasonably necessary to evidence
the release of its Liens in the property so sold; provided, however, the Liens
on the real property located in Humble, Texas subject to the Deed of Trust and
the Second Lien Deed of Trust shall be released only in accordance with the
terms of said Deed of Trust and Second Lien Deed of Trust; and (3) dispositions
of Collateral (other than Inventory) in connection with the obsolescence or
replacement thereof, or (d) except for Liens in favor of Agent in its capacity
as Agent and as Collateral Agent under the Collateral Agency Agreement, pledge,
transfer or otherwise dispose of any equity interest in any of Borrower's
Subsidiaries or any Indebtedness of any of Borrower's Subsidiaries or issue or
permit any Subsidiary of Borrower to issue any additional equity interest.

         8.5 Redemption, Dividends and Distributions. (a) Borrower will not, and
will not permit any of its Subsidiaries to, at any time, declare or make, or
incur any liability to declare or make, any dividend, distribution, redemption,
payment or similar item in respect of any of its shareholders or holders of its
Indebtedness (collectively, a "Restricted Payment") unless, immediately after
giving effect to such action, no Default or Event of Default would exist
(including, without limitation, under Section 7.3 hereof) and Borrower would be
permitted by the provisions of Section 8.1 hereof and Section 10.1 of the Note
Agreement to incur at least $1.00 of additional Funded Debt (other than Funded
Debt owing to a Subsidiary or Funded Debt incurred pursuant to clauses (a)
through (d), inclusive, of said Section 10.1).

         (c) Notwithstanding the above, any Subsidiary may always pay dividends
of any kind to Borrower.

         8.6 Nature of Business. Change the nature of its business or enter into
any business which is substantially different from the business in which it is
presently engaged.

         8.7 Transactions with Related Parties. Enter into any transaction or
agreement with any officer, director or holder of any equity interest in
Borrower or any of its Subsidiaries (or any Affiliate of any such Person) other
than transactions among Obligors, unless the same is upon terms substantially
similar to (or more favorable to the relevant Obligor than) those obtainable
from wholly unrelated sources (to the best knowledge of the executive officers
of the applicable Corporation or Affiliate, after making reasonable inquiry of
the personnel and records of the applicable Corporation or Affiliate).

         8.8 Loans and Investments. Make any loan, advance, extension of credit
or capital contribution to, or make or have any Investment in, any Person, or
make any commitment to make any such extension of credit or Investment, except
(a) Permitted Investments; (b) Investments disclosed to Agent in the financial
statements delivered on or prior to the Closing Date pursuant to Section 6.2
hereof (but not increases in such Investments after the Closing Date); (c)
Investments in any Obligor; (d) advances to Subsidiaries which are not Obligors,
but the aggregate of such advances may not exceed $5,000,000 at any one time
outstanding; and (e) normal and reasonable advances in the ordinary course of
business to directors, officers and employees.

                                       46
<PAGE>   51

         8.9 Intentionally omitted.

         8.10 Organizational Documents. Amend, modify, restate or supplement any
of its Organizational Documents if such action would reasonably be expected to
materially and adversely affect any Loan or Obligation or the abilities of
Borrower to perform its Obligations under any Loan Document, unless such action
shall be consented to in writing by Agent.

         8.11 Unfunded Liabilities. Allow any Unfunded Liabilities after the
Closing Date to arise or exist in an aggregate amount in excess of $8,000,000.

         8.12 Operating Lease Expenses. Incur operating lease expenses
(excluding lease payments under capital leases) for Borrower and its
Subsidiaries in the aggregate in any fiscal year in excess of $5,000,000.

         8.13 Subordinated Indebtedness. Except as expressly permitted by the
relevant subordination agreement or in writing by the Majority Lenders, amend,
modify or obtain or grant a waiver of any provision of any document or
instrument evidencing any Subordinated Indebtedness or prepay, purchase, redeem,
retire or otherwise acquire for value, deposit any monies with any Person with
respect to or make any payment or prepayment of the principal of or any other
amount owing in respect of, any Subordinated Indebtedness.

         8.14 Negative Pledges. Enter into any agreement or contract which
limits or restricts in any way the granting of Cover.

         8.15 Amendment to Long Term Debt. Borrower will not (i) shorten the
maturity of the Long Term Debt, or (ii) amend any of the financial covenants in
any documents evidencing, describing or securing the Long Term Debt, or any
other Indebtedness permitted hereby, in any way that is less favorable to
Borrower than the comparable terms that exist in the Loan Agreement or the Loan
Documents.

         9. Defaults and Remedies.

         9.1 Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur, then Agent may (and at the
direction of the Majority Lenders, shall) do any or all of the following: (1)
without notice to Borrower or any other Person, declare the Revolving Loan
Commitments terminated (whereupon the Revolving Loan Commitments shall be
terminated) and/or accelerate the Revolving Loan Termination Date to a date as
early as the date of termination of the Revolving Loan Commitments; (2)
terminate any Letter of Credit allowing for such termination, by sending a
notice of termination as provided therein and require Borrower to provide Cover
for outstanding Letters of Credit; (3) declare the principal amount then
outstanding of and the unpaid accrued interest on the Loans and Reimbursement
Obligations and all fees and all other amounts payable hereunder, under the
Notes and under the other Loan Documents to be forthwith due and payable,
whereupon such amounts shall be and become immediately due and payable,

                                       47
<PAGE>   52

without notice (including, without limitation, notice of acceleration and notice
of intent to accelerate), presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by Borrower; provided that in
the case of the occurrence of an Event of Default with respect to any Obligor
referred to in clause (f), (g) or (h) of this Section 9.1, the Revolving Loan
Commitments shall be automatically terminated and the principal amount then
outstanding of and unpaid accrued interest on the Loans and the Reimbursement
Obligations and all fees and all other amounts payable hereunder, under the
Notes and under the other Loan Documents shall be and become automatically and
immediately due and payable, without notice (including, without limitation,
notice of acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower; and (4) exercise any or all other rights and remedies
available to Agent or any of the Lenders under the Loan Documents, at law or in
equity:

                  (a) Payments - (i) any Obligor shall fail to make any payment
         or required prepayment of any installment of principal on the Loans or
         any Reimbursement Obligation payable under the Notes, this Agreement or
         the other Loan Documents when due or (ii) any Obligor fails to make any
         payment or required prepayment of interest with respect to the Loans,
         any Reimbursement Obligation or any other fee or amount under the
         Notes, this Agreement or the other Loan Documents when due and such
         failure to pay continues unremedied for a period of five days; or

                  (b) Other Obligations - Borrower or any of its Subsidiaries
         shall default in the payment when due of any principal of or interest
         on any Indebtedness having an outstanding principal amount of at least
         $5,000,000 including, without limitation, the Long Term Debt (other
         than the Loans and Reimbursement Obligations) and such default shall
         continue beyond any applicable period of grace; or any event or
         condition shall occur which results in the acceleration of the maturity
         of any such Indebtedness or enables (or, with the giving of notice or
         lapse of time or both, would enable) the holder of any such
         Indebtedness or any Person acting on such holder's behalf to accelerate
         the maturity thereof and such event or condition shall not be cured
         within any applicable period of grace; or

                  (c) Representations and Warranties - any representation or
         warranty made or deemed made by or on behalf of any Obligor in this
         Agreement or any other Loan Document or in any certificate furnished or
         made by any Obligor to Agent or the Lenders in connection herewith or
         therewith shall prove to have been incorrect, false or misleading in
         any material respect as of the date thereof or as of the date as of
         which the facts therein set forth were stated or certified or deemed
         stated or certified; or

                  (d) Affirmative Covenants - (i) default shall be made in the
         due observance or performance of any of the covenants or agreements
         contained in Section 7.3 hereof, (ii) default shall be made in the due
         observance or performance of any of the covenants or agreements
         contained in Sections 7.2, 7.4, 7.7 or 7.8 hereof and, in each case,
         such default continues unremedied for a period of 20 days after (x)
         notice thereof is given by Agent to Borrower or (y) such default
         otherwise becomes known to any executive officer of Borrower,

                                       48
<PAGE>   53

         whichever is earlier, or (iii) default is made in the due observance or
         performance of any of the other covenants and agreements contained in
         Section 7 hereof or any other affirmative covenant of any Obligor
         contained in this Agreement or any other Loan Document and such default
         continues unremedied for a period of 30 days after (x) notice thereof
         is given by Agent to Borrower or (y) such default otherwise becomes
         known to any executive officer of Borrower, whichever is earlier; or

                  (e) Negative Covenants - default is made in the due observance
         or performance by Borrower of any of the other covenants or agreements
         contained in Section 8 of this Agreement or of any other negative
         covenant of any Obligor contained in this Agreement or any other Loan
         Document; or

                  (f) Involuntary Bankruptcy or Receivership Proceedings - a
         receiver, conservator, liquidator or trustee of Borrower or any of its
         Subsidiaries or of any of their respective Property is appointed by the
         order or decree of any court or agency or supervisory authority having
         jurisdiction, and such decree or order remains in effect for more than
         60 days; or Borrower or any of its Subsidiaries is adjudicated bankrupt
         or insolvent; or any of such Person's Property is sequestered by court
         order and such order remains in effect for more than 60 days; or a
         petition is filed against Borrower or any of its Subsidiaries under any
         state or federal bankruptcy, reorganization, arrangement, insolvency,
         readjustment or debt, dissolution, liquidation or receivership law or
         any jurisdiction, whether now or hereafter in effect, and is not
         dismissed within 60 days after such filing; or

                  (g) Voluntary Petitions or Consents - Borrower or any of its
         Subsidiaries commences a voluntary case or other proceeding or order
         seeking liquidation, reorganization, arrangement, insolvency,
         readjustment of debt, dissolution, liquidation or other relief with
         respect to itself or its debts or other liabilities under any
         bankruptcy, insolvency or other similar law now or hereafter in effect
         or seeking the appointment of a trustee, receiver, liquidator,
         custodian or other similar official of it or any substantial part of
         its Property, or consents to any such relief or to the appointment of
         or taking possession by any such official in an involuntary case or
         other proceeding commenced against it, or fails generally to, or
         cannot, pay its debts generally as they become due or takes any
         corporate action to authorize or effect any of the foregoing; or

                  (h) Assignments for Benefit of Creditors or Admissions of
         Insolvency - Borrower or any of its Subsidiaries makes an assignment
         for the benefit of its creditors, or admits in writing its inability to
         pay its debts generally as they become due, or consents to the
         appointment of a receiver, trustee, or liquidator of such Corporation
         or of all or any substantial part of its Property; or

                  (i) Undischarged Judgments - a final non-appealable judgment
         or judgments for the payment of money exceeding, in the aggregate,
         $2,000,000 (exclusive of amounts covered by insurance or indemnity) is
         rendered by any court or other governmental body against Borrower or
         any if its Subsidiaries and such Corporation does not discharge the
         same

                                       49
<PAGE>   54

         or provide for its discharge in accordance with its terms, or procure a
         stay of execution thereof within 30 days from the date of entry
         thereof; or

                  (j) Invalid Lien - the Borrower shall claim, or any court
         shall find or rule, that the Agent does not have a valid Lien as
         provided for herein on any material portion of the Collateral; or

                  (k) Collateral - the sale, encumbrance or abandonment (except
         as otherwise expressly permitted by this Agreement) of any material
         portion of the Collateral; or the making of any levy, seizure or
         attachment thereof or thereon; or the uninsured loss, theft,
         substantial damage, or destruction of any material portion of the
         Collateral; or

                  (l) Concealment - Borrower or any of its Subsidiaries shall
         have concealed, removed, or permitted to be concealed or removed, any
         part of its Property, with intent to hinder, delay or defraud its
         creditors or any of them, or shall have made any transfer of its
         Property to or for the benefit of a creditor at a time when other
         creditors similarly situated have not been paid; or

                  (m) Ownership Change or Encumbrance - any Person other than
         Borrower shall own more than fifty percent (50%) of the outstanding
         equity interest in any Subsidiary of Borrower (other than directors'
         qualifying shares mandated by applicable law and, if a Subsidiary is
         organized in a foreign jurisdiction and the applicable laws of such
         jurisdiction require such Subsidiary to be partially owned by the
         government or individual or corporate citizens of such jurisdiction in
         order for such Subsidiary to transaction business in such jurisdiction,
         the interest of such government and/or citizens in such Subsidiary) or
         any Person shall acquire any Lien on Borrower's interest in and to the
         equity interest in any Subsidiary of Borrower (other than the
         Noteholder's Liens pursuant to the Security Documents on a pari passu
         basis with the Lenders' Liens) or any Change of Control shall occur; or

                  (n) Uninsured Loss - Borrower and its Subsidiaries shall be
         the subject of uninsured or unindemnified casualty losses exceeding, in
         the aggregate, $5,000,000 during the term hereof; or

         9.2 Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, without notice to any Obligor (any such notice being expressly waived
by Borrower and the other Obligors), to setoff and apply any and all deposits
(general or special, time or demand, provisional or final (but excluding the
funds held in accounts clearly designated as escrow or trust accounts held by
Borrower or any other Obligor for the benefit of Persons which are not
Affiliates of any Obligor, whether or not such setoff results in any loss of
interest or other penalty, and including without limitation all certificates of
deposit) at any time held, and any other funds or Property at any time held, and
other Indebtedness at any time owing by such Lender to or for the credit or the
account of Borrower or any other Obligor against any and all of the Obligations
irrespective of whether or not such Lender or Agent will have made any demand
under this Agreement, the Notes or any other Loan Document. Should the right

                                       50
<PAGE>   55

of any Lender to realize funds in any manner set forth hereinabove be challenged
and any application of such funds be reversed, whether by court order or
otherwise, the Lenders shall make restitution or refund to Borrower pro rata in
accordance with their Revolving Loan Commitments. Each Lender agrees to promptly
notify Borrower and Agent after any such setoff and application, provided that
the failure to give such notice will not affect the validity of such setoff and
application. The rights of Agent and the Lenders under this Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which Agent or the Lenders may have. This Section is subject to the
terms and provisions of Sections 4.5 and 11.7 hereof.

         9.3 Collateral Account. Borrower hereby agrees, in addition to the
provisions of Section 9.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by Agent or the
Majority Lenders (through Agent), pay to Agent an amount in immediately
available funds equal to the then aggregate amount available for drawings under
all Letters of Credit issued for the account of Borrower, which funds shall be
held by Agent as Cover; Agent shall release such Cover upon Borrower's request
if (a) no Default or Event of Default then exists and (b) the release of such
Cover would not give Agent the right to demand a prepayment pursuant to Section
3.2(b) hereof.

         9.4 Preservation of Security for Unmatured Reimbursement Obligations.
In the event that, following (i) the occurrence and during the continuation of
an Event of Default and the exercise of any rights available to Agent or any
Lender under the Loan Documents and (ii) payment in full of the principal amount
then outstanding of and the accrued interest on the Loans and Reimbursement
Obligations and fees and all other amounts payable hereunder and under the
Notes, any Letters of Credit shall remain outstanding and undrawn, Agent shall
be entitled to hold (and Borrower and each other Obligor hereby grants and
conveys to Agent a security interest in and to) all cash or other Property
("Proceeds of Remedies") realized or arising out of the exercise of any rights
available under the Loan Documents, at law or in equity, including, without
limitation, the proceeds of any foreclosure, as collateral for the payment of
any amounts due or to become due under or in respect of such Letters of Credit;
provided, however, that the aggregate Proceeds of Remedies may not exceed the
Obligations. Such Proceeds of Remedies shall be held for the ratable benefit of
the Lenders. The rights, titles, benefits, privileges, duties and obligations of
Agent with respect thereto shall be governed by the terms and provisions of this
Agreement. Agent may, but shall have no obligation to, invest any such Proceeds
of Remedies in such manner as Agent, in the exercise of its sole discretion,
deems appropriate. Such Proceeds of Remedies shall be applied to Reimbursement
Obligations arising in respect of any such Letters of Credit and/or the payment
of any Lender's obligations under any such Letter of Credit when such Letter of
Credit is drawn upon. Nothing in this Section shall cause or permit an increase
in the maximum amount of the Obligations permitted to be outstanding from time
to time under this Agreement.

         9.5 Remedies Cumulative. To the maximum extent not prohibited by
applicable law, no remedy, right or power conferred upon Agent or any Lender is
intended to be exclusive of any other remedy, right or power given hereunder or
now or hereafter existing at law, in equity, or otherwise, and all such
remedies, rights and powers shall be cumulative.

                                       51
<PAGE>   56

10.      Agent.

         10.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder, under the Letters
of Credit and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Any Loan Documents
executed in favor of Agent shall be held by Agent for the ratable benefit of the
Lenders. Agent ("Agent" as used in this Section 10 shall include reference to
its Affiliates and its own and its Affiliates' respective officers,
shareholders, directors, employees and agents) (a) shall not have any duties or
responsibilities except those expressly set forth in this Agreement, the Letters
of Credit, and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender;
(b) shall not be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, the
Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, execution, filing, registration,
collectibility, recording, perfection, existence or sufficiency of this
Agreement, the Letters of Credit, or any other Loan Document or any other
document referred to or provided for herein or therein or any Property covered
thereby or for any failure by any Obligor or any other Person to perform any of
its obligations hereunder or thereunder, and shall not have any duty to inquire
into or pass upon any of the foregoing matters; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder or under
the Letters of Credit or any other Loan Document except to the extent requested
by the Majority Lenders; (d) shall not be responsible for any mistake of law or
fact or any action taken or omitted to be taken by it hereunder or under the
Letters or Credit or any other Loan Document or any other document or instrument
referred to or provided for herein or therein or in connection herewith or
therewith, including, without limitation, pursuant to its own negligence, except
for its own gross negligence or willful misconduct; (e) shall not be bound by or
obliged to recognize any agreement among or between Borrower and any Lender to
which Agent is not a party, regardless of whether Agent has knowledge of the
existence of any such agreement or the terms and provisions thereof; (f) shall
not be charged with notice or knowledge of any fact or information not herein
set out or provided to Agent in accordance with the terms of this Agreement or
any other Loan Document; (g) shall not be responsible for any delay, error,
omission or default of any mail, telegraph, cable or wireless agency or
operator; and (h) shall not be responsible for the acts or edicts of any
Governmental Authority. Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any way
limiting any of the foregoing, each Lender acknowledges that Agent shall have no
greater responsibility in the operation of the Letters of Credit than is
specified in the Uniform Customs and Practice for Documentary Credits (1993
Revision, International Chamber of Commerce Publication No. 500). In any
foreclosure proceeding concerning any collateral, each holder of an Obligation
if bidding for its own account or for its own account and the accounts of other
Lenders is prohibited from including in the amount of its bid an amount to be
applied as a credit against the Obligations held by it or the Obligations held
by the other Lenders; instead, such holder must bid in cash only. However, in
any such foreclosure proceeding, Agent may (but shall not be obligated to)
submit a bid for all Lenders (including itself)

                                       52
<PAGE>   57

in the form of a credit against the Obligations, and Agent or its designee may
(but shall not be obligated to) accept title to such collateral for and on
behalf of all Lenders.

         10.2 Reliance. Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (which may be counsel for Borrower), independent
accountants and other experts selected by Agent. Agent shall not be required in
any way to determine the identity or authority of any Person delivering or
executing the same. As to any matters not expressly provided for by this
Agreement, the Letters of Credit, or any other Loan Document, Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions of the Majority Lenders, and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders. If any order, writ, judgment or decree shall be made or entered by any
court affecting the rights, duties and obligations of Agent under this Agreement
or any other Loan Document, then and in any of such events Agent is authorized,
in its sole discretion, to rely upon and comply with such order, writ, judgment
or decree which it is advised by legal counsel of its own choosing is binding
upon it under the terms of this Agreement, the relevant Loan Document or
otherwise; and if Agent complies with any such order, writ, judgment or decree,
then it shall not be liable to any Lender or to any other Person by reason of
such compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.

         10.3 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the non-payment of principal of or interest
on Loans or Reimbursement Obligations) unless Agent has received notice from a
Lender or Borrower specifying such Default and stating that such notice is a
"Notice of Default." In the event that Agent receives such a Notice of Default,
Agent shall give prompt notice thereof to the Lenders (and shall give each
Lender prompt notice of each such non-payment). Agent shall (subject to Section
10.7 hereof) take such action with respect to such Notice of Default as shall be
directed by the Majority Lenders and within its rights under the Loan Documents
and at law or in equity, provided that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, permitted hereby with respect to
such Notice of Default as it shall deem advisable in the best interests of the
Lenders and within its rights under the Loan Documents, at law or in equity.

         10.4 Material Written Notices. In the event that Agent receives any
written notice of a material nature from Borrower or any Obligor under the Loan
Documents, Agent shall promptly inform each of the Lenders thereof.

         10.5 Rights as a Lender. With respect to its Revolving Loan Commitments
and the Loans made and Letter of Credit Liabilities, Bank One in its capacity as
a Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting in its agency
capacity, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Agent in its individual capacity. Agent may (without having
to account

                                       53
<PAGE>   58

therefor to any Lender) accept deposits from, lend money to and generally engage
in any kind of banking, trust, letter of credit, agency or other business with
Borrower (and any of its Affiliates) as if it were not acting as Agent, and
Agent may accept fees and other consideration from Borrower (in addition to the
fees heretofore agreed to between Borrower and Agent) for services in connection
with this Agreement or otherwise without having to account for the same to the
Lenders.

         10.6 Indemnification. The Lenders agree to indemnify Agent (to the
extent not reimbursed under Section 2.2(c), Section 11.3 or Section 11.4 hereof,
but without limiting the obligations of Borrower under said Sections 2.2(c),
11.3 and 11.4), ratably in accordance with the sum of the Lenders' respective
Revolving Loan Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN
PART BY THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES, which may be imposed on,
incurred by or asserted against Agent in any way relating to or arising out of
this Agreement, the Letters of Credit or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses which Borrower is obligated to pay under Sections 2.2(c), 11.3 and 11.4
hereof, interest, penalties, attorneys' fees and amounts paid in settlement, but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents; provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified. The obligations of the Lenders under
this Section 10.6 shall survive the termination of this Agreement and the
repayment of the Obligations.

         10.7 Non-Reliance on Agent and Other Lenders. Each Lender agrees that
it has received current financial information with respect to Borrower and each
other Obligor that it has, independently and without reliance on Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and each other Obligor and
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Loan Documents. Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement,
the Letters of Credit or any of the other Loan Documents or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Obligor. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Agent
hereunder, under the Letters of Credit or the other Loan Documents, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of any
Obligor (or any of their affiliates) which may come into the possession of
Agent.

         10.8 Failure to Act. Except for action expressly required of Agent
hereunder, under the Letters of Credit or under the other Loan Documents, Agent
shall in all cases be fully justified in

                                       54
<PAGE>   59

failing or refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction by the Lenders of their indemnification
obligations under Section 10.6 hereof against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action.

         10.9 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Lenders and Borrower, and Agent may be removed
at any time with or without cause by the Majority Lenders; provided, that Agent
shall continue as Agent until such time as any successor shall have accepted
appointment as Agent hereunder. Upon any such resignation or removal, (i) the
Majority Lenders without the consent of Borrower shall have the right to appoint
a successor Agent so long as such successor Agent is also a Lender at the time
of such appointment and (ii) the Majority Lenders shall have the right to
appoint a successor Agent that is not a Lender at the time of such appointment
so long as Borrower consents to such appointment (which consent shall not be
unreasonably withheld). If no successor Agent shall have been so appointed by
the Majority Lenders and accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent. Any successor Agent shall be a bank which
has an office in the United States and a combined capital and surplus of at
least $250,000,000. 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 retiring Agent
and the retiring Agent shall be discharged from its duties and obligations
hereunder and under any other Loan Documents. Such successor Agent shall
promptly specify by notice to Borrower its Principal Office referred to in
Section 3.1 and Section 4 hereof. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Section 10 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.

         10.10 No Partnership. Neither the execution and delivery of this
Agreement nor any of the other Loan Documents nor any interest the Lenders,
Agent or any of them may now or hereafter have in all or any part of the
Obligations shall create or be construed as creating a partnership, joint
venture or other joint enterprise between the Lenders or among the Lenders and
Agent. The relationship between the Lenders, on the one hand, and Agent, on the
other, is and shall be that of principals and agent only, and nothing in this
Agreement or any of the other Loan Documents shall be construed to constitute
Agent as trustee or other fiduciary for any Lender or to impose on Agent any
duty, responsibility or obligation other than those expressly provided for
herein and therein.

11.      Miscellaneous.

         11.1 Waiver. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of Agent
or any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under any Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any

                                       55
<PAGE>   60

other right, power or privilege. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law or in equity.

         11.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof (or
provided for in an Assignment and Acceptance); or, as to any party hereto, at
such other address as shall be designated by such party in a notice (given in
accordance with this Section) (i) as to Borrower, to Agent, (ii) as to Agent, to
Borrower and to each Lender, and (iii) as to any Lender, to Borrower and Agent.
Except as otherwise provided in this Agreement, all such notices or
communications shall be deemed to have been duly given when (i) transmitted by
telex or telecopier or delivered to the telegraph or cable office, (ii)
personally delivered, (iii) one Business Day after deposit with an overnight
mail or delivery service, postage prepaid or (iv) three Business Days after
deposit in a receptacle maintained by the United States Postal Service, postage
prepaid, registered or certified mail, return receipt requested, in each case
given or addressed as aforesaid.

         11.3 Expenses, Etc. Whether or not any Loan is ever made or any Letter
of Credit ever issued, Borrower shall pay or reimburse within 30 days after
written demand (a) Agent for paying the reasonable fees and expenses of legal
counsel to Agent, together with the reasonable fees and expenses of each local
counsel to Agent, in connection with the preparation, negotiation, execution and
delivery of this Agreement (including the exhibits and schedules hereto) and the
other Loan Documents and the making of the Loans and the issuance of Letters of
Credit hereunder, and any modification, supplement or waiver of any of the terms
of this Agreement, the Letters of Credit or any other Loan Document; (b) Agent
for any lien search fees; (c) Agent for reasonable out-of-pocket expenses
incurred in connection with the preparation, documentation, administration and
syndication of the Loans or any of the Loan Documents (including, without
limitation, the advertising, marketing, printing, publicity, duplicating,
mailing and similar expenses) of the Loans and Letter of Credit Liabilities; (d)
Agent for paying all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement, any Letter of Credit or any other Loan Document or
any other document referred to herein or therein; (e) Agent for paying all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any Lien contemplated
by this Agreement or any document referred to herein; and (f) following the
occurrence and during the continuation of an Event of Default (or, in connection
with the protection of the Collateral, after a Default), any Lender or Agent for
paying all amounts reasonably expended, advanced or incurred by such Lender or
Agent to satisfy any obligation of any Obligor under this Agreement or any other
Loan Document, to appraise, evaluate, monitor, administer and protect the
Collateral, to realize on the Collateral, to collect the Obligations or to
enforce, protect, preserve or defend the rights of the Lenders or Agent under
this Agreement or any other Loan Document, including, without limitation and to
the maximum extent not prohibited by applicable law, reasonable fees and
expenses incurred in connection with such Lender's or Agent's participation as a
member of a creditor's committee in a case commenced under the Bankruptcy Code
or other similar law, fees and expenses incurred in

                                       56
<PAGE>   61

connection with lifting the automatic stay prescribed in Section 362 of the
Bankruptcy Code and fees and expenses incurred in connection with any action
pursuant to Section 1129 of the Bankruptcy Code and all other customary
out-of-pocket expenses incurred by such Lender or Agent in connection with such
matters, together with interest thereon at the Past Due Rate on each such amount
until the date of reimbursement to such Lender or Agent; but (x) no right or
option granted by the Borrower to the Agent or any Lender pursuant to any Loan
Document shall be deemed to impose or admit a duty on the Agent or any Lender to
supervise, monitor or control any aspect of the character or condition of any of
the Collateral or any operations conducted in connection with it for the benefit
of the Borrower or any other Person, and (y) the performance by the Agent or any
Lender of an agreement, covenant or obligation of the Borrower under any Loan
Document which the Borrower has not performed shall not be considered or
constitute a cure of such default or a waiver of the Agent's or any Lender's
right at any time after an Event of Default to exercise its rights and remedies
under the Loan Documents and applicable law. Without limiting any of the
foregoing, in addition to all other payments required hereunder, Borrower hereby
agrees to pay to Agent, for its services as Collateral Agent, the following
fees: (i) all actual out of pocket expenses incurred in its role as Collateral
Agent, (ii) an annual fee of $15,000.00, payable upon the execution of this
Agreement and on each anniversary hereof.

         11.4 Indemnification. Borrower shall indemnify each of Agent, the
Lenders, and each affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages to which any of them may become subject,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by Borrower of the
proceeds of any extension of credit (whether a Loan or a Letter of Credit) by
any Lender hereunder; (ii) breach by any Obligor of this Agreement or any other
Loan Document; (iii) violation by any Obligor of any Legal Requirement; (iv)
investigation, litigation or other proceeding relating to any of the foregoing,
and Borrower shall reimburse Agent, each Lender, and each Affiliate thereof and
their respective directors, officers, employees and agents, upon demand for any
reasonable expenses (including reasonable legal fees) incurred in connection
with any such investigation or proceeding; or (v) taxes (excluding income taxes
and franchise taxes) payable or ruled payable by any Governmental Authority in
respect of the Obligations or any Loan Document, together with interest and
penalties, if any; provided, however, that Borrower shall not have any
obligations pursuant to this Section with respect to any losses, liabilities,
claims, damages or expenses incurred by the Person seeking indemnification by
reason of the gross negligence or willful misconduct of that Person or with
respect to any disputes between or among any and all of Agent, Lenders and
Issuers. Nothing in this Section is intended to limit the obligations of
Borrower under any other provision of this Agreement. Agent and each Lender,
respectively, shall indemnify Borrower and hold Borrower harmless from and
against the gross negligence or willful misconduct of Agent or such Lender, as
the case may be.

         11.5 Amendments, Etc. No amendment or modification of this Agreement,
the Notes or any other Loan Document shall in any event be effective against
Borrower unless the same shall be agreed or consented to in writing by Borrower.
No amendment, modification or waiver of any

                                       57
<PAGE>   62

provision of this Agreement, the Notes or any other Loan Document, nor any
consent to any departure by Borrower therefrom, shall in any event be effective
against the Lenders unless the same shall be agreed or consented to in writing
by the Majority Lenders, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
that no amendment, modification, waiver or consent shall, unless in writing and
signed by each Lender affected thereby, do any of the following: (a) increase
any Revolving Loan Commitment of any of the Lenders (or reinstate any
termination or reduction of the Revolving Loan Commitments) or subject any of
the Lenders to any additional obligations; (b) reduce the principal of, or
interest on, any Loan, Reimbursement Obligation or fee payable to such Lender
hereunder; (c) postpone or extend the Revolving Loan Maturity Date, the
Revolving Loan Termination Date, the Revolving Loan Availability Period or any
scheduled date fixed for any payment of principal of, or interest on, any Loan,
Reimbursement Obligation, fee or other sum to be paid hereunder or waive any
Event of Default described in Section 9.1(a) hereof; (d) change the percentage
of any of the Revolving Loan Commitments or of the aggregate unpaid principal
amount of any of the Loans and Letter of Credit Liabilities, or the percentage
of Lenders, which shall be required for the Lenders or any of them to take any
action under this Agreement; (e) change any provision contained in Sections
2.2(c), 7.9, 11.3 or 11.4 hereof or this Section 11.5; (f) release any Person
from liability under a Guaranty; or (g) modify the provisions of Sections 4.1(b)
or 4.2 hereof regarding pro rata application of amounts after an Event of
Default shall have occurred and be continuing. Notwithstanding anything in this
Section 11.5 to the contrary, no amendment, modification, waiver or consent
shall be made with respect to Section 10 without the consent of Agent to the
extent it affects Agent, as Agent.

         11.6 Successors and Assigns.

         (a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent and the Lenders and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of all of the Lenders,
and any such assignment or transfer without such consent shall be null and void.
Each Lender may sell participations to any Person in all or part of any Loan, or
all or part of its Notes, Revolving Loan Commitments or interests in Letters of
Credit, in which event, without limiting the foregoing, the provisions of the
Loan Documents shall inure to the benefit of each purchaser of a participation;
provided, however, the pro rata treatment of payments, as described in Section
4.2 hereof, shall be determined as if such Lender had not sold such
participation. Any Lender that sells one or more participations to any Person
shall not be relieved by virtue of such participation from any of its
obligations to Borrower under this Agreement relating to the Loans. In the event
any Lender shall sell any participation, such Lender shall retain the sole right
and responsibility to enforce the obligations of Borrower relating to the Loans,
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement other than amendments,
modifications or waivers with respect to (i) any fees payable hereunder to the
Lenders and (ii) the amount of principal or the rate of interest payable on, or
the dates fixed for the scheduled repayment of principal of, the Loans.

         (b) Each Lender may assign to one or more Lenders or any Eligible
Assignee all or a portion of its interests, rights and obligations under this
Agreement; provided, however, that (i) the

                                       58
<PAGE>   63

aggregate amount of the Revolving Loan Commitments of the assigning Lender
subject to each such assignment shall in no event be less than $5,000,000; (ii)
other than in the case of an assignment to another Lender (that is, at the time
of the assignment, a party hereto) or to an Affiliate of such Lender or to a
Federal Reserve Bank, Agent and, so long as no Event of Default shall have
occurred and be continuing, Borrower must each give its prior written consent,
which consent shall not be unreasonably withheld; and (iii) the parties to each
such assignment shall execute and deliver to Agent, for its acceptance an
Assignment and Acceptance in the form of Exhibit 11.6(b) hereto (each an
"Assignment and Acceptance") with blanks appropriately completed, together with
any Note or Notes subject to such assignment and a processing and recording fee
of $3,000 paid by the assignee (for which Borrower will have no liability). Upon
such execution, delivery and acceptance, from and after the effective date
specified in each Assignment and Acceptance (A) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder and (B) the Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto except in respect of provisions of this Agreement which
survive payment of the Obligations and termination of the Commitments).
Notwithstanding anything contained in this Agreement to the contrary, any Lender
may at any time assign all or any portion of its rights under this Agreement and
the Notes issued to it as collateral to a Federal Reserve Bank; provided that no
such assignment shall release such Lender from any of its obligations hereunder.

         (c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any of the other Loan Documents or any other instrument or
document furnished pursuant thereto; (ii) such Lender assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or the performance or observance by Borrower of
any of its obligations under this Agreement or any of the other Loan Documents
or any other instrument or document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 6.2 hereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon Agent, such Lender
assignor 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;
(v) such assignee appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance

                                       59
<PAGE>   64

with their terms all obligations that by the terms of this Agreement and the
other Loan Documents are required to be performed by it as a Lender.

         (d) The entries in the records of Agent as to each Assignment and
Acceptance delivered to it and the names and addresses of the Lenders and the
Revolving Loan Commitments of, and principal amount of the Loans owing to, each
Lender from time to time shall be conclusive, in the absence of manifest error,
and Borrower, Agent and the Lenders may treat each Person the name of which is
recorded in the books and records of Agent as a Lender hereunder for all
purposes of this Agreement and the other Loan Documents.

         (e) Upon Agent's receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee thereunder, together with any Note or Notes
subject to such assignment and the written consent to such assignment (to the
extent consent is required), Agent shall, if such Assignment and Acceptance has
been completed with blanks appropriately filled, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in its records and
(iii) give prompt notice thereof to Borrower. Within five Business Days after
receipt of notice, Borrower, at its own expense, shall execute and deliver to
Agent in exchange for the surrendered Notes new Notes to the order of such
assignee in an amount equal to the Revolving Loan Commitments assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained Revolving Loan Commitments hereunder, new Notes to the order of the
assigning Lender in an amount equal to the Revolving Loan Commitment retained by
it hereunder. Such new Notes shall be in an aggregate maximum principal amount
equal to the aggregate maximum principal amount of such surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the respective Note. Thereafter, such
surrendered Notes shall be marked renewed and substituted and the originals
thereof delivered to Borrower (with copies, certified by Borrower as true,
correct and complete, to be retained by Agent).

         (f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 11.6 but
subject to Section 11.16 hereof, disclose to the assignee or participant or
proposed assignee or participant, any information relating to Borrower furnished
to such Lender by or on behalf of Borrower.

         11.7 Limitation of Interest. Borrower and the Lenders intend to
strictly comply with all applicable federal and Texas laws, including applicable
usury laws (or the usury laws of any jurisdiction whose usury laws are deemed to
apply to the Notes or any other Loan Documents despite the intention and desire
of the parties to apply the usury laws of the State of Texas). Accordingly, the
provisions of this Section 11.7 shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is
inconsistent with this Section, even if such provision declares that it
controls. As used in this Section, the term "interest" includes the aggregate of
all charges, fees, benefits or other compensation which constitute interest
under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in

                                       60
<PAGE>   65

equal parts during the full term of the Obligations. In no event shall Borrower
or any other Person be obligated to pay, or any Lender have any right or
privilege to reserve, receive or retain, (a) any interest in excess of the
maximum amount of nonusurious interest permitted under the laws of the State of
Texas or the applicable laws (if any) of the United States or of any other
jurisdiction, or (b) total interest in excess of the amount which such Lender
could lawfully have contracted for, reserved, received, retained or charged had
the interest been calculated for the full term of the Obligations at the Ceiling
Rate. The daily interest rates to be used in calculating interest at the Ceiling
Rate shall be determined by dividing the applicable Ceiling Rate per annum by
the number of days in the calendar year for which such calculation is being
made. None of the terms and provisions contained in this Agreement or in any
other Loan Document (including, without limitation, Section 9.1 hereof) which
directly or indirectly relate to interest shall ever be construed without
reference to this Section 11.7, or be construed to create a contract to pay for
the use, forbearance or detention of money at an interest rate in excess of the
Ceiling Rate. If the term of any Obligation is shortened by reason of
acceleration of maturity as a result of any Default or by any other cause, or by
reason of any required or permitted prepayment, and if for that (or any other)
reason any Lender at any time, including but not limited to, the stated
maturity, is owed or receives (and/or has received) interest in excess of
interest calculated at the Ceiling Rate, then and in any such event all of any
such excess interest shall be canceled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to such Lender, it shall be credited pro tanto
against the then-outstanding principal balance of Borrower's obligations to such
Lender, effective as of the date or dates when the event occurs which causes it
to be excess interest, until such excess is exhausted or all of such principal
has been fully paid and satisfied, whichever occurs first, and any remaining
balance of such excess shall be promptly refunded to its payor. The Borrower,
the Lenders and the Agent expressly agree, pursuant to Chapter 346 ("Chapter
346") of the Texas Finance Code, that Chapter 346 (which relates to open-end
line of credit revolving loan accounts) shall not apply to any Loan Document or
to any Obligation, and that none of them shall be governed by Chapter 346 or
subject to its provisions in any manner whatsoever.

         11.8 Survival. The obligations of Borrower under Sections 2.2(c),
2.2(d), 7.9, 11.3 and 11.4 hereof and all other obligations of Borrower in any
other Loan Document (to the extent stated therein), the obligations of each
Issuer under the last sentence of Section 2.2(b)(iii) and the obligations of the
Lenders under Sections 10.5 and 11.7 hereof, shall, notwithstanding anything
herein to the contrary, survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Revolving Loan Commitments and the
Letters of Credit.

         11.9 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

         11.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.

                                       61
<PAGE>   66

         11.11 Governing Law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED)
THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM
TIME TO TIME IN EFFECT.

         11.12 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.

         11.13 Tax Forms. Each Lender which is organized under the laws of a
jurisdiction outside the United States shall, on the day of the initial
borrowing from each such Lender hereunder and from time to time thereafter if
requested by Borrower or Agent, provide Agent and Borrower with the forms
prescribed by the Internal Revenue Service of the United States certifying as to
such Lender's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Lender
hereunder or other documents satisfactory to such Lender, Borrower and Agent
indicating that all payments to be made to such Lender hereunder are not subject
to United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty. Unless Borrower and Agent shall have received such
forms or such documents indicating that payments hereunder are not subject to
United States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, Borrower or Agent shall withhold taxes from such payments
at the applicable statutory rate.

         11.14 Conflicts Between This Agreement and the Other Loan Documents. In
the event of any conflict between the terms of this Agreement and the terms of
any of the other Loan Documents, the terms of this Agreement shall control.

         11.15 Limitation on Charges; Substitute Lenders; Non-Discrimination.
Anything in Section 2.2(d), 3.3(c) or 7.9 notwithstanding:

                  (1) Borrower shall not be required to pay to any Lender
         reimbursement with regard to any costs or expenses described in such
         Sections, unless such Lender notifies Borrower of such costs or
         expenses within 90 days after the date paid or incurred;

                  (2) none of the Lenders shall be permitted to pass through to
         Borrower charges and costs under such Sections on a discriminatory
         basis (i.e., which are not also passed through by such Lender to other
         customers of such Lender similarly situated where such customer is
         subject to documents providing for such pass through); and

                  (3) if any Lender elects to pass through to Borrower any
         material charge or cost under such Sections or elects to terminate the
         availability of LIBOR Borrowings for any material period of time,
         Borrower may, within 60 days after the date of such event and so long
         as no Default shall have occurred and be continuing, elect to terminate
         such Lender as

                                       62
<PAGE>   67

         a party to this Agreement; provided that, concurrently with such
         termination Borrower shall (i) if Agent and each of the other Lenders
         shall consent, pay that Lender all principal, interest and fees and
         other amounts owed to such Lender through such date of termination or
         (ii) have arranged for another financial institution approved by Agent
         (such approval not to be unreasonably withheld) as of such date, to
         become a substitute Lender for all purposes under this Agreement in the
         manner provided in Section 11.6; provided further that, prior to
         substitution for any Lender, Borrower shall have given written notice
         to Agent of such intention and the Lenders shall have the option, but
         no obligation, for a period of 60 days after receipt of such notice, to
         increase their Revolving Loan Commitments in order to replace the
         affected Lender in lieu of such substitution.

         11.16 Disclosure to Other Persons; Confidentiality. Agent and each
Lender agree that it may deliver copies of any financial statements and other
documents or information delivered to it and disclose any other information
disclosed to it by or on behalf of Borrower or any Subsidiary of Borrower in
connection with or pursuant to this Agreement and the other Loan Documents only
to:

                  (i) its directors, officers, employees and professional
         consultants, but only in connection with extensions of credit and
         proposed extensions of credit to the Borrower and/or some or all of its
         Subsidiaries (collectively, "Credit Transactions");

                  (ii) any other Lender, but only in connection with Credit
         Transactions;

                  (iii) any Person to which such Lender offers to sell its Note
         or any part thereof, provided that each such Person agrees in writing
         before such disclosure to observe the confidentiality standards
         described in this Section (including but not limited to the restriction
         on the use of Confidential Information only in connection with Credit
         Transactions);

                  (iv) any Person to which such Lender sells or offers to sell a
         participation in all or any part of its Note, provided that each such
         Person agrees in writing before such disclosure to observe the
         confidentiality standards described in this Section (including but not
         limited to the restriction on the use of Confidential Information only
         in connection with Credit Transactions);

                  (v) any federal or state regulatory authority having
         jurisdiction over it;

                  (vi) any other Person to which such delivery or disclosure may
         be necessary or reasonably appropriate in response to any subpoena or
         other legal process or investigative demand; and

                  (vii) any other Person in connection with any litigation
         involving any obligation, right or remedy of Agent or any Lender under
         the Loan Documents.

         Subject to the foregoing, Agent and each Lender hereby agrees to use
its best efforts to hold in confidence and not to disclose any Confidential
Information; provided, that such Person will be

                                       63
<PAGE>   68

free, after notice to Borrower, to correct any false or misleading information
which may become public concerning its relationship to Borrower. For the purpose
of this Section, the term "Confidential Information" shall mean information
about Borrower or any Subsidiary of Borrower furnished by Borrower or any such
Subsidiary, but does not include any information which (i) is publicly known, or
otherwise known to such holder, at the time of disclosure; (ii) subsequently
becomes publicly known, but not through any act or omission by such holder; or
(iii) otherwise becomes known to such holder other than through disclosure by
Borrower or any Subsidiary of Borrower.

         The Borrower shall be entitled to equitable relief by way of injunction
if the Agent, any Lender, any Transferee or any representative of the Agent, any
Lender or any Transferee breaches or threatens to breach any of the provisions
of this Section.

         11.17 Conditional Release of Collateral. (a) If at any time the
Borrower obtains an investment grade rating, same being defined as a senior
unsecured rating of (i) BBB- by Standard & Poor's Rating Services, a division of
McGraw-Hill Companies, Inc., or (ii) Baa3 by Moody's Investors Service (to the
extent a split rating prevails, the lower rating cannot be more than one level
below the higher) or (b) a National Association of Insurance Commissioners
senior unsecured rating of 2 or higher, the Agent and the Lenders agree that
Collateral shall no longer be required to secure the Obligations and all of the
Security Documents shall, upon request of the Borrower and payment by the
Borrower of all reasonable expenses incidental thereto, be released promptly. In
consideration thereof, the Borrower hereby agrees with the Agent and the
Lenders, if at any time it does not maintain such investment credit rating that
it will thereafter, promptly upon request of the Agent, execute such Security
Documents, in form and substance reasonably satisfactory to Agent and the
Majority Lenders, as Agent shall request to reinstate the liens and security
interests that exist in the Collateral under the Security Documents, as of the
Closing Date.

         (b) To the extent that the Borrower has not obtained the requisite
senior unsecured credit rating as determined above, then based upon achieving
all of the following financial measurements at the end of any fiscal quarter or
year, the Collateral shall no longer be required so long as the Borrower
maintains the required financial measurements as set forth below:

                  (i)      Minimum Interest Coverage Ratio (which shall exclude
                           Rent Expense in the calculation thereof) of 8.0 to
                           1.0

                  (ii)     Maximum Leverage Ratio of 1.75 to 1.0

                  (iii)    Maximum Debt to Capitalization Ratio of 35%

                  (iv)     Minimum trailing twelve month revenues determined in
                           accordance with GAAP of $250MM

                  (v)      Minimum shareholder's equity determined in accordance
                           with GAAP of $200MM.

         (c) Notwithstanding the foregoing, in the event the Senior Notes are
still outstanding when the foregoing conditions are satisfied, the Agent and the
Lenders shall not release any Collateral pursuant to the foregoing provisions
until and unless the Noteholder (i) simultaneously

                                       64
<PAGE>   69

releases its liens in and to the Collateral, (ii) agrees that, in the event the
liens and security interests are reinstated in accordance with the foregoing,
the form of security documents reinstating said liens and security interests
shall be in substantially the same form as the Security Documents, and (iii)
executes an intercreditor agreement in substantially the same form as the
Collateral Agency Agreement.

         11.18 Final Agreement. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
OF THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

         THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.

            [The remainder of this page is intentionally left blank.]

                                       65
<PAGE>   70

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Closing Date.

                                        HYDRIL COMPANY,
                                        a Delaware corporation

                                        By: /s/ MICHAEL C. KEARNEY
                                           ------------------------------------
                                        Name:  Michael C. Kearney
                                        Title: Vice President and CFO

                                        By: /s/ ANDREW W. RICKS
                                           ------------------------------------
                                        Name:  Andrew W. Ricks
                                        Title: Treasurer

                                        Address for Notices:

                                        3300 North Sam Houston Parkway East
                                        Houston, Texas 77032
                                        Attention: Andrew W. Ricks
                                                   ----------------------------
                                        Telecopy No.: (281) 985-3340
                                        Telephone No.: (281) 985-3204

<PAGE>   71
                                       BANK ONE, TEXAS, N.A., a national banking
                                       association, as Agent and as a Lender

                                       By: /s/ BRANDI GARCIA
                                          --------------------------------------
                                       Name:  Brandi Garcia
                                       Title: Vice President

                                       Address for Notices:

Revolving Loan Commitment              910 Travis
Percentage:                            Houston, Texas 77007
                                       Attention: Brandi Garcia
100%                                   Telecopy No.: (713) 751-6777
                                       Telephone No.: (713) 751-3768

                                       67
<PAGE>   72

                                                                   EXHIBIT 1.01A

                             RATE DESIGNATION NOTICE

         HYDRIL COMPANY, Bank One, Texas, N.A., as Agent, and certain financial
institutions executed and delivered that certain Second Amended and Restated
Loan Agreement (as amended, supplemented and restated, the "Loan Agreement")
dated as of August 25, 2000. Any term used herein and not otherwise defined
herein shall have the meaning herein ascribed to it in the Loan Agreement. In
accordance with the Loan Agreement, Borrower hereby notifies Agent of the
exercise of an Interest Option.

A.       Current borrowings

         1.       Interest Options now in effect:  _________________

         2.       Amounts:  $_______________

         3.       Expiration of current Interest Periods, if applicable:  ______

B.       Proposed election

         1.       Total Amount:  $________________

         2.       Date Interest Option is to be effective:  ____________________

         3.       Interest Option to be applicable (check one):

                  [ ]        Base Rate

                  [ ]        LIBOR

         4.       Interest Period: (if applicable, check one)

                  [ ] one month

                  [ ] three months

                  [ ] six months

                             Exhibit 1.01A - Page 1
<PAGE>   73

Borrower represents and warrants that the Interest Option and Interest Period
selected above comply with all provisions of the Loan Agreement and that there
exists no Event of Default or any event which, with the passage of time, the
giving of notice or both, would be an Event of Default.

         Date:
               -----------------------

                                        HYDRIL COMPANY,
                                        a Delaware corporation

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

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

                             Exhibit 1.01A - Page 2
<PAGE>   74

                                                                   EXHIBIT 1.01B

                          [LETTERHEAD OF THE BORROWER]

                         REQUEST FOR EXTENSION OF CREDIT

                      ---------------------------, -------

Bank One, Texas, N.A.

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

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

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

Attention:
          -------------------------------

Ladies and Gentlemen:

                  The undersigned hereby certify that the undersigned are the
_______________ and ____________________ of HYDRIL COMPANY, a Delaware
corporation (the "Company"), and that as such they are authorized to execute
this Request for Extension of Credit (the "Request") on behalf of the Company
pursuant to the Second Amended and Restated Loan Agreement (as it may be
amended, supplemented or restated from time to time, the "Agreement") dated as
of August 25, 2000, by and among the Company, Bank One, Texas, N.A., as Agent,
and the Lenders therein named. The (check one) [Loan] Letter of Credit being
requested hereby is to be in the amount set forth in (b) below and is requested
to be made on ___________________________________, which is a Business Day. The
undersigned further certify, represent and warrant that to the knowledge of such
officers, after due inquiry (each capitalized term used herein having the same
meaning given to it in the Agreement unless otherwise specified herein):

         (a)      As of the date hereof:

<TABLE>
<S>               <C>                                                           <C>
                  (1)      The aggregate Revolving Loan Commitment is:          $
                                                                                 ==========

                  (2)      The aggregate outstanding principal of the Notes,
                           before giving effect to the Loan, if any, requested
                           hereby, is:                                          (__________)
</TABLE>

                             Exhibit 1.01B - Page 1
<PAGE>   75

<TABLE>
<S>               <C>                                                           <C>
                  (3)      The Letter of Credit Liabilities as of the date
                           hereof, before giving effect to the Letter
                           of Credit, if any, requested hereby, is:             (__________)

                  (4)      The aggregate unused Revolving Loan
                           Commitment of all Lenders, if positive, is:          $
                                                                                 ==========
</TABLE>

         (b)      If and only if the aggregate unused Revolving Loan Commitments
                  of all Lenders is positive, the Company hereby requests under
                  this Request a Loan or Letter of Credit (as indicated above)
                  in the amount of $______________ (which is no more than the
                  aggregate unused Revolving Loan Commitments of all Lenders).

         (c)      If a Letter of Credit is requested hereby, it should be issued
                  for the benefit of ___________________________________ and
                  should have an expiration date of _____________________ and
                  any special language to be incorporated into such Letter of
                  Credit is attached hereto. The sum of the face amount of the
                  requested Letter of Credit plus the Letter of Credit
                  Liabilities as the date hereof as specified in item (a)(5)
                  above does not exceed $5,000,000.

         (d)      The representations and warranties made in each Loan Document
                  are true and correct in all material respects on and as of the
                  time of delivery hereof, with the same force and effect as if
                  made on and as of the time of delivery hereof (other than
                  those which became inaccurate because of transactions
                  permitted by the Loan Documents and consummated after the date
                  of the relevant representation).

         (e)      No material adverse change in the assets, liabilities,
                  financial condition, business or affairs of the Company or any
                  of the other Obligors has occurred.

         (f)      After giving effect to the proposed extension of credit, the
                  aggregate amount of credit extended to Borrower and its
                  Subsidiaries by outside sources, including credit extended by
                  the Lenders, does not exceed $85,000,000.

         (g)      No Default or Event of Default has occurred and is continuing.

Thank you for your attention to this matter.

                                        Very truly yours,

                                        [SIGNATURES OF TWO AUTHORIZED
                                        OFFICERS]

                             Exhibit 1.01B - Page 2
<PAGE>   76

                                                                     EXHIBIT 2.6

                                      NOTE

$____________                     Houston, Texas       __________________, _____

         FOR VALUE RECEIVED, HYDRIL COMPANY ("Maker"), a Delaware corporation,
promises to pay to the order of _______________________ ("Payee"), at the
principal office of Bank One, Texas, N.A., a national banking association, 3300
North Sam Houston Parkway East, Harris County, Texas 77032, in immediately
available funds and in lawful money of the United States of America, the
principal sum of _________________________________ Dollars ($____________) (or
the unpaid balance of all principal advanced against this note, if that amount
is less), together with interest on the unpaid principal balance of this note
from time to time outstanding at the rate or rates provided in that certain
Second Amended and Restated Loan Agreement (as amended, supplemented, restated
or replaced from time to time, the "Loan Agreement") dated as of August 25,
2000, among Maker, certain signatory banks named therein, and Bank One, Texas,
N.A., as Agent; provided, that for the full term of this note the interest rate
produced by the aggregate of all sums paid or agreed to be paid to the holder of
this note for the use, forbearance or detention of the debt evidenced hereby
(including, but not limited to, all interest on this note at the Stated Rate
plus the Additional Interest) shall not exceed the Ceiling Rate. Any term
defined in the Loan Agreement which is used in this note and which is not
otherwise defined in this note shall have the meaning ascribed to it in the Loan
Agreement.

         1. Loan Agreement; Advances. This note has been issued pursuant to the
terms of the Loan Agreement, and is one of the Notes referred to in the Loan
Agreement. Advances against this note by Payee or other holder hereof shall be
governed by the terms and provisions of the Loan Agreement. Reference is hereby
made to the Loan Agreement for all purposes. Payee is entitled to the benefits
of the Loan Agreement. The unpaid principal balance of this note at any time
shall be the total of all amounts lent or advanced against this note less the
amount of all payments or permitted prepayments made on this note and by or for
the account of Maker. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on a schedule
which may be attached hereto (and thereby made a part hereof for all purposes)
or otherwise recorded in the holder's records; provided, that any failure to
make notation of (a) any advance shall not cancel, limit or otherwise affect
Maker's obligations or any holder's rights with respect to that advance, or (b)
any payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Maker's entitlement to credit for that payment as of the date
received by the holder.

         2. Mandatory Payments of Principal and Interest.

         (a) Accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable on the Interest Payment Dates.

                              Exhibit 2.6 - Page 1

<PAGE>   77

         (b) On the Revolving Loan Maturity Date, the entire unpaid principal
balance of this note and all accrued and unpaid interest on the unpaid principal
balance of this note shall be finally due and payable.

         (c) All payments hereon made pursuant to this Paragraph 2 shall be
applied first to accrued interest, the balance to principal.

         (d) If any payment provided for in this note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day (unless the result of such extension of time would be to extend the
date for such payment into another calendar month or beyond the Revolving Loan
Maturity Date, and in either such event such payment shall be made on the
Business Day immediately preceding the day on which such payment would otherwise
have been due), and such extension of time shall in such case be included in the
computation of interest on this note.

         (e) The Loan Agreement provides for required prepayments of the
indebtedness evidenced hereby upon terms and conditions specified therein.

         3. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Loan Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Loan Documents, which under applicable laws are or
may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable federal and Texas usury
laws (and the usury laws of any other jurisdiction whose usury laws are deemed
to apply to this note or any of the other Loan Documents despite the intention
and desire of the parties to apply the usury laws of the State of Texas). In
furtherance thereof, none of the terms of this note or any of the other Loan
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the Ceiling Rate. Maker or other parties now or hereafter becoming liable for
payment of the indebtedness evidenced by this note shall never be liable for
interest in excess of the Ceiling Rate. If, for any reason whatever, the
interest paid or received on this note during its full term produces a rate
which exceeds the Ceiling Rate, the holder of this note shall credit against the
principal of this note (or, if such indebtedness shall have been paid in full,
shall refund to the payor of such interest) such portion of said interest as
shall be necessary to cause the interest paid on this note to produce a rate
equal to the Ceiling Rate. All sums paid or agreed to be paid to the holder of
this note for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of this note, so
that the interest rate is uniform throughout the full term of this note. The
provisions of this Paragraph 3 shall control all agreements, whether now or
hereafter existing and whether written or oral, between Maker and Payee.

                              Exhibit 2.6 - Page 2

<PAGE>   78

         4. Default. The Loan Agreement provides for the acceleration of the
maturity of this note and other rights and remedies upon the occurrence of
certain events specified therein.

         5. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Loan
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.

         6. Paragraph Headings. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.

         7. Choice of Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES
OF AMERICA FROM TIME TO TIME IN EFFECT.

         8. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective permitted legal representatives, heirs, successors
and assigns of Maker and Payee.

         9. Records of Payments. The records of Payee shall be prima facie
evidence of the amounts owing on this note.

         10. Severabilitv. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it.

         11. Revolving Loan. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Revolving Loan Maturity Date. Maker may
borrow, repay and reborrow hereunder, and except as set forth in the Loan
Agreement there is no limitation on the number of advances made hereunder.

                              Exhibit 2.6 - Page 3

<PAGE>   79

                                             MAKER

                                             HYDRIL COMPANY,
                                             a Delaware corporation

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

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

                              Exhibit 2.6 - Page 4

<PAGE>   80

                                                                     EXHIBIT 6.9

                                 HYDRIL COMPANY
                                  SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                   %                   JURISDICTION OF
                        NAME                                    OWNED                    ORGANIZATION
                        ----                                    -----                    ------------

<S>                                                             <C>             <C>
Hydril Canadian Company, Ltd.                                    100%            Canada

Hydril U.K. Ltd.                                                 100%            United Kingdom

Rototec Ltd.                                                     100%            United Kingdom

Hydril Private Ltd.                                              100%            Singapore

Hydril S.A. de C.V.                                              100%            Mexico

Bettis de Mexico S.A. de C.V.                                    100%            Mexico

Hydril Africa                                                    100%            United States

Hydril S.A.                                                      100%            Switzerland

Technical Drilling & Production                                   60%            Nigeria
      Services Nigeria, Ltd.

P.T. Hydril Indonesia                                            100%            Indonesia

Hydril Oil Tool Company                                          100%            United States

Hydril Foreign Sales Corp.                                       100%            U.S. Virgin Islands

White Rock Engineering, Inc.                                     100%            United States
</TABLE>

                              Exhibit 6.9 - Page 1

<PAGE>   81

                                                                     EXHIBIT 7.2

                             COMPLIANCE CERTIFICATE

         The undersigned hereby certifies that such officer is the
_________________ of HYDRIL COMPANY, a Delaware corporation (the "Borrower"),
and that such officer is authorized to execute this certificate on behalf of the
Borrower pursuant to the Second Amended and Restated Loan Agreement (the
"Agreement") dated as of August 25, 2000, by and among the Borrower, BANK ONE,
TEXAS, N.A., as Agent, and the lenders therein named; and that a review of the
Borrower and the other Obligors has been made under such officer's supervision
with a view to determining whether the Borrower and the other Obligors have
fulfilled all of their respective obligations under the Agreement, the Notes and
the other Loan Documents; and on behalf of the Borrower further certifies,
represents and warrants that to the knowledge of such officer, after due inquiry
(each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified):

                  (a) The Borrower and the other Obligors have fulfilled, in all
         material respects, their respective obligations under the Agreement,
         the Notes and the other Loan Documents.

                  (b) The representations and warranties made in each Loan
         Document are true and correct in all material respects on and as of the
         time of delivery hereof, with the same force and effect as if made on
         and as of the time of delivery hereof (other than those which became
         inaccurate because of transactions permitted under the Loan Documents
         and consummated after the date of the relevant representation).

                  (c) The financial statements delivered to the Agent
         concurrently with this Compliance Certificate have been prepared in
         accordance with GAAP consistently followed throughout the period
         indicated and fairly present the financial condition and results of
         operations of the applicable Persons as at the end of, and for, the
         period indicated (subject, in the case of Quarterly Financial
         Statements, to the absence of footnotes and normal changes resulting
         from year-end adjustments).

                  (d) The calculations set forth on Schedule I attached hereto
         and incorporated herein by reference made for the purpose of providing
         the information required in (e) below are true and correct and
         accurately reflect the financial condition of Borrower with respect
         thereto.

                  (e) No Default or Event of Default has occurred and is
         continuing. In this regard, the compliance with the provisions of
         Section 7.3 is as follows:

                              Exhibit 7.2 - Page 1
<PAGE>   82

                  (i)      SECTION 7.3(a) -- TANGIBLE NET WORTH

                                                            Minimum
                           Actual                           Required

                           $_________                       $________

                  (ii)     SECTION 7.3(b) - DEBT TO CAPITALIZATION RATIO

                                                            Minimum
                           Actual                           Allowed

                           _________                        45%

                  (iii)    SECTION 7.3(c) -- INTEREST COVERAGE RATIO

                           From December 31, 1999 through December 31, 2000:

                                                            Minimum
                           Actual                           Required

                           _____ to 1.00                    2.00 to 1.00

                           After December 31, 2000:

                                                            Minimum
                           Actual                           Required

                           _____ to 1.00                    2.50 to 1.00

                  (iv)     SECTION 7.3(d) - LEVERAGE RATIO

                                                            Minimum
                           Actual                           Allowed

                           _____ to 1.00                    3.00 to 1.00

                  DATED as of ____________________________.

                                               [SIGNATURE OF AUTHORIZED OFFICER]

                              Exhibit 7.2 - Page 2
<PAGE>   83

                                   SCHEDULE I

                                  CALCULATIONS

                          [TO BE PROVIDED BY BORROWER]

                       Schedule I to Exhibit 7.2 - Page 1

<PAGE>   84

                                                                     EXHIBIT 8.2

                                      LIENS

                                 HYDRIL COMPANY
                                      LIENS
                                 AUGUST 23, 2000
                                     (000S)

<TABLE>
<CAPTION>
                                                                                                             Final
HYDRIL COMPANY                                                 Amount        Bal 8/23        Mo Pymt        Payment
                                                             ----------     ----------     ----------       --------

<S>                                                          <C>            <C>            <C>              <C>   <C>
1997 IBM Capital Lease for Software/Hardware                 $      827     $      321     $       18       05/30/02

1999 IBM Capital Lease for Software/Hardware                        200            105              6       02/28/01
                                                             ----------     ----------     ----------

TOTAL HYDRIL COMPANY                                         $    1,027     $      426     $       24
                                                             ==========     ==========     ==========
</TABLE>

                              Exhibit 8.2 - Page 1
<PAGE>   85

                                                                     EXHIBIT 8.4

                         [Letterhead of Hydril Company]

                       ----------------------------, -----

Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0800

Attention:        Investment Department-Securities

       Re:        Note Purchase Agreement dated as of June 25, 1998 (the
                  "Agreement"; capitalized terms being used with the meanings
                  specifed in the Agreement)

Dear Russ:

                  We have recently sold our _______________________________ for
approximately _____________________ after obtaining the requisite lien release
from the Collateral Agent. The Collateral Agent has informed us that since it is
not a party to the Agreement, they would like for us to obtain your confirmation
that Hydril is entitled to the Net Proceeds of the sale as provided by Section
10.7(a)(vi) of the Agreement. (After giving effect to the sale, Hydril is well
within the 15% of Consolidated Total Capitalization test in that Section.)

                  Accordingly, we would appreciate your confirming that Hydril
is entitled to the Net Proceeds of the ___________________________ sale [AND
OTHER TRANSFERS THAT COMPLY WITH SECTION 10.7(A)] by signing below and returning
a copy to me. Also, please fax me a copy at 281-985-3340.

                  Thank you for your attention to this matter.

                                                  ------------------------------
                                                  Andrew W. Ricks
                                                  Assistant Treasurer

Confirmed as of the date of this letter.

PRINCIPAL MUTUAL LIFE INSURANCE COMPANY

By:
   ----------------------------------

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

                              Exhibit 8.4 - Page 1
<PAGE>   86

                                                                 EXHIBIT 11.6(b)

                            ASSIGNMENT AND ACCEPTANCE

                             DATED:
                                    -----------------

         Reference is made to the Second Amended and Restated Loan Agreement
dated as of August 25, 2000 (as restated, amended, modified, supplemented and in
effect from time to time, the "Loan Agreement"), among HYDRIL COMPANY, a
Delaware corporation (the "Company"), the Lenders named therein, and BANK ONE,
TEXAS, N.A., as Agent (the "Agent"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Loan
Agreement. This Assignment and Acceptance, between the Assignor (as defined and
set forth on Schedule I hereto and made a part hereof) and the Assignee (as
defined and set forth on Schedule I hereto and made a part hereof) is dated as
of the Effective Date (as set forth on Schedule I hereto and made a part
hereof).

         1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Loan Agreement respecting those,
and only those, credit facilities contained in the Loan Agreement as are set
forth on Schedule I (collectively, the "Assigned Facilities," individually, an
"Assigned Facility"), in a principal amount for each Assigned Facility as set
forth on Schedule I.

         2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company or its Subsidiaries or the performance or observance by the
Company or its Subsidiaries of any of its respective obligations under the Loan
Agreement, any other Loan Document or any other instrument or document furnished
pursuant thereto; and (iii) attaches the Note(s) held by it evidencing the
Assigned Facility or Facilities, as the case may be, and requests that the Agent
exchange such Note(s) for a new Note or Notes payable to the Assignor (if the
Assignor has retained any interest in the Assigned Facility or Facilities) and a
new Note or Notes payable to the Assignee in the respective amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).

         3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Loan Agreement,

                            Exhibit 11.6(b) - Page 1
<PAGE>   87

together with copies of the financial statements referred to in Section 6.2
thereof, or if later, the most recent financial statements delivered pursuant to
Section 7.2 thereof, and such other documents and information as it has deemed
appropriate to make its own credit analysis; (iii) agrees that it will,
independently and without reliance upon the Agent, the Assignor 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 the Loan Agreement; (iv) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Agreement as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will be bound by
the provisions of the Loan Agreement and will perform in accordance with its
terms all the obligations which by the terms of the Loan Agreement are required
to be performed by it as a Lender; (vi) if the Assignee is organized under the
laws of a jurisdiction outside the United States, attaches the forms prescribed
by the Internal Revenue Service of the United States certifying as to the
Assignee's exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Loan Agreement or such other
documents as are necessary to indicate that all such payments are subject to
such tax at a rate reduced by an applicable tax treaty, and (vii) has supplied
the information requested on the administrative questionnaire attached hereto as
Exhibit A.

         4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance by it and the Company and recording by
the Agent pursuant to Section 11.6 of the Loan Agreement, effective as of the
Effective Date (which Effective Date shall, unless otherwise agreed to by the
Agent, be at least five Business Days after the execution of this Assignment and
Acceptance).

         5. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignee, whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and Assignee shall make
all appropriate adjustments in payments for periods prior to the Effective Date
by the Agent or with respect to the making of this assignment directly between
themselves.

         6. From and after the Effective Date, (i) the Assignee shall be a party
to the Loan Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder, and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Agreement.

         7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed by their respective duly authorized
officers on Schedule I hereto.

                            Exhibit 11.6(b) - Page 2
<PAGE>   88

                     SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE

Legal Name of Assignor:
                        -----------------------------

Legal Name of Assignee:
                        -----------------------------

Effective Date of Assignment:
                              -----------------------

<TABLE>
<CAPTION>
                                                                             Percentage Assigned of Each
                                                                               Facility (to at least 8
                                                 Principal                      decimals) (Shown as a
                                                Amount (or,                    percentage of aggregate
                                               with respect                   original principal amount
                                                to Letters                  [or, with respect to Letters
Assigned                                      of Credit, face                  of Credit, face amount]
Facilities                                   amount) Assigned                      of all Lenders)
----------                                   ----------------               ----------------------------

<S>                                         <C>                             <C>
Loans                                       $                                                    %
                                             -----------------                          ---------

Letter of Credit
participation interests                     $                                                    %
                                             -----------------                          ---------

                  Total                     $
                                             -----------------
</TABLE>

                             ,        Revolving Loan Commitment Percentage:    %
-----------------------------                                                --
         as Assignor

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

                             ,        Revolving Loan Commitment Percentage:    %
-----------------------------                                                --
         as Assignee

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

                     Schedule I to Exhibit 11.6(b) - Page 1
<PAGE>   89

ACCEPTED:

BANK ONE, TEXAS, N.A., as Agent

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

HYDRIL COMPANY

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

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

                     Schedule I to Exhibit 11.6(b) - Page 2

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